How To Budget While Living Paycheck to Paycheck

Friday, May 10, 2019

How To Budget While Living Paycheck to Paycheck

So you've read the blog posts, books, and downloaded budget templates from all over the internet.  You're dead set on getting a budget set up and in place this time around.   But you keep putting it off day after day with the reasoning that you just can't afford to budget because you already live paycheck to paycheck.  

Valid reason, right? 
Stop right there! I'm going to explain to you why you definitely need a budget to STOP you from living paycheck to paycheck and how you can budget while living paycheck to paycheck.  

First of all - one of the main reasons most people even live paycheck to paycheck is because they only have access to half their budget for the month when they get their paychecks.  So when you have big bills due before the end of the month and before you receive both paychecks, you need to make sure you have enough already to cover it.   

This means you need to have properly planned out where everything in each paycheck goes prior to the bill being due.  And a lot of times we try to set money aside for a bill but since it's just sitting there in the bank account, you're more likely to swipe your debit card on an impulse buy because you know you have money sitting in there. 

So how do you fix this?? Well, it's not all that hard. 

1. Have a budget in place.
Obviously if you don't have a monthly budget in place - GET ONE! You can use my guide on how to make a budget and make sure you plan for expenses that don't occur on a regular basis.  Even though your dog doesn't go to the vet each month - you may need to put $20 each paycheck aside in a Vet fund.  

It's SO important to have a budget in place so that you are assigning your money a job and a place to wait in the meantime for that job.  This will bring me into the next point. 

2. Have envelopes or account shares set up for different categories.  
So this is why I like the cash envelope system for expenses that get paid in cash. This can be groceries, car maintenance, gas, fun money, and more.   For bills it's likely that you pay them electronically so it only makes sense to keep that money in your bank account.   

So for bills like that,  if you have a bank where you can create little shares in your account (you can usually name them things too) you should definitely take advantage of that.  I have a BILLS share in addition to my checking, savings, emergency fund, and vet fund share.  

Now what if you don't have a bank that lets you do that? Then in order to not touch the money you set aside for your monthly bills you need to commit to NOT spending with your debit card.   Use cash for everything you can that way you aren't swiping your debit card mindlessly.  See why the cash envelope system is SO important and SO helpful? 

3. Set up a paycheck budget. 
So how do you track what all the money is for on a bi-weekly basis? Well, I use my monthly budget to show me how my money is distributed on a monthly basis and how much to set aside for savings categories.  But on a bi-weekly basis I actually just use a plain old piece of notebook paper.  Each piece of paper has the 2 paychecks (or 3) for that month on it.  I use my budget to show me how much I need to put from each check towards a bill.  So say I have a utility bill that's generally around $100 a month.  I know to designate AT LEAST $50 from each paycheck for it.   When the money leaves my account I highlight it.  This way, if I look at my bank account and see $600, but then I look at my notebook paper and see all the un-highlighted amounts equal $600 I know that all the money is accounted for.  I split all of my bills between 2 paychecks and I've never had an issue so I know that way works best for me. 

4. Plan out 2-3 months ahead of time. 
So how do you plan for things that are due in the beginning of a month?   Easy! You include them in your previous month's paycheck distribution plan.  So here's a good example.  My insurance payment used to get taken out on the 8th of the month.  That's generally before my 2nd paycheck and sometimes even before my 1st paycheck.  So I look at the calendar that I keep with my bill due dates written on it whenever I make up my little paycheck sheets.  I use that to determine which month's paychecks will go for which month's bills.    It may take a couple months until you get on a rolling schedule but once you do, you'll be good for the future.  

And as you work to establish a schedule it helps to have money set aside for some bills that you aren't ready to pay yet on the calendar.  That's again why I scream at people to get an Emergency Fund in place! 

So now that I've walked you through the process, are you going to get your finances in order so you are no longer living paycheck to paycheck AND you can successfully have a budget in place? 

How To Budget While Living Paycheck to Paycheck

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1 comment:

  1. I think I have to hit Lotto....even though I budget like mad that last disaster in my house wiped out my emergency fund!!


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