Living "paycheck to paycheck" -- isn't that the point?

[Frugal]

I agree, living paycheck to paycheck is what many people end up doing, when their paychecks pays some to all of their immediate bills like mortgage, credit card payment, etc., and not much else. More people are in this situation than you would think, because of wage stagnation, and overall inflation in most sectors of the economy such as food, gas, and utilities like heat.

If you are able to save anything after paying your bills, I have to agree that technically, you are not living to paycheck to paycheck, since you have something left over afterwards. Some people literally have nothing left over, not even a dollar, and can't buy groceries or whatever until they get their next paycheck or gov't check.

[maat55]

I keep buffers in all my accounts, aside from my emergency fund.

[maat55]

Originally Posted by BuckyBadger

EF, right? And then pay back into the EF by diverting savings or decreasing spending until it's back up to a comfortable level?

I must sound idiotic. I have a PhD for crying out loud! But "Personal Finance" was never a course offered to me...

Your buffers and EF are two separate things. You should treat your EF as a treasured item, only using it in a real emergency, not as a buffer.

[PMMM]

I use a budget program called YNAB and I keep a 1 month buffer so I don't have to worry about that.

In other words all of the money that I receive this month is not needed until next month so in my budget plan it's not available until next month. All bills that are due this month are already budgeted for with the money I have saved. As this month ends I will already have built up the buffer for the following months bills and those paychecks will then go for the following month.

This way I never worry about big bills. But I also budget each month for all expenses. I have a couple life insurance policies that I pay for once per year. The total bill is $1500.00 but I budget for that each month. When the bill comes due I just write a check or use my credit card. The money is already there. I too use my credit card and pay in full each month to get the rewards. (I love flying to Hawaii and not paying.)

I have an large emergency fund which I never touch that is in the form of a No Penalty CD from Ally Bank. But I also have another emergency fund in the form of a MM account that is about 4 months worth of expenses. This is what I use for unexpected expenses and I replenish it as I use it. Much like Disney Steve articulated.

It works well for me and I never worry about bounced checks or not having money in the account if I need it for something.

[glock35ipsc]

I agree with the other comments in that living paycheck-to-paycheck is very different than living off of a zero-balance budget.

In regards to the emergency fund, as an FYI we have ours in a completely different bank, one in which we can't simply transfer money from one account to another. It does have it's own check book and debit cards.

I am anal to the point that we have a separate checking account that we call our "Medical Checking Account". We only pay medical related expenses out of this account (RX, co-pays, etc), and budget a certain amount to it each month. There is always many hundreds in this account.

We also have three checking accounts; a joint, and we each have a personal account. Paychecks go in to the joint account, then whatever we have budgeted for our blow money, fuel, groceries, golf, etc gets transferred into the personal accounts. This works well for us since we work different schedules (me days, her nights). In the past one might have made a purchase that did not get put into the checkbook register, etc, and yada yada yada, mistakes happened.

Long ramble aside, my point is we always carry a balance somewhere, whether it's in one of the checking accounts, the EF, or the savings account or money market account. So we are never "out of money" other than just on paper (the written budget).

[Little House]

I don't think I'd describe your situation as living "paycheck to paycheck" because you are setting aside some money for savings. What you might want to do is keep the extra $1,000 in an account that is linked to your primary checking. Many banks offer this service as an overdraft protection. That way you can transfer the funds yourself if your checking account is getting too low for your liking, then transfer the money back once your pay check is deposited. I call my "overdraft account" my "slush fund" account. I feel more in control if I can quickly transfer money to and from my primary checking.

[snafu]

Many banks give benefits for keeping a minimum balance in your checking a/c. What will\does your bank offer? Would you feel more secure having utilities on a 'budgeting' system so that you pay the same amount each and every month? You can also put utilities on CC to reap benefits.

I check a/c balances weekly as I track spending categories.

[khosta]

I am trying to save my money.... but no matter what I do it seems I am still living paycheck to payckeck - I pay my bills on time always, and then with the extra money, after grocery shopping, household shopping, etc, there is barely anything left. I will never get out of this vicious cycle.... UGH!

[disneysteve]

Originally Posted by khosta

I am trying to save my money.... but no matter what I do it seems I am still living paycheck to payckeck - I pay my bills on time always, and then with the extra money, after grocery shopping, household shopping, etc, there is barely anything left. I will never get out of this vicious cycle.... UGH!

Do you have a budget? Are you "paying yourself first?" Are you using a cash-based system?

If there isn't money left after all of your spending, you are spending too much. The way to fix that is to create a written budget and stick to it. If your grocery budget for the month is $400, then set aside $400 cash and when that's gone, you are done. No more grocery buying for that month.

Savings should be a part of that budget. Ideally, 20% of income should be going to savings though initially you may need to start with a lower number, like 5%, to get the hang of it. As you adjust your spending downward, you can adjust your savings upward.

[snafu]

khosta: change is hard but we're here to help. Post your spending categories and amounts, and see the suggestion. Transportation costs are getting higher, how are you managing? Food costs have been going up; restaurants can't absorb higher costs. Utilities will be increasing next.

[jteezie]

Paycheck to paycheck is a horrible horrible nightmare... even when it isn't.

I admit, I look at savings as an expense. For me, it is my biggest expense. This is probably the wrong way to look at it because it creates an emotional tension where you feel like you are short on money, but you are in fact saving adequately and SHOULD be spending the rest of it to enjoy the present.

I'm going through this dilemma and am trying to train myself to think differently. This is my best effort thus far.

I see the benefits of money as a weird equation/relationship between future and present value. I used to weigh everything toward the future because of this magical thing called compound growth/interest. Every dollar in the future was ALWAYS better than a dollar today. But that dollar needs to be converted into something. I believe it buys quality of life. Saving now definitely increases quality of life in the future. The more time to compound, the greater the improvement, however there reaches a point where the returns on the future start declining because you've accumulated too much and cannot spend it all. At this point it starts becoming less beneficial to save if you are sacrificing enjoyment in the present. The key is to find that balancing point. It will constantly shift as you gain/use/lose money, but it is important to have some sort of framework for evaluating how to spend your money.

I'm sure I said the same thing as everybody else, but in a different way. To try to tie it all together - I think it is fine to have a paycheck to paycheck mindset because it ensures that you don't spend more than you earn, however there are negative consequences such as stress so it is important to change the way that we respond to the paycheck to paycheck lifestyle. If we follow a decision process that ensures that we "spend" adequately on savings, everything will work out. Whether or not that works out is a whole other discussion...

Hope that helps.

[jerrycates]

Many of us came to a point of living the life from paycheck to paycheck and still are able to enjoy what life has to offer. Minimally but still fine.

[Lynk]

I pay myself first. 10% of my paycheck goes into savings. I also put back a cushion for my checking account each month. My account has a limit if you go below it will charge you. I have always been way above it but it just makes me feel better. When my cushion gets up to a certain point I put half of it in my savings.

[shanecurran]

It is a good idea to have an extra $1,000 in the checking account, but it takes a lot of discipline to not spend that money.

[Lynk]

I pay myself first. 10% of my paycheck goes into savings. I also put back a cushion for my checking account each month. My account has a limit if you go below it will charge you. I have always been way above it but it just makes me feel better. When my cushion gets up to a certain point I put half of it in my savings and start all over again.