I believe one of the primary reasons for cyclical poverty (or even living paycheck-to-paycheck) is an unhealthy relationship with money, usually caused, at least partially, by impactful and formative experiences as a child. I believe the opposite to be just as true: a primary factor of generational wealth is a healthy relationship with money. There are many other contributing factors, some possibly more important than a healthy or unhealthy relationship with money, but in this article I want to focus on how to build a healthy relationship with money and how that can, potentially, help you break the cycle of living paycheck-to-paycheck.

Compare yourself to others as little as possible

It is impossible to win by comparing yourself to others financially. There will always be someone that has more money than you or a nicer house, car, or clothes. My family was not poor growing up but we certainly weren’t wealthy. When I was a kid, I wanted brand-name clothes to signal to others that we were just as well off as they were. I felt ashamed that other kids got the latest video game console for Christmas and we didn’t. I wondered why we used so many coupons at the grocery store when other families got by using none at all.

It wasn’t until I became an adult with a full-time job that I realized I was actually proud of my parents’ financial habits. We didn’t usually get the latest clothes or video games, but we always had food to eat, clean clothes to wear, and a warm bed to sleep in. I had spent my entire life, until about the age of 25, longing to have as much as everyone else. But I discovered that wasn’t nearly as important as I once thought it was. Who cares if I have name-brand clothes if I like what I’m wearing? So what if we use coupons at the grocery store? Many wealthy people love to be frugal and save money.

Resisting the urge to compare yourself to others financially is much easier said than done, but comparison can prevent you from being happy with what you have and keep you on a financial hamster wheel, always racing towards the top that you will never reach.

Teach yourself about money

My parents had no idea what a Roth IRA was or how powerful an HSA can be. I learned from them that it was important to save money (in a savings account), but not much else. I didn’t receive any formal financial education until college. When I started learning more about personal finance, my world was turned upside down. I learned that it was possible for regular people to become wealthy. I previously believed investing was just something rich people did.

Many Americans are financially illiterate, and you may be one of them – and that’s okay! It is easier than ever to educate yourself about money and learn how to actually build wealth. The Money Guy Show is a great place to educate yourself about money. No matter whether you are just trying to get out of debt and stop living paycheck-to-paycheck or are searching for advanced investing strategies beyond your run of the mill Roth IRA and 401(k), we have content to help you. The Financial Order of Operations is an incredible starting point for anyone that isn’t sure exactly what to do next. 

When it comes to educating yourself about personal finance, take a proactive approach rather than a complacent one. Approach it with an open mind. What you learned when you were younger may not be true.

Use budgeting tools to keep yourself on-track

For me, budgeting was an essential part of building a healthy relationship with money. Without a budget, I spent every single dollar I made every month. If for some reason I had money leftover at the end of the month, I would find something to spend it on. Maintaining a budget helped me realize how wasteful some of my spending was. It helped me set financial goals and earmark money for future saving and spending. I used (and still use) the popular app YNAB, which is built around the idea of giving every dollar a job right when you earn it.

This method worked very well for me. Every dollar immediately had a purpose; no more money sitting around in my bank account waiting to be spent frivolously. I reached a point where I would budget months in advance, and the money I earned in January would be assigned to budget categories for May. Rent, Roth IRA contributions, dining out, groceries, electric bills, and more would all be covered well in advance. I felt like I didn’t have much extra spending money because every dollar had a purpose. In reality, I had a substantial amount of potential spending money, but since all that money was earmarked, to me it didn’t exist.

Once budgeting and spending become second nature, you may graduate to a cash management plan, where you have the ability to save what you need to save every month without sticking to a strict budget. Personally, I still use a budget and don’t plan on stopping anytime soon. I know that I naturally spend less and save more when I am planning where every dollar goes in advance.

Give yourself permission to spend a healthy amount

When I started budgeting, I quickly learned that I would go crazy if I didn’t have some money set aside for unplanned, frivolous spending. A big part of having a healthy relationship with money is being able to spend money that you know you can afford to spend without feeling guilt or shame. People of all levels of wealth and income struggle with this.

One major reason I’ve noticed people struggle to spend money on unnecessary expenses is uncertainty about their financial habits. They don’t truly know whether they are saving enough for the future, so out of an abundance of caution, they severely restrict their spending to save even more. It is difficult to find a perfect balance, and you can quickly go from not spending enough (as crazy as that sounds) to overspending.

