How to Budget When You Live Paycheck to Paycheck

When you live paycheck to paycheck, it can feel impossible to make any progress towards getting out of debt or saving up for something special or even just covering all your monthly expenses because surprises always come up and you can barely cover your bills, much less covering those surprises that come up. And strangely, surprises are never cheap surprises!

So, a surprise comes up and you log into your bank account and see that you have $500 and you think “Great! I can do this!” but at the end of the month you are way under what you need to cover everything. How does that keep happening?

First of all, the balance in your bank account is NOT a good indicator of your financial situation. You might have $2,000 in the bank but $1,500 is going to come due for rent in 3 days, $200 for the electric bill, and you’re going to need $150 for groceries and $75 for gas before your next paycheck comes. That realistically only leaves you $25. Spending $50 on a nice meal because you have $2,000 in the bank is going to cause you stress at the end of the month because now you are over budget.

You need to give all $2,000 a job to do.

You’ve probably heard of the envelope system where you take your $2,000 and divide the cash up into envelopes. For example, you would put $1,500 in the envelope marked for rent. $200 in the one marked Electricity and so forth. Then, when you pay rent, you take the $1,500 out of the envelope and go pay rent. Well, in this digital age it is not really safe to keep envelopes of cash lying around your house and driving it everywhere to pay bills. If you are like me, everything comes out automatically. In my app, Vivaria Budget, I have set up the envelope system, but I call them honeypots. It’s way more fun!

In order to give every penny a job to do, you have to know how much you bring in every month. Do you get paid weekly? Twice a month? Every two weeks? Find the average of what you make each month. If you are every other week or self employed, I will talk about those specifically in another article.

The honeypots are a necessity when you live paycheck to paycheck because maybe you make $2,000 in a month, but you only make $1,000 in the beginning and $1,000 later in the month. You will have bills come due before you receive all $2,000 of it. Knowing when the money is coming in and when bills are coming out is essential.

Next, you need to know how much your bills are, when they come out, and how much your spending is. Bills are things that come out once a month, like electricity. Spending is for things that happen throughout the month like groceries or gas. Make a list of everything you spend and how much you spend on it.

Now make honeypots for each bill or category of spending. You can go ahead and lump several together, like subscriptions for streaming services, rather than make a honey pot for each one separately.

Then divide up your paycheck into the honeypots. If you live paycheck to paycheck, you won’t be able to fully fill up each honeypot with one paycheck. Fill up as many bills as you can that will come due before your next paycheck, but be sure to put some into the spending that will happen soon as well. If you are still short, see if you can put off any spending until the next paycheck or try pausing or cancelling some memberships or subscriptions for a while.

Any debt you have will go into monthly bills. I will talk more about how to tackle debt in another article.

Now that you have your paycheck divided up, you have given every penny a job to do in the hive.

The goal to living on a budget is not to be boring and never have any fun ever again. It is merely a short time to have some discipline, maybe reign in some spending that is out of control so that you can be in a better place and can enjoy things more freely in the future when you can set aside for an amazing trip rather than going into debt for a trip and stressing out because of how behind you are.

In fact, here is my secret tip, make a small honeypot for something that you enjoy. Mine was coffee. When we worked super hard for 3 and half years to get out of debt, I had a honeypot of $25 for my favorite coffee place. No, you aren’t going to be able to get your favorite coffee every weekday morning on the way to work. Buy some creamer and flavoring and make coffee at home. But on the weekends, I would get a bestie to go with me to a coffee place on a Saturday morning and we would just sit and talk about our lives. That was the BEST coffee because it was special and because I had set aside a very special job for those pennies.

My husband, daughter and I lived in a 735 square foot condo for 6 years. We spent 3 of those working super hard to get out of debt and now I have a larger two-story house that I love and am SOOOOO thankful for! We still monitor spending some, but nothing like when we were living on a budget. All that to say, that yes, it is hard work. Yes, you will have to turn down some fun things, but when you reach your goal and then can do those fun things without stress or regret, they are so much better! It is so worth it!

If you're tired of getting paid and wondering where your money went, Vivaria was built to help you take control of it. Create Honeypots for your expenses, plan your bills, and build a debt payoff strategy so you can see exactly what your money is supposed to do. 

Let me help you on your journey to stop living paycheck to paycheck!