For more than a decade, wages, in real terms, have been pretty much stagnant.

Even as productivity has increased among the middle class, wages have failed to improve to match. So, even though the recession has been over for more than five years, many Americans still feel the pinch.

Recent research suggests that more than 25 million middle-class Americans are living paycheck to paycheck.

According to a study from the Brookings Institution, 66 percent of the American households living “hand-to-mouth” are families with median incomes of around $41,000.

This means that, even though there is an economic recovery underway (albeit a rather lukewarm recovery), millions of Americans — many of them with jobs — aren’t reaping the benefits of the recovery.

When you’re living paycheck to paycheck, you don’t usually have liquid assets, such as savings accounts. The research finds that these Americans do have homes and retirement accounts, but, even then, the median net worth is still only $41,000.

To get beyond living paycheck to paycheck, the Americans in this study needed an income of $51,000 a year and had assets of $116,000.

But that doesn’t mean that you are doomed to live paycheck to paycheck, no matter how much (or little) you make. You can stop living paycheck to paycheck if you are willing to make changes to the way you handle your budget.

Here’s How to Stop Living Paycheck to Paycheck

Before we get started I want you to understand that for many years I lived paycheck to paycheck. Heck, many months I ended up in more debt because I was using a credit card to pay for things I felt I needed but couldn’t afford.

Living paycheck to paycheck is stressful and not fun. There were times a friend would call to go out and I’d have to say no because my bank account was just about tapped. I remember situations where if I went out to eat one weekend it meant that I’d be done until my next paycheck and I’d have to cut back.

There were days it felt like there was nothing I could do about it. It was depressing. I lived in NYC and living by the seat of my pants financially just seemed to be the norm.

But when I look back there were actions I could have taken. Some of those steps are what I used to get out of the paycheck to paycheck mentality and eventually get out of debt.

Here the steps get out of the paycheck to paycheck mentality summed up for you.

Step 1: Identify and Cut the Waste in Your Budget

Your first step is to figure out where you are wasting money. This might have to eat some humble pie with this, but you have to do it.

Experts estimate that the average household wastes between 10 percent and 15 percent of its monthly income. This means that if you make that $41,000 a year, there is a good chance that you are wasting at least $341.67 each month. That’s a LOT of money that can be put to better use. You need to go through your spending and figure out where that waste is for you, and turn it into something productive.

To identify what is waste in your budget, do the following 3 things:

Determine your priorities, values, and goals : Decide how you want your money to work for you. What are your family’s priorities, values, and goals? Identify the long-term goals you have for your money and your life, and make sure these goals line up with your values. Then, focus your spending so that it matches your values. It comes down to fitting your spending with your values (and understanding what those values are).

: Decide how you want your money to work for you. What are your family’s priorities, values, and goals? Identify the long-term goals you have for your money and your life, and make sure these goals line up with your values. Then, focus your spending so that it matches your values. It comes down to fitting your spending with your values (and understanding what those values are). Track your spending for between one and three months : The longer you can track your spending, the better. But keep track of your spending for at least three months. Acknowledge everything you spend your money on, no matter how small it seems. Everything! Pay attention to where your money is going. Don’t cheat this step. You need to be brutally honest here.

: The longer you can track your spending, the better. But keep track of your spending for at least three months. Acknowledge everything you spend your money on, no matter how small it seems. Everything! Pay attention to where your money is going. Don’t cheat this step. You need to be brutally honest here. Identify items that don’t match your priorities, values, and goals: Go through your spending and look for items that you don’t need, and that don’t help you realize your long-term and short-term goals. Look for items that don’t fit with your values and priorities. All these items are “waste” that can be trimmed from your budget. Sure, spending can be fun. But you need to ask yourself if the fun is useful long-term or just a quick thrill. I’ll tell you, those quick thrills end up being debt you have to pay later on.

Once you’ve figured out what’s wasteful in your spending, well… stop spending on that stuff! You can free up so much money if you try.

Whether you want to get out of debt, save up for early retirement or work toward buying a home, cut out the unnecessary (and often unwanted) spending that doesn’t help you advance your financial and lifestyle goals.

You might be surprised at how much you are wasting each month.

Don’t forget to take other steps, including reducing your energy consumption, finding ways to spend less on gas, and employing strategies to look for deals and save money on everyday purchases like groceries. This can help you find a little more money in your budget as well.

You might have this initial feeling like you’re giving up too much and that you can’t have fun anymore. I hear you. But being in debt is not fun either. Trying to figure out where you’ll wrangle money to get by until your next paycheck comes isn’t fun. The surprising thing is you might actually appreciate being a bit more minimalist.