The key to finding a perfect balance is identifying all of your financial goals, determining what you need to do to achieve those goals, and implementing a plan that aims to account for as many “unknowns” as possible (such as investing returns, changes in income, big life events, and inflation, just to name a few). Our Know Your Number course is a good place to start thinking about those goals and what they will take to accomplish. Meeting with a fee-only financial advisor is a great next-step for those who would benefit from a second set of eyes or financial co-pilot.

A healthy relationship with money doesn’t develop overnight. If you currently believe you have an unhealthy relationship with money, it is possible to overcome prior habits and beliefs, but it takes time. As someone whose relationship with money has changed drastically over the years, and become healthier over time, I can say without a doubt that starting the work today is very much worth it and can lead you to feeling happier, more secure, and confident in your finances.

If you are one of the Americans living paycheck to paycheck, you probably know what you should do, and what order to do it in if you are familiar with the Financial Order of Operations. That doesn’t make it easy. I want to go back to the very basics of finance and lay out how you can get your financial life together in 2025. Financial Mutants, this article is probably not for you, but feel free to share it with anyone who won’t take it the wrong way.

1. Make a plan to spend less than you make.

The most basic step to being successful financially is spending less than you make. You must spend less than you make in order to save, invest, or pay off debt. If you are in a tough situation financially, it is much easier said than done. To spend less than you make, you have two options: decrease your spending or increase your income. There’s no right answer for everyone. You may not have any room left to decrease your spending, or it may not be possible for you to increase your income much, or you may need to both decrease your spending and increase your income to be successful.

If you don’t know if you can lower your expenses, or how much you could lower your expenses, I’d like you to open a spreadsheet (Google Sheets is a great free option) and enter in every single expense you had last month. Use the cell shading feature to color code the cells. You can use whatever colors you’d like, but I’d suggest using green to notate necessary expenses (rent or mortgage payment, gas, utilities, groceries, loan payments, etc.), yellow to notate non-essential expenses (dining out, fun money, etc.) and red to notate any “regretted” expenses (why did I spend money on that?).

How much could you save every month if you cut out all of the red spending? How much could you save if you cut out some of the yellow spending? If you don’t normally track your expenses, this experience could be eye-opening for you. You might realize that all you need to do to be successful financially is eliminate certain expenses. However, that may not be the case. Maybe you don’t have any expenses left to cut, or feel like expenses you could cut would cause more harm than good (let’s face it, not getting that weekly Starbucks isn’t going to solve all your financial problems).

If you feel like you don’t have any room to cut your expenses, or if solely cutting your expenses isn’t enough, the other way to spend less than you make is to increase your income. Increasing your income is more possible than ever, and it can take MANY different forms. Maybe for you it’s as simple as taking on extra hours at work, if you have the capacity. If you have marketable services you could consider taking on clients as a freelancer if your full-time job allows. Changing industries entirely may be necessary if you feel like you are in a dead-end career without the potential for growth. If you have extra time, there are plenty of side hustles out there that require little to no skill.

2. Rewire your brain to practice deferred gratification.

Everyone who is able to spend less than they make and invest for the future has one thing in common: the ability to practice deferred gratification. It comes naturally to some but for most of us it is very difficult to do. Our brain naturally wants gratification now. Saving for retirement is especially difficult because you don’t have to delay gratification for hours or days or even weeks or months, but years and likely decades. How in the world do you put money away and not touch it for decades when you have the option to enjoy that money now?

A great first step is to know what every dollar invested today could turn into by retirement. Sure, it doesn’t feel great investing $100 for retirement when you can instead spend that $100 today. But what if I told you the decision isn’t between $100 now and $100 in retirement? If you are 20 and invest $100 earning 10% for 45 years, until age 65, you would actually have $8,835. So the decision now is between spending $100 now or $8,835 at age 65. Even though our brains are wired to want gratification now, it’s pretty easy to see how much you can be rewarded by waiting.

It can still be really difficult for us to actually save that money instead of spending it. Sure, I might have $8,835 at 65, but what does that even look like? I know exactly what that $100 will get me today and how much I’ll enjoy it. A zero-based budgeting software such as YNAB can essentially help trick you into living below your means. The idea is that by giving every dollar a job and a purpose, you don’t feel like you have money left over every month. You may feel “broke” because you are utilizing every single dollar you make. Except instead of spending every single dollar you make, you are investing for retirement and saving for emergencies and other large expenses.

3. Start the Financial Order of Operations

Once you have a cash surplus every month and are spending less than you make, you are ready to tackle the Financial Order of Operations. Check out our ultimate guide to the FOO if you are unfamiliar with the steps or want to learn more about starting. The first step is to build a baseline emergency fund to cover your highest insurance deductible. Check all of your policies, like homeowners, car insurance, and health insurance, and use your new-found cash surplus to build enough to cover the most expensive deductible in a high-yield savings account.

Building this baseline protection from emergencies can keep you from going into debt to cover unexpected expenses. You are well on your way to being a regular Financial Mutant – before you know it you’ll be contributing to Roth IRAs, HSAs, and tracking your net worth every single year. The difficult part of the journey is already behind you – once you are living below your means and practicing deferred gratification, building wealth is surprisingly simple.

You may have heard the news: the popular budgeting app Mint was shut down in March 2024 and is currently migrating at least some features to creditkarma, a personal finance app also owned by parent company, Intuit.

We reviewed some of our favorite budgeting apps in February, and the app I have personally used since college is You Need a Budget or YNAB. We are not sponsored by YNAB or any budgeting app, but I thought it would be helpful to give my perspective about how and why I use YNAB for anyone looking to start budgeting or looking for a new budgeting app.

Watch Brian & Bo review the popular YNAB Budgeting App (near 7 min mark) along with other favorites in February 2024.

• Every Dollar (03:48)
• YNAB, AKA You Need a Budget (07:48)
• Copilot (11:30)
• Monarch (14:35)

Before I tried YNAB, I tried many different expense-tracking apps like Mint but had never truly budgeted. I initially tried YNAB because they offered one year free to college students, and still do. I had no plans of paying for YNAB after my free year. The idea of paying for an app to effectively help me save money made no sense to me. How is spending money going to help me actually save money? Can’t I save more money by not paying for a budgeting app?

After actually using YNAB for a year, I was sold. I was not making much money at all, working part-time and being in college, but YNAB helped me live below my means and build an emergency fund.

Why YNAB works

YNAB is not a passive budgeting app. It requires a significant amount of involvement from the user, especially at the beginning (once you get your budget up and running it isn’t as much work). YNAB worked for me because it uses zero-based budgeting, which means as soon as you get paid or receive income you put those dollars to work. Before I started using YNAB in college, I would always have enough to pay for all my necessary expenses like rent, gas, and groceries, but all my extra cash flow would be eaten up by unnecessary purchases. By assigning every dollar to a category right when you get paid, you no longer feel like you can spend money on frivolous purchases even though you technically have money in the bank. That’s the beauty of YNAB: it makes you feel like you have less money than you do, which makes it much easier to save.

Learn more about the YNAB personal finance app at www.ynab.com

How to use YNAB

You have to put in work to have success using YNAB. This means actually creating a budget that you can stick to, adding transactions as soon as you spend money, and adjusting your budget proactively instead of reactively. YNAB integrates with most major banks and credit card companies, so you don’t need to manually enter transactions, but I highly recommend doing so. Manually entering transactions not only means your budget is always as up-to-date as possible, doing the work yourself discourages impulse purchases and spending money you don’t have.

Almost everyone has major expenses and purchases throughout the year that sneak up on them, and YNAB handles these beautifully. Setting up sinking funds allows you to budget for any recurring expenses or unexpected expenses on a monthly basis. Have to pay $120 every March for a subscription service? You can easily set a goal to save $10/month to make it a bit easier. Have an older car that you’ll need to replace in the next few years? You can set a goal to put away $200/month for a car down payment.

YNAB has a YouTube channel with hundreds of helpful videos from getting started with YNAB, maintaining your budget, and learning about more advanced features. No matter which budgeting app you use, you’ll get as much out of it as you put into it. There’s no magical app that can make you spend less or create more margin in your budget. However, budgeting apps can be an extremely useful tool to build financial discipline and create more slack to save and invest for retirement.