Leaving The Paycheck to Paycheck Mentality
For all of my adult life, I’ve looked at my money on a monthly basis, and assigned bills to each paycheck. The electricity gets paid out of the first paycheck. The rent (now mortgage) gets paid out of the second paycheck. And so on and so forth. My planning for how to meet monthly obligations was always directly tied to the money that was coming in that particular month. I honestly didn’t realize there was any other way until after I started this blog.
We have now successfully reduced our recurring monthly obligations so that they could all conceivably be covered by one of my spouse’s two paychecks each month. Because we have eliminated about $660 worth of monthly bills in eliminating the car loan, his student loan, and the credit card, our recurring monthly bills are almost exactly the same as a single biweekly paycheck for him. Not quite, but very close. This does not in any way, shape or form mean that we could get by each month on just one of his paychecks, for we wouldn’t eat or drive the cars, never mind saving any for irregular expenses, but it has opened up a new possibility in my head. Maybe it’s time to try and get a paycheck ahead. Maybe we could go from living paycheck to paycheck, to living one paycheck ahead of the game. Instead of spending paychecks as they come in on monthly bills and expenses, we could be spending the first paycheck of the month at the end of the month, and the second paycheck of the month the next month instead.
I still have to come up with a plan how to do so, and since it is close to the end of 2008, I’ve decided to make it my goal to start 2009 working one paycheck ahead. I’ll still be putting all the money we possibly can each month towards paying off the last non-mortgage debt, it may just get shifted by two weeks or so while I do it.
Off to work on step one – change all direct deposits of paychecks from our checking account to our savings account.
November 25th, 2008 at 11:19 am
Our bills and expenses are covered by one biweekly paycheck. The second paycheck is the one that has finally become extra. But it took a while of having that before we realized it. I know, we’re geniuses. It is a weird transition to make but once you do, it’s more freeing. We were living paycheck to paycheck longer than we had to simply because we didn’t realize we didn’t have to. And once you get ahead, you keep getting further ahead, little by little. Just realizing you can do it is the most important step to making it happen.
November 25th, 2008 at 11:41 am
Isn’t is so liberating to be financially responsible. So many people complain that budgets are so restrictive. But I wouldn’t give up my financial freedom for anything.
I agree with Emily. When you start getting ahead, you keep widening that gap.
Keep up the good work!!!
November 25th, 2008 at 11:51 am
This post was encouraging for me to read. I’m on the same path that you are, but I’m further behind. It’s exciting to see other people further on their journey to eliminate debt. Congrats!
November 25th, 2008 at 1:23 pm
I look forward to reading more about how this goes for you!
November 25th, 2008 at 1:43 pm
Your blog is so inspiring! I’m way behind you, but this is another thing for me to aspire towards. How wonderful would it feel not to be so acutely aware of when your next payday is? Sometimes I feel like my life revolves around payday.
November 25th, 2008 at 2:20 pm
If we were to have just DH’s base pay we couldn’t make it on one paycheck; given, however, that he averages 10-12 hours OT every week, we could *if* we didn’t have credit card debt. As long as DH is at his current payscale, we couldn’t make it on a single basic paycheck. Kinda @#%! since he’s in management and has been with this “company” for 20 years.
November 25th, 2008 at 2:24 pm
Getting a paycheck ahead is such a relief–congrats on your goal to do so! It is a big relief. Don’t try to be perfect, though. The minute my husband and I got ahead of the paycheck schedule when it came to bills, we had an emergency too big for our EF. We’re back at square one, but at least we’re not back to square -4. We just figured that fate was preparing us for that emergency, although it was really nice to have the money waiting in our checking account before the bill even came. We’re slowly working our way back up to getting ahead.
November 25th, 2008 at 2:37 pm
Getting ahead by a paycheck is another kind of “emergency fund”…it gives you a little breathing room financially and there a few extra dollars available for unseen expenses. I highly encourage everyone to try to get there. It takes so much stress out of your life.
November 25th, 2008 at 4:52 pm
Cool! My husband gets paid once per month at the end of the month, so we need to have some cash on hand at that time to cover our rent (due on the 1st) and a few other bills that are due early in the month.
During leaner times, we’d find ourselves at the end of the month without any money. We’d have to wait for that paycheck to arrive before we could pay any bills. It was incredibly lucky that we never were late or overdrew our account.
