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

[BuckyBadger]

But I'm also thinking more about the following sort of case: the animals go to the vet once a year and it's like $350. It's not an evergency, I'm also not going to take $13.50 out of my account every pay period and put it somewhere else to "prepare" for a bill that I can easily pay by not putting those $350 into savings for a month. Or by taking $350 out of my EF for a month and putting it back next paycheck.

So, what happens if you take out the $350 for the vet and then you have an emergency where the car dies or something? Are you going to borrow then? Defeats the purpose of an EF.

If by "borrow," you mean, "from myself," then yes. If I paid $350 from my EF for the vet and then had car expenses I would have $25,650 still to pay them. Then over the next few paychecks I would build my EF back up to $26k.

You may be misunderstanding my goal. I have no consumer debt to pay down. I don't need to pinch every penny -- just keep track of things before anything could get out of hand. I am trying to figure out the best way to put away the most money I can toward furure wants and needs, while still living a comfortable lifestyle and without dedicating my life to budgeting minutia.

My overall goal is like that of elessar78 and disneysteve. Make "paying myself (ourselves)" an important and primary part of where each paycheck goes, and spend the rest however we want.

[littleroc02us]

If by "borrow," you mean, "from myself," then yes. If I paid $350 from my EF for the vet and then had car expenses I would have $25,650 still to pay them. Then over the next few paychecks I would build my EF back up to $26k.

You may be misunderstanding my goal. I have no consumer debt to pay down. I don't need to pinch every penny -- just keep track of things before anything could get out of hand. I am trying to figure out the best way to put away the most money I can toward furure wants and needs, while still living a comfortable lifestyle and without dedicating my life to budgeting minutia.

My overall goal is like that of elessar78 and disneysteve. Make "paying myself (ourselves)" an important and primary part of where each paycheck goes, and spend the rest however we want.

Sorry I was mistaken about the 26k checking account thing. I guess you do what you want, but if it were me I would put aside and EF account and then use the rest to invest or put towards a major purchase.

[Mithrin]

I like to keep a buffer in my checking account so that I don't have to worry about overdrafts. I generally keep an extra 1K in checking. It's more than the largest check I write each month (rent), so I don't have to worry about whether the rent check is cashed before the paycheck clears. Also, my bank now requires a minimum balance to avoid a monthly fee, and the padding keeps me from getting hit with that.

[Redraidernurse]

We always keep a cushion in our checking account, so we never give a second thought worrying about any over drafting.

[tripods68]

From our Net Pay checks, we automatically saved at 1,124 - to 1,625 per month towards our EF. Our monthly goal is to saved 1,500 a month till we reach our 8 - 10 months EF. We're half way on our goal but it's by no means easy...and its a constant struggle. The point is, we hardly keep any balance on our checking account.

Not to get off tangent, but last night I was watching 60 minutes which they featured "homeless" kids living on motels because of the depression-era with millions of families who have loss their jobs, homes, etc. Many of them have gone to sleep hungry.

It made me sad a bit tearful but thankful at the same time how lucky we are as a family. Both of us still have our jobs while raising our two wonderful kids to the best of our abilities. With our many busy lives, sometimes its nice to be reminded, what we view as daily struggles, are no way be compared to those families who have suffered far deeper than many of us here...We are all should be bless and thankful.

[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]

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]

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.