Side Note: If you seriously want to know where your money is going you need to track it. You can do it with pen and paper and by checking your statements but I’ve found using budget software is super-useful and easy, especially if it has a phone app. Here are a few of our favorites: Personal Capital – This software was first introduced to manage investment accounts, but you can use it to see all of your banking accounts in one place as well. It’s great to see where all of you money is in one place! Oh, and it’s free to use too with mobile apps as well. (There are paid options if you want them to manage your money).

– This software was first introduced to manage investment accounts, but you can use it to see all of your banking accounts in one place as well. It’s great to see where all of you money is in one place! (There are paid options if you want them to manage your money). Mint – This is free software that’s pretty powerful. Many people find Mint helpful in managing their money and it’s a personal finance favorite.

– This is free software that’s pretty powerful. Many people find Mint helpful in managing their money and it’s a personal finance favorite. Quicken – This one will cost you. But many find it a little more comprehensive than Mint (they happen to be owned by the same company – Intuit). I’m currently using Quicken for Mac and I’m liking it so far.

– This one will cost you. But many find it a little more comprehensive than Mint (they happen to be owned by the same company – Intuit). I’m currently using Quicken for Mac and I’m liking it so far. You Need A Budget – People who use YNAB seem to love it. I’ve heard a lot about this popular software. YNAB focuses on your budget and finding purpose for all of your money. This software will also cost you but there is a free trial and you can get it free if you are a student.

Step 2: Put Your Wasted Money to Work for You

Your next step is to take that wasted money and put it to work for you.

Depending on your goals and priorities, that might mean paying off high-interest credit card debt, or it might mean upping your retirement account contributions. You might put it in a high-yield account designed as an emergency fund.

The idea is to use that wasted money in a way that is no longer wasteful.

If you want to avoid living paycheck to paycheck in the future, you need to build up your assets. Rather than wasting your money, it’s vital that you change your outlook. Mindfully spend on what matters to you, rather than mindlessly spending on consumer items that aren’t that important to you. You will be surprised at how much fat simply thinking about your purchases and getting down to the “why” behind your spending can trim from your budget.

Step 3: Cultivate Income Diversity

Of course, the end of your paycheck-to-paycheck lifestyle doesn’t have to depend entirely on what you cut from your budget.

You also have the option to make more money.

Relying only on a paycheck can be a risk in the current economy. Job security is on the decline, and you never know when you will be the next person laid off.

Cultivating income diversity can help you avoid living paycheck to paycheck because it provides you with alternative income. A small side business can be a great way to bring extra income into your home — extra income that doesn’t disappear if you are laid off in six months.

Use extra income to further build your assets. You can super-charge your emergency fund, or you can add more money to your retirement account. Use the extra income for “fun” things like vacations or family outings. That way, you can concentrate on using money from your day job to build your savings and other assets.

Gone are the days of working at a company for 30 years and then retiring with a nice pension. Cultivating income diversity just makes sense, since it provides you with an extra way to build your resources and a safety net for the unexpected. You don’t have to try to replace your primary income with side income, but it doesn’t hurt to build a little extra revenue each month.

Step 4: Consider Cash Flow

Don’t forget to watch how your money flows in and out.

Sometimes, cash flow — including the timing surrounding when you get your money — is as important as how much money you are getting.

Divide up your bills according to due date, and according to when you will get paid. If you are paid twice a month, plan for some bills to be paid in one period, and the rest to be paid in the other. If you don’t manage your cash flow effectively, you can find yourself running out of money, and scrambling to use credit cards or other sources of high-interest debt to make up the shortfall.

Hint: If you’re having trouble lining up your bills with your pay dates try calling up the company and moving your bill’s due date. Credit card companies will usually let you move your due date around a bit. I’ve done this in the past and it helped me tremendously. This can be the difference between paying on time and being late and getting hit with fees.

To avoid living paycheck to paycheck, you need to be aware of where your money is coming from and when it arrives, as well as know where it is going and when it will get there. This can help you avoid overdraft charges in your bank account, as well as other fees that can come when your money isn’t where it’s supposed to be at any given time.

With the right setup, automation can help you avoid some of these cash flow pitfalls. However, you still have to take the time every now and then to make sure everything is on track. Make it a point to casually look over any automated portions of your finances a couple times a month to double check that everything is as it should be.

Final Words on How You Can Stop Living Paycheck to Paycheck

I’ve lived paycheck to paycheck and I tell you it’s stressful. Sometimes you just can’t do much about it. You just don’t have enough money. But if you look at your finances honestly and you’re willing to cut back some non-essentials, you can get out of the paycheck to paycheck mentality. Then you can start getting ahead of your bills and then, start building wealth.

Create a plan for your money, and then move forward with it. As long as your plan uses long-term and short-term goals based on your values and priorities, you have a good chance at getting beyond the paycheck to paycheck lifestyle.