Welcome to my world! I am a paycheck to paycheck budgeter. I am a true believer in zero-based budgeting. In fact, I believe it is one of the main reasons I was able to take control of my financial beast. If most or all of your income is entirely focused on your paychecks, shouldn’t your expenses also be focused on your paychecks too? Like I have said before, this is the game of life, stuff happens and things are not neatly packaged into perfect monthly expenses. You need to be able to roll with the punches and make changes that are necessary due to life’s unexpected presents.
Paycheck to paycheck budgeting is a perfect tool if you get paid bi-monthly. Breaking up your expenses to focus on your paychecks works like a charm and allows you to also deal with life’s mishaps. So how do you go about starting a paycheck to paycheck budget?
Using the calendar method with paycheck to paycheck budgeting is simple and great for people who like to visualize the month. It is also a great visual to decide what bills you have to pay with what paychecks. The example below is a simple visual to show you the power of the calendar method for paycheck to paycheck budgeting. Knowing what expenses you have to pay with the upcoming paycheck and learning how much “extra” money you have left over for variable expenses allows you to allocate your money more wisely.
Any “extra” money you have left over from each paycheck needs to have a job. You will need this extra money to pay for your variable expenses such as gas, food, clothes, and those morning coffee runs. After you allocate your extra money to a “job”, you should end up with income – expenses = $0 (hence the name zero-based budgeting).
One of the advantages of paycheck to paycheck budgeting is being able to plan for that annual or semi-annual bill you might have. For example, you might decide to pay your car insurance every 6 months and not every month. Take the amount of the bill and divide it by the number of pay periods you’ll receive until the next bill is due. This will allow you to set aside that amount each pay period until you have accumulated enough to pay the entire bill. You may not realize it, but when you don’t have enough to cover a big expense or annual bill, it is usually because you earned the money in another pay period; it was just never set aside.
I have learned over the years that this budgeting method is not something I do because I am poor or because I can’t live on last month’s income. I do it because it makes the most sense. When you type “paycheck to paycheck” into Google, you will see results such as Stop living paycheck to paycheck, how to step away from paycheck to paycheck budgeting, and how to break the living paycheck to paycheck cycle. So you have to ask, why is it so frowned upon? Most of the time, the term “paycheck to paycheck” is associated with being poor. It used to suggest or hint that the person using this method has to stick to a “strict” budget to survive. This is far from the truth. Some of the wealthiest people use the paycheck to paycheck method because it gives them the freedom to allocate their money the way they want. If you budget paycheck to paycheck knowing that a huge chunk is going towards a future financial goal, that’s a success. A lot of people tell me they don’t even know where their paycheck goes, it just disappears. Just because you are rich with money, doesn’t make you rich when it comes to funding future financial goals. Making $900,000 a year doesn’t fund your retirement, or pay for your child’s education. It does not put money into savings or invest it in your future – it’s just money that you earn and you choose how to spend it. Paycheck to paycheck budgeting will allow you to achieve what it truly means to be rich.
This was absolutely the key for me! Once I figured this out, everything fell into place. Now I’m salaried it’s fine, but back then on a low wage with varying pay coming in every week … it was a nightmare.
Yes! Budgeting paycheck to paycheck is a great way to stay organized and to keep track of your bills. Thanks for the comment!
Yes! Budgeting per paycheck makes so much more sense to me. That is the way I’ve always done my budgets. It seems like if you do a monthly budget you could run out of money before your 2nd paycheck comes for the month.
LOVE THIS! I have always budgeted this way and kinda went with the templates people on pinterest have done! Thanks now I have an actual template I can follow and get!
I am so glad it helped Megan!
How do you budget on 11 dollars a hour. I can seem to budget right. Please help!!
Lucrece, I know the feeling of not making much and trying to budget. I did it for nearly 7 years before I jumped into the world of finance. I feel you and I hear you! It’s hard and it takes some time to figure out. Trust me when I say this, you are not alone.
The very first thing you need to do is figure out your expenses. What exactly are you spending your money on every single month? What expenses are certain? These are expenses that you pay every month and they never change. Things like your mortgage/rent, car payment, utilities, cell phones etc.. You also have to figure out what other things you are spending money on. Things like clothes, food, and clothing. These are expenses that change from month to month.
Add up your expenses and compare that amount to your take home income. Are you in the red or green? If you are in the red it’s OK. Look at your expenses and see where you can reduce. Look at budgeting as tracking your money. Where is it going? Then set up a plan from there.
You really have to know your finances on a very personal level. I will make sure to address this question in an upcoming blog post. If you have any further questions, or just need someone to talk to about the frustrations you are having, please reach out. You can always reach me through the contact page on the blog or by emailing me at TheBudgetMom@gmail.com. Here is a post on how to set up a budget step by step, with pictures.
http://www.thebudgetmom.com/how-to-create-a-budget-when-you-really-dont-want-to/
This might help as well. You can do this! I know it’s easy to feel down, but you really can learn how to budget with a low income. It’s all about making the most out of the money you do have. $11/hr may not seem like much, but it can go a long way. Keep your head up!
Love the article. This is how I do our household budget. I set a base pay budget (no over-time or travel pay added in). Then I figure what we can afford off of the base salary. Then under that I add any extra income from over-time and anything else. This usually gets allocated to debt payoff, and any extras like entertainment or gift funds.
I love that Annah! That’s exactly how we budget too! It works the best for us!
Great post, I like the way you show it on the calendar its paycheck and then monthly bills and what get s paid when. I like this idea I am looking for a new way to budget this may be it for me.
Thanks
Robin
I am so glad it helped Robin!
How do you create a paycheck to paycheck budget if one spouse gets paid bi-weekly and the other weekly? I’m having trouble figuring out what bills to pay from what check since they changed my husband’s pay from bi-weekly to weekly. Thank you.
I love a week by week budget. Just a question , if you’r wanting to smash out some debt/a loan , would you bother saving or would you put every extra cent you have into paying it off ?
Hello, Olivia. If you are wanting to pay off debt I suggest you come up with a debt repayment plan. Here are two articles that might help:
https://www.thebudgetmom.com/debt-snowball-method/
https://www.thebudgetmom.com/how-to-pay-down-debt-using-the-avalanche-method/
Once you have your repayment plan, then I would throw any left over money from your budget into your repayment plan.
I am excited to discipline myself finally after talking about it for months. Today is the day I start my financial balance. Thank you
GreT article! That’s exactly how I budget and felt bad about it! Thank you so much, it’s also a lot easier on my brain to budget this way!