Living payday to payday means most of your income has gone by the time the next payday arrives. Nothing is left over, so one unexpected bill can push you into an overdraft, a missed payment or a loan.
It is common, and it is not always a sign of overspending. Rising rent, energy and food costs leave many people on steady incomes in the same position. The steps below will not create money that is not there, but they can make what you have go further and give you earlier warning when things are about to go wrong.
Track where your money goes
Before you cut anything, get a clear picture. Go through your bank statements for the last two or three months, or note everything you spend for one full pay cycle, including cash and small card payments.
Sort what you find into three groups:
- Income: your take home pay and any benefits, and the dates they arrive
- Fixed costs: rent or mortgage, council tax, energy, water, phone, insurance and any credit repayments
- Day to day spending: food, travel, children's costs, subscriptions and everything else
MoneyHelper's free Budget Planner adds it up for you and shows where your money is going. Many banking apps also sort your spending into categories automatically.
Pay priority bills first
Some bills matter more than others because the consequences of missing them are more serious. These are usually called priority bills:
- Rent or mortgage payments
- Council tax
- Gas and electricity
- TV licence
- Court fines and child maintenance
- Tax owed to HMRC
- Hire purchase on something you need, such as a car you use to get to work
Falling behind on these can lead to losing your home, problems with your energy supply or enforcement action. Credit cards, overdrafts, personal loans and buy now pay later still matter, but missing them usually has less severe consequences. If you cannot pay everything, cover priority bills first and contact your other creditors to explain. MoneyHelper sets out how to prioritise your debts in more detail.
Match your bills to your payday
Many people run short because bills leave their account at the wrong time, not because the total is too high. A few changes can help:
- Ask your providers to move direct debit dates to just after your payday
- Split annual or quarterly costs, such as car insurance, into a monthly amount you set aside yourself, and check whether paying the provider monthly costs more
- Move bill money into a separate account or savings pot on payday, so what is left in your main account is what you can actually spend
- Split your spending money into weekly amounts, so the last week before payday is not the one that runs dry
Bring your costs down
Once you know where your money goes, start with the biggest regular costs. A small saving on a large bill usually adds up to more than cutting small treats.
- Check you are getting every benefit you are entitled to, using one of the free benefits calculators listed on GOV.UK
- Ask your broadband and mobile providers whether you qualify for a social tariff if you receive certain benefits
- Ask your council about Council Tax Reduction, or the single person discount if you are the only adult in your home
- Ask your energy and water suppliers about payment plans, social tariffs and hardship funds
- Cancel subscriptions you no longer use, and compare insurance and phone deals when they come up for renewal
Build a small buffer
A buffer is money set aside for the costs you cannot predict, such as a boiler repair, a school trip or a higher energy bill in winter. Without one, those costs usually end up on a credit card, an overdraft or a loan.
Start small. A regular amount you can keep up is better than waiting until you can afford a large one. A standing order to a separate savings account on payday moves the money before you have a chance to spend it. Once you have enough for one typical unexpected bill, keep going towards a month of essential costs.
If you receive Universal Credit, check whether you can open a Help to Save account, where the government adds a bonus to what you save. Many credit unions also offer savings accounts alongside lower cost loans.
Free help if you are struggling
If you are behind on bills, or only keeping up by borrowing, speak to a free debt advice service. They are confidential, they will not judge you, and talking to them does not affect your credit score.
- MoneyHelper: free, government backed guidance on budgeting, benefits and debt, and help to find a debt adviser
- StepChange: a debt charity offering free debt advice online and by phone
- Citizens Advice: help with debt, benefits and bills online, by phone or at a local office, with separate advice for Scotland
- National Debtline: free debt advice online and by phone for people in England, Wales and Scotland
If you live in England or Wales and creditors are chasing you, a debt adviser can apply for Breathing Space on your behalf. It gives up to 60 days of protection, during which creditors cannot take enforcement action, contact you about the debts or add interest and charges. You still need to make your repayments. In Scotland, a moratorium gives temporary protection from creditor action while you apply for a formal debt solution.
When borrowing makes things worse
When money runs out before payday, a loan can feel like the quickest fix. In practice it moves the gap to next month and adds interest on top, so the next pay cycle starts with less. That is how a short term problem becomes a longer one.
Borrowing is likely to make things worse if:
- You would use it to pay for food, rent or other everyday essentials
- You would use it to repay another loan or a credit card
- You are already behind on priority bills
- You have needed to borrow before payday in more than one recent month
- You are not sure how you would make the repayments
If any of these apply, speak to one of the free services above before you apply for credit. If you are facing a genuine one off cost and the repayments fit comfortably within your budget, compare the total amount you would repay, not just the monthly payment. Our guide Are payday loans bad? explains the costs and the alternatives.