What to Do if You're Starting Off 2022 Living Paycheck to Paycheck

Here's how to shore up your finances if you're starting the year off on rocky footing.

During normal times, living paycheck to paycheck without any money in savings is a precarious notion. But right now, it's an even more dangerous financial situation to be in.

High inflation has caused the cost of consumer goods to rise exponentially. These days, people are paying more for everything from gas to utilities to groceries. And without a financial cushion to fall back on, you could end up landing in unhealthy debt if an unplanned bill comes your way, or if consumer prices rise even more.

If you're starting off 2022 with a paycheck-to-paycheck existence, you're certainly not alone. But it's important to pull yourself out of that situation as quickly as you can. Here's how.

1. Set up a budget

Following a budget is one of the easiest ways to track your spending and get a better grasp on your finances. If you don't have a budget yet, comb through your bank and credit card statements from the past six to 12 months and figure out what your various bills entail. Then, aim to figure out what they cost you on average (while you might pay a set $900 a month on rent, things like your grocery and utility bills may vary).

While you can create your budget using a spreadsheet (or even good old pen and paper), there are different budgeting apps worth looking at to help you stay on track. Some of these apps sync up with your checking account and credit cards to assign purchases to different spending categories and help you really get a clear picture of where your money goes.

2. See if you can trim your spending

To build some cash reserves, you'll need to not deplete your entire paycheck every month. That could mean having to make some tough choices about the things you spend money on.

Once you have your budget in place, comb through it and see which expense categories you have the potential to cut back in. You may not be able to lower your auto loan or rent payment, but if you spend $80 a month on cable, that's an expense you may be able to eliminate temporarily, or at least replace with a less expensive alternative, like a streaming service costing $15 a month.

3. Get a side hustle

You may only have so many expenses in your budget that you can slash. In that case, your ticket to building some savings could boil down to getting a side hustle. The money you earn from that second job can go into the bank so it's there for you when you need it.

If you're not sure how to find a side hustle, think about what your schedule looks like. If it's hectic, you may need to find a gig with flexible hours, like doing web design or data entry from home. Otherwise, you might manage to secure a steady second income stream by working evening and weekend shifts at a local eatery or retailer.

Living paycheck to paycheck can be stressful, and it can also result in you landing in debt. If you don't have money in the bank to fall back on, take these steps to break that cycle and improve your financial outlook.