7 ideas to help you break free from living paycheque to paycheque

In his personal finance column for CTVNews.ca, Christopher Liew offers seven ideas to help break the cycle of living paycheque to paycheque (Getty Images / blackCAT)

Are you looking for a way to break free of the seemingly endless cycle of living precariously and gain more control over your financial life?

For many, living paycheque to paycheque is a daily reality. Unexpected expenses, rising costs, and stagnant wages can make it difficult to build financial security and experience the mental peace of mind that comes along with it.

The good news is that breaking this cycle is possible with a proactive mindset and some practical changes.

Half of Canadians live paycheque to paycheque

First off, if you’re feeling like you’re barely managing to tread water and stay afloat with your bills -- you’re not alone. Don’t let social media, music videos, and movies skew your view on life.

The harsh reality is that nearly half of all Canadians are currently living from cheque to cheque; just managing to make it from one month to the next, without much left over.

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In early 2024, the Healthcare of Ontario Pension Plan (HOOPP) released a report showing that only 49 per cent of unretired workers had managed to set any money aside from retirement in the previous year.

7 tips to help you break the cycle and grow financially

I don’t mention these facts to make you feel hopeless, but rather to give you a little more perspective so you’re not too hard on yourself. By implementing some of the following tips, you’ll be able to put yourself and your family in a better position so that you don’t have to become a statistic.

1. Spend a day evaluating your current finances

Are you up to speed on your current finances? Do you know your average monthly income? What percentage of that goes to rent/mortgage and bills? What percentage is saved? How much do you spend on groceries or eating out every two weeks?

The next time you have some free time, I encourage you to go over your last couple of months of bank and credit card records, calculating and writing down the answers to these questions as you go.

This is an easy first step that you can take to give yourself a better understanding of how much money is coming in versus going out on a month-to-month basis.

If you don’t feel like reading through your statements line by line, you can also download or subscribe to a personal finance app that tracks your income and spending across all accounts.

2. Track your money and cut out unnecessary spending

Along with the above tip, you need to start categorizing how money leaves your account and where it’s going. Take special note of unexpectedly large areas of expenditure. When I first did this for my own personal finances, I realized that I was overspending in the following categories:

To help fix these areas, I started buying more groceries in bulk and meal-prepping on my days off. I set a weekend budget for myself that I was allowed to spend on entertainment like eating out, having a couple of drinks, going to a show, etc.

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To tackle my credit card interest, I transferred my higher-interest credit card balance onto another lower-interest credit card that would allow more of my payments to go toward the principal balance.

3. Find cheaper ways to have fun

According to a 2021 report from Statistics Canada, the average household spent $4,223 on recreation, not including the purchases of alcohol, tobacco, cannabis, or gambling. That comes down to just under $392 per month.

If you were to include the purchases of recreational substances and gambling, the average annual cost jumps to $6,199 or $516 per month.

I’m not saying not to have a bit of fun or blow off some steam every now and again. However, you should be aware of how much you’re spending and set limits for yourself based on your personal budget, income, and savings goals.

4. Set month-end goals for yourself

One of the best ways to hold yourself to better spending habits and incentivize yourself to pursue additional income is to set month-end goals for yourself.

Personally, I like to write my own monthly goals on a whiteboard that I keep by my desk so that I see them, think about them, and act on them every day.

5. Create additional side income

If you’re working less than 40 hours per week and you’re not a full-time parent, you have time to earn some extra money. Thanks to the internet and the growing ‘gig economy,’ almost anybody can make a few extra dollars on a flexible timeline by:

6. Take on greater responsibilities at work

If you’re lucky enough to work for a company that offers some room for advancement, approach your management team and ask them to take on more responsibilities.

Realistically, the best way to get a raise and earn more income isn’t to sit around and wait for an offer. The best way is to approach the matter head-on, let your intentions and goals be known, and ask your superiors what you can do to help land you in a better position with more responsibilities and better pay.

7. Reduce your standard of living

One of the biggest mistakes you can make is having too high of a standard of living.

Fancy apartments will try to lure you into a higher rent than you can afford by teasing amenities that you’ll rarely (if ever) use.

Car dealerships will lure you into financing a newer, more luxurious vehicle with a higher trim package than you can afford.

Streaming platforms will lure you into never-ending monthly subscriptions that you’ll forget about once you finish watching that one movie or new TV series exclusive to the platform.

Not all of these things are bad in themselves. Combined, however, they can trap you into living and paying for a higher standard of living than you can afford, leaving you with little to nothing left over to put toward your emergency savings or invest in your future.

Final thoughts

There’s rarely ever a single solution that will fix your finances and help you break free of cheque-to-cheque living.

With a little patience, your finances can easily change over the course of the next 12 months, so you can move into the next year with more strength, confidence, and security.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial