Living a Paycheck Behind

[lorraineb]

Does anyone live paycheck behind? there is a fairly good chance that I will be getting a small raise in the coming months, and I have seen this method of saving the past. What I would do is take whatever raise I receive, and then save 100% of it. I would continue to live as if I were still getting the same amount of money as I was before I received the raise. Then the next time that I get a raise, I could move up to the level of what I was being paid before, and save whatever raise that is. It seems like a pretty easy and effective way to save money which is something that I sometimes have trouble doing.

I was wondering if anybody has ever done something like this, and how successful they were using this method? Were there any problems that came about that I should be aware of if I try to do something like this? What is your opinion on this live a paycheck behind savings method?

[Permanent Temp]

Well the one time I've done something similar I suppose was when I got my contract job I decided to take all the income from my part-time job and put it in my emergency fund since I no longer needed it to survive.

It was a really good move on my part. Every two weeks I just transfer the money directly there and watch the balance grow. This emergency fund has already saved my butt twice since being established over a year ago.

What I don't understand about your method described is if you can live on the money you have now why wouldn't you just keep living off of that and just use any future raise money as savings, to a goal, to debt etc. Why increase your paycheck if you don't have to and are managing fine on the money you make now?

[Retired To Win]

... What I don't understand about your method described is if you can live on the money you have now why wouldn't you just keep living off of that and just use any future raise money as savings, to a goal, to debt etc. Why increase your paycheck if you don't have to and are managing fine on the money you make now?

EXACTLY!

Take that money and move yourself to Financial Independence. You can check out my approach at:

My Financial Independence Key:

http://retired-to-win.savingadvice.com/2013/12/17/my-financial-independence-key-separating_106169/

Good luck.

[MonkeyMama]

Even better, always save *all* of your raises. That is what we do. I have no idea how one gets ahead if they spend most of their raises. I'd save this one and see how it goes. & I would think about saving the next raise too.

There are of course exceptions and it is not at all like it sounds. Our lifestyle is way more luxurious than it was when we just started out, and we have 2 more mouths to feed. But the only time we have ever particularly raised our spending level was when we bought our first home (15 years ago). {& even this is only because we *had to*. Not exactly a lifestyle choice, except not wanting to live with parents and roommates forever once we had college degrees and good incomes}. Things come down in price over the years and we get more efficient. In addition, our cash mentality means things were very tight when first starting out, but doesn't matter so much with time. I only had a year or whatever to save up for my first car so it was only $1,000. I now have $20,000+ saved for my next car. I am not spending/saving any more car money than I ever have, on an annual basis, but I have just had a *lot* longer to save up for my next car. This kind of applies to everything, but is probably the most extreme example.

OF course, we have splurged on things over the years. It's easier for us to splurge on a shorter-term expense than a long-term commitment. I have no problem spending money, but we prefer to keep our commitments and regular spending on the low side. Makes life a lot easier when crap happens (Which it always does). One of our big splurges was part-time daycare with spouse at home. It was crazy expensive and I knew no one else understood. BUT, it was just a few years, and since then all that money goes to our savings and investments. I Was okay with the splurge because it was not a long-term commitment. IT was something I could have dropped the next day if we suffered a financial setback.

[creditcardfree]

I know we are currently saving the last raise my husband received, and likely the one before that. Most of the increases have been funneled to retirement and college savings. You WILL get ahead financially if you do this. Good plan!!

[feh]

Even better, always save *all* of your raises. That is what we do. I have no idea how one gets ahead if they spend most of their raises. I'd save this one and see how it goes. & I would think about saving the next raise too.

Ditto.

Spending more after a raise, whether it's the current raise or the previous one, is just lifestyle creep. Try to decouple what you make and what you spend.

[snafu]

I like your plan and hope you'll action it. Anytime there is a change in income is a good time for a full spending review. Take an hour to review spending January - mid April and see if you can identify any money 'leaks.' These are small amounts in themselves but over the year add up to a substantial sum. Are there any small changes that can be made to add to savings which accelerates your plan? Do you plan to open a dedicated savings for the sum or would you be content adding it to your EF for example.

Last year I was so annoyed at the charges our bank was adding/increasing, I switched to a CU. I am still surprised by their excellent customer service and savings [$35. x 12 = $420] in regular bank charges. I thought the smaller ATM network would be problematic but they are linked to an ATM machine nearby. I finally realized I hardly use cash due to cash back CC benefits.

[hamchan]

I want to live in this magical world where my raises actually outpace inflation. Geez.

[paystub]

Agreed with Retired To Win.

[cougs4bcs]

if i did that, i'd only be saving an extra 1500 per year! i think mindset is more important. but definitely a great plan in theory!

[phantom]

I think your plan will work well as long as you're getting bigger and bigger raises all the time. But, I think it's going to get a bit weird if your next raise is smaller than this most recent one. Let's say you just got an extra $100/month, and your next raise is an extra $50/month. It seems odd to me that you would be using your extra $50 to justify spending an extra $100 and that your savings would actually drop after the next time you get a raise.

Still, I think that anything you can do to convince yourself to keep your spending low after a raise is a good thing. If this happens to be the trick that gets you to do that, great!

[JimmieMenon]

Salary raises is the main problem in middle level companies. They don't utilize payroll services therefore sometimes they fall behind the salary distribution date and sometimes they give incorrect salary to the employees.