Living paycheck to paycheck while paying down debt

Quick insights

• Living paycheck to paycheck is when you spend most or all of your income on immediate and/or necessary expenses, resulting in little to no disposable income.
• The term also describes people who have little to no savings or financial buffer, leaving them in a vulnerable position financially.
• Living paycheck to paycheck can occur at all income levels.

If you've ever heard the term “living paycheck to paycheck,” you might be wondering what it means. It refers to a situation where you spend most or all of your income on bills and immediate living expenses, leaving little to no money left for things like savings and investments. According to a 2025 MarketWatch survey, 56.9% of Americans are living paycheck to paycheck, with 64.2% of families with children living paycheck to paycheck.ec-mkt-watch-fin-survey

Having no financial buffer can make it difficult if you're faced with an emergency expense or situation, like suddenly becoming unemployed or dealing with a large medical bill. But focusing on debt reduction can help. Even if it might not seem feasible, reducing debt may help ease some of the stress surrounding bills and expenses for those living paycheck to paycheck. How? Read on to find out.

Understand your financial situation

If paying down debt while living paycheck to paycheck is a goal of yours, then it can be important to first get a grasp of your financial situation. You can do this by going through your finances and making a detailed inventory.

Start by calculating your total monthly income. Next, list out all your monthly expenses or money spent. Look at credit and debit card statements, bills and the amount of cash leaving your account. Next, determine which of the expenses are non-negotiable or essential, and prioritize those in your budget.

This will help you understand exactly where your money is going and if any of the expenses could be cut. It also lets you see whether you’re spending money on things that could be eliminated, freeing up money to go toward paying off debt or building savings.

Apps or online spreadsheets might help organize or make sense of all the data. For example, free online budgeting tools can assist you in creating an inventory of your current spending and income.

Cut costs to free up money for debt repayment

To have money to put toward paying off debt, you’ll need to free up funds that you’ve been using in other ways. Reviewing your monthly spending might help you notice some trends. Maybe you notice a long list of subscriptions, some of which you don't really need. Or maybe you notice a lot of money spent eating out. Consider if you’re able to commit to cutting back or preparing more of your food at home so you can put that extra money toward debt repayment. 

You can also try to negotiate and find better prices for things like insurance, cell phone bills or internet. You can do this by researching competitor rates and offers ahead of time and then calling your provider to negotiate a better price. You can also ask for any available promotions or discounts.

If you’re not able to get a better price with your current provider, you can also think about switching providers to find a better deal and save some money.

Finally, if possible, consider finding an additional form of income. Look into freelance or gig work or find a temporary side job to make some extra money to go toward debt repayment.

Prioritize debt repayment

Now it’s time to pick a debt repayment method. There are a few different strategies to choose from when paying off debt.

The avalanche method, for example, is a method that prioritizes paying off debts with the highest interest rates first, which minimizes total interest paid over time. With this method, you start by focusing on paying off the debt with the highest interest rate first. Any money left over after paying bills and other immediate expenses goes toward repaying this debt. Once it’s paid off in full, you move on to the next debt with the highest interest rate, pay that down until it’s eliminated and so on.

While this debt repayment method minimizes overall interest paid over time, this strategy might not be for everyone. The other main debt repayment method is called the snowball method, which focuses on paying off smaller debts first for some initial wins, helping build momentum. The idea is you pay off the smallest debt first. Once that’s paid off, you keep going with the next smallest debt until you tackle bigger and bigger debts.

Regardless of the debt repayment method you choose, do your best to make your minimum monthly payments to avoid potential fees and penalties.

In conclusion

While living paycheck to paycheck can be difficult, there are paths forward that can help ease this financial stress. Focusing on debt repayment while living paycheck to paycheck can reduce interest charges from debt over time.

Look at your spending patterns and see if you can identify some expenses you can eliminate, such as un-used subscriptions. Remember, paying off debt is usually a gradual process. With consistency, patience and determination, you can make a difference in your financial situation.