How you can stop living from pay cheque to pay cheque

Editor-at-Large · 8 February 2021
In this edited extract from her book Ditch the Debt and Get Rich Effie Zahos shares her tips to break the cycle of living from pay to pay.

“Money’s too tight to mention. Three more days until payday. I can’t wait!” If that sounds like you then read on. You might be blaming lack of funds. Maybe you feel like you don’t earn enough or have too many debts.

The fact is that there may be a very good reason why we are living from pay to pay, but we tend to put the blame on everything and everyone except our own behaviour.

Don’t get me wrong – a low income can certainly be one of the main reasons you’re short on cash but, in my experience, often income has very little to do with it. A person with a $200,000 salary can have just as much trouble getting by as someone who earns $60,000.

The saying “It’s not what you earn that counts but what you spend” is apt here. With all that in mind, here’s your blueprint to help you put a strategy in place so that you can work towards being in a stronger financial position and stop living from pay to pay.

Payday circle of life

Payday circle of life
Source: Ditch the Debt and Get Rich

Create a bare-bones budget

If you want to escape the vicious cycle of living from pay to pay, the first thing you need to do is create a bare-bones budget. This is different to a normal budget because it only includes the expenses you need to survive – the ones that mean you’ll have a roof over your head, (home-cooked) meals on the table and the lights on – and not the things that would fall under nice-to-have or luxuries. Here is a guide to what you should and shouldn’t include.

What you should include

What you shouldn’t include

  • Dining out/takeaway
  • Entertainment services such as Netflix or Foxtel
  • Non-essential clothing
  • Holidays
  • Recreational activities/hobbies
  • Non-essential household items
  • Personal care such as manicures and cosmetics

Can you cut any of your costs?

When you have all your expenses listed, it’s a good idea to go through them individually to see if there are ways to trim the costs.

If you have a mortgage, this is a great place to start as chances are it would be one of your biggest regular expenses. If you can score a cheaper rate, not only will your repayments be lower but you can save big bucks over the life of the loan.

For example, let’s assume you have a $500,000 loan and are paying 3.49%pa. By switching to a loan with a lower rate of 2.19%, your repayments would be $334 a month less, saving you $4,008 a year. And you’d pay $100,383 less interest over the life of the loan.

Keep in mind that cheapest doesn’t always mean best, so consider the features as well as the price. It’s also a good idea to call your existing lender to ask if they can match the rate to save you the hassle of switching.

If you’re renting, you can also look for ways to reduce that expense: is it possible to move to a different location where the rent is cheaper or to a smaller place or share house? It doesn’t have to be forever – it can be a temporary solution.

It is also a good time to shop around for better deals on some of your other regular bills such as electricity and gas, mobile and internet plans as well as insurance. You might be surprised by how much you could save on these as well.

Do you need to make more money?

Hopefully, you’ll find you have enough money coming in to cover the expenses listed in your bare-bones budget but, if not, you may need to explore ways to make more money.

Looking for a new job that pays more is the obvious solution to boost money coming in but that is easier said than done and it may take a while to find something appropriate. While you’re waiting to land a new job, look for alternative ways to bring in extra cash.

This could include selling unwanted items, getting a second casual job or picking up a side hustle.

Live on your bare-bones budget temporarily

Even if you feel that you could possibly add in a few nice-to-haves, I would suggest living on your bare-bones budget for a few months – at the very least until you have built up a decent emergency fund.

Having money set aside for a rainy day is vital if you want to stop living pay to pay, which is why I have included it as one of the items in the ‘what you should include’ list. So, any money ‘left over’ after meeting all your other necessary expenses should be directed to your emergency fund at this stage.

Once you have reached your emergency fund goal, you can revisit your budget and start adding some ‘fun’ stuff back in, such as the occasional takeaway meal or a Netflix subscription. It’s a good idea to reintroduce these little luxuries gradually so that you don’t end up struggling to make ends meet again. And make sure you update your budget accordingly.


Happy man with money
Image source: (Shutterstock)

Tips to help you manage your money

There are a few little tricks to help you better manage your money and stick to your budget.

Put your money into buckets

One way to easily manage your money is to break down your expenses into smaller buckets rather than having them all lumped into one. For example, you may have one for school fees, one for groceries, one for bills, one for splurges and so on. How many buckets you have is completely up to you but be sure to name them.

The idea is that when you get paid, you transfer the designated amount into each bucket. This is the modern-day equivalent of the envelope system where you put cash for different expenses into an envelope.

Plan for your irregular expenses

One way that people often get caught out is not setting aside enough money to cover bills that aren’t fortnightly or monthly but rather quarterly, such as electricity and gas, or annually, such as car registration and rates. So that you don’t find yourself scrambling for cash to pay these bills, you could use something called ‘bill smoothing’. This involves estimating what that big expense will be and then breaking it down into fortnightly or monthly amounts. For example, if you think your electricity bill will be $1,500 for the year then you put away $125 a month or $58 a fortnight to make sure you have enough when the bill arrives.

Don’t spend money you don’t have

It might sound obvious but given that there are 13.7 million credit card accounts in Australia and buy now, pay later schemes such as Afterpay are growing in popularity, not spending money we don’t have appears to be easier said than done for many.

So, keep your credit card at home, cancel any buy now, pay later arrangements, and use cash to pay for things whenever possible.

Keep track of your spending

It’s important to stay on top of your spending so bad habits don’t creep in again. This could be as simple as regularly taking a look at your accounts online but there are also helpful apps that track your spending.


Ditch the Debt and Get Rich book



This is an edited extract from Ditch the Debt and Get Rich (Are Media Books, RRP $29.99), exclusive to Canstar, and republished with permission.



Cover image source: iQoncept/

This article was reviewed by Editorial Campaigns Manager Maria Bekiaris before it was published as part of our fact-checking process.


Effie ZahosAbout Effie Zahos

Canstar’s Editor-at-Large, Effie Zahos, has more than two decades of experience helping Aussies make the most of their money. Prior to joining Canstar, Effie was the editor of Money Magazine, having helped establish it in 1999. She is an author and one of Australia’s leading personal finance commentators, appearing regularly on TV and radio.



Follow Canstar on Facebook and Twitter for regular financial updates.


Thanks for visiting Canstar, Australia’s biggest financial comparison site*

→ Looking to find a better deal? Compare car insurance, car loans, health insurance, credit cards, life insurance and home loans with Canstar. You can also check your credit score for free.

Share this article