Living paycheck to paycheck is a stressful lifestyle, and unfortunately, it’s also a common one. A recent study by Magnify Money discovered that over 56% of Americans have less than $1,000 in both their checking and savings accounts.

woman sitting on swing at the beach

This statistic is alarming because we all know that one stroke of bad luck, whether it be a car accident or a broken kitchen appliance, can quickly wipe out at least that amount, if not much more.

In these situations, many people resort to charging credit cards, either for basic living expenses or one-time emergencies because they can’t afford to set money aside for savings. But it doesn’t have to be that way. Follow these steps to create a financial buffer that will help you plan for emergencies, get out of debt, and start setting financial goals you’ll actually look forward to.

Take Financial Inventory

Before you think of your financial future, you have to fully understand your current financial situation. Start off by looking at every single expenditure you’ve had in the last month. An easy way to do this is by going through all of your debit and credit card statements.

You can categorize your purchases to get a better idea of how you’re spending your money: groceries, restaurants, gas, minimum credit card payments, etc. Hopefully, you’re not surprised by what you see, but chances are, you might be taken aback by how quickly your money is spent without you even realizing it.

When you’re taking your financial inventory, it’s also a good time to look at the debt you owe. Ask yourself how well you’re handling your monthly obligations. Are you at least making your minimum payments each month? Missing payments can quickly start to drag down your credit score, so it’s important to pay your loan and credit card balances on time regularly.

If you’re only paying the minimum each month, figure out how long it will take you to pay it off entirely and how much extra you’ll pay in interest over time.

Most fixed rate mortgages and federal student loans have low interest rates, so if you have other high interest debt, be sure to prioritize those first. Depending on your interest payments and overall financial picture, it may be wise to include aggressively paying off your debt in your new financial plan.

Shift Your Spending Habits

Now that you know how you spend your money each month, it’s time to adjust your attitude towards money. Maybe you already only spend money on the bare essentials, but most people have at least a few frivolous habits, even if they’re living paycheck to paycheck.

Identify your weak spots and figure out how you can plan ahead to avoid them. For instance, if you frequently find yourself too busy to cook dinner during the workweek, spend an afternoon off cooking low-cost freezer meals.

Often the best places to save money aren’t on big ticket items, but on small, recurring expenditures that add up over time. Figure out your vices and then create a plan to eliminate the temptation.

Speaking of temptation, if you’re struggling with debt, make sure to stop using your credit card. Keep it locked up at home if you need to. A credit card can be a dangerous tool to keep in your wallet, especially when you’re charging items you don’t actually need.

Even if you can make your monthly payments, think of all the extra interest you’ll be paying on top of the original cost of the item. Is it really worth it? In most cases, probably not.

Strip Down Your Budget

Now that you’ve ruled out frivolous spending to stretch out your paycheck, it’s time to slash that budget even further by downsizing. Look at your major monthly expenses, even the “necessities,” and evaluate where you can cut back. Could you relocate to a smaller apartment, or start taking public transportation to save on gas?

Also, review your cell phone plan. A fancy smartphone with unlimited data is nice to have, but you’d be hard pressed to call it a need when you can just as easily use a cheap flip phone for emergency calls.

What about your grocery budget? You don’t have to fill up on cheap, unhealthy options just to save money, but there probably are some splurges you could cut back. Reduce the number of days you eat meat or stock up on your pantry staples when they go on sale.

Can you get rid of cable and rely solely on Netflix? Or even no television at all? Some of these suggestions may seem like major sacrifices, but that’s what it takes to stop worrying about overdrawing your account before receiving your next paycheck.

Prioritize Your Savings

The best way to prevent a bounced check, a declined debit card, or new debt is to buffer your finances with savings. Most experts agree that you need a minimum of three different types of savings accounts. The first is a $1,000 emergency fund that should be kept in an accessible account.

This is your first priority when setting money aside for savings. This fund should only be used when you have an unforeseen expense, like a car repair. Once you take money out, make sure to replenish it back to $1,000 as soon as you can.

Next, save up an additional 3-6 months of living expenses that could cover all your bare necessities in case you lose your job or are unable to work for some reason. It’s not fun to imagine these things happening, but they are an unfortunate reality in today’s economy. Only touch this money if you’ve lost your primary income stream. After that, it’s time to start thinking about retirement.

It’s never too early to start saving, so try to put at least a small amount away each year in either your employer’s 401(k) plan or some type of IRA. Once you’ve covered these three savings accounts, you can then start putting money away for other large purchases, like a new car or a vacation.

Now if you’re living paycheck to paycheck, you might find it difficult to set this much money aside each month. But it’s important to get started, even with a small amount, so that you’re not completely knocked off your feet when a surprise expense comes up.

If you’ve discovered ways to cut back your expenses, it’s important to divert some of that money into savings so that you don’t go into debt the next time you need some cash.

If you need to start off slowly, try tucking away just 1% of each paycheck. If you earn $1,000 every two weeks, that’s only $10. Every month try to increase your savings goal by another 1%. You’ll be pleasantly surprised at how quickly your savings account grows.

Reduce Your Income Gap

After you’ve crunched all the numbers and determined how much you need to spend and save, it’s possible you might still come up short. Maybe you have a lot of debt to pay off or several children to support, but sometimes even after cutting out all extraneous purchases, your bills might outweigh your income.

When there’s no more money left to save, that leaves you with the option to earn more. There are countless ways to do this. Sell items from your home that you don’t use or need anymore, either on Craigslist or eBay. Ask your boss for a raise, or get a part-time job on your days off. Sell vegetables from your garden or start a dog walking service.

You’re only limited by your own imagination. And if you’re not sure where to start, put out feelers for several ideas and see which takes off the fastest. There’s nothing glamorous about taking on extra work, but no one ever became successful by standing still. Get creative about your side hustle and who knows? Maybe you’ll find a new path for yourself.

Stay Optimistic

While your goal right now might just be to keep yourself from drowning in your bills and other financial burdens, you’ll soon be able to see further down the road. Try not to feel too overwhelmed by life, and remember that nothing is permanent. Once you get into a rhythm of making the necessary sacrifices to keep your head above water, you’ll soon be able to adjust your focus to the next level.

When you’re close to hitting your savings milestones, give yourself another goal to work towards. Maybe it’s a dream trip or learning a new professional skill for a job in a different field.

Start thinking about what you’d like to do and map out the steps you need to take in order to get there. It doesn’t even have to require any financial backing, but just a bit of bravery. You can do so much and there’s nothing better to invest in than yourself.