I think it’s much easier for us to be at least a half of a paycheck ahead.
November 25th, 2008 at 6:17 pm
I’m excited for you. I hope to see more about this change and what works/doesn’t work for you.
Due to complicated situations with my life, this is what I am working on right now. It will bring some wonderful changes to my life, in more ways than one, so I can’t wait.
November 25th, 2008 at 6:48 pm
Just a thought;
Won’t you have to save one paycheck by the end of the year to start 2009 off living one paycheck ahead?
I love reading your blog, and I can’t wait to see what you write next.
November 25th, 2008 at 7:46 pm
Honestly, I don’t understand the difference. If I was “one paycheck ahead”, I’d transfer a paycheck to savings, because it makes sense for me just to pay this months expenses out of this months money in my checking account.
BUT, it seems like it makes a difference in your finances, and that you have been saving money. So, congrats!
November 25th, 2008 at 8:20 pm
Despite not having enough in a single paycheck to cover our costs, I did make the transition you are talking about during a month in which we had three paychecks. I also got ahead by prepaying a bit extra and rearranging due dates. Now, though income is biweekly, no bill is directly associated with a specific paycheck. Originally I had a single, separate account where funds (aside from grocery/etc allowance) remained until I paid everyone at the end of the month. I paid a set amount on a set day, where I could, so that even though our income may be unpredictable, our bills weren’t. Some months I overpaid, others I essentially underpaid because of a credit. Lately I’ve begun segregating funds (set amounts per paycheck) for different bills into different ING savings account (e.g., Utilities, Telecommunications [cable, phone], Insurance) from which bills’ “amount due” are automatically paid by my billpay service. This further insulates us from inconsistent paychecks, and requires even less active attention from me. We have equivalent to a full month’s cushion at ING now for any and all regular bills. I keep track of bills, but there’s not direct correlation between INs and OUTs. I do have an ill defined savings account funded with leftover money not fitting other categories from which to draw those unpredictable/irregular expenses. The amount going into this particular account will fluctuate based on how large the paycheck actually is. I have a spreadsheet which allows me to know well ahead of time when some of these expenses will show up and how close I am to being funded for these events (property taxes good example). Disappointingly I can also see where we could have a shortfall if there isn’t OT income…. Overall, it takes about 5 minutes per paycheck to keep on track.
event.
Anyway, long story short: that extra biweekly paycheck can allow you to get the ball rolling as can a tax return, or some other serendipitous
November 25th, 2008 at 9:39 pm
Living one paycheck ahead of the game is a wonderful goal! I just make this one of my goals for next year, too!
November 25th, 2008 at 11:00 pm
What an inspiring post. I can only dream that we will be here sooner rather than later. I can’t wait to see what 2009 has in store for you and for all of us on this snowflaking, debt-eliminating course.
November 26th, 2008 at 7:18 am
We just re-arranged our budget to see how much our fixed expenses were. Sure enough, one paycheck of my husband’s worth. Since he gets two a month, and I get two a month, we shouldn’t have any problem abolishing our credit card debt.
I got freaked out this week when a bill that I thought had been paid in September popped back up. Strange how car bills can take away your feeling of financial security. (We had finally gotten around to saving up for our Xmas present, went out and bought it, and the bill came in and wiped out our cushion.) If we had bought the thing when we had no emergency fund, an $800 unexpected bill would have been a really big problem.
November 26th, 2008 at 9:33 am
I love this blog. Thank you for sharing your world. I just started a blog as well and think you would like mine as well. We seem to be interested in the same things. I used to be in debt and worked my way out…keep plugging…once you get debt-free it will be hard to go back! Keep the blog going!
http://beefupyourpiggy.blogspot.com
November 29th, 2008 at 10:22 am
You should check out the site ynab.com It has this mentality and software to go with it…a real eye opener for me!
November 29th, 2008 at 11:58 am
Congratulations on your achievment! One paycheck ahead is an importnant milestone. It should be easier for you now to get towards a full-scale emergency fund that should amount to at least 6 paychecks in savings. Do yourself a favor and put your money to a high-yield savings account to make your hard earned dollars work for you from day one.
November 29th, 2008 at 2:15 pm
Guess what?
I spoke too soon, apparently. The fuel pump on my car went out and wiped out my emergency fund, so we’re just above living paycheck to paycheck again. Argh.