Ah, the dreaded paycheck-to-paycheck lifestyle can be hard to break out of. It’s a very easy cycle to fall into, but an incredibly hard cycle to get out of without proper money management. Living paycheck to paycheck leaves no room for errors. Unexpected expenses just can’t happen, because if they do, you won’t be able to afford them with the money in your bank account. This can lead to extra debt, which also doesn’t help.
When you are trying to break the paycheck-to-paycheck cycle, it’s best to take it one month at a time. This is the approach I take with my clients. Slow and steady wins the race. I’m sharing some tips on how to get one month ahead on bills and expenses. If you have nothing in your savings now, don’t worry. It may take some time, but following these tips will help you get there eventually.
Here’s how to get one month ahead on bills…
#1 Know what you need to get one month ahead
Before you can start getting ahead, you need to know what one month’s worth of bills actually looks like. Refer to your budget to figure out what one month’s worth of expenses totals out for you. If you don’t have a budget, start by listing all of your monthly expenses. Make sure you include your monthly debt payments and other necessary spending items (gas, groceries, etc.) as well. The total number you get is what you will want to strive for to have in savings.
#2 Create a “Get Ahead” savings account
To avoid confusing your savings priorities, I suggest opening a separate savings account solely for your “get one month ahead” fund. If possible, you will want to pump the breaks on any other savings until you reach your get ahead goal amount.
#3 See where you can cut back
Since you already have your monthly expense list in front of you, use it to see what you can get rid of, even if it’s only temporary. Have you been skipping the gym for the last few months? Can you hold off on your waxing subscription? Cutting your recurring expenses means you don’t have to save as much money when trying to get one month ahead on your bills.
#4 Save your “extra” paychecks
If you are paid on a bi-weekly basis, there will likely be 2 times throughout the year when you will get 3 paychecks in one month. This is a great chance to get one month ahead. You are already living on two paychecks a month, so it shouldn’t be too much of a burden to put your third paycheck directly into savings.
If you can put all of that paycheck into savings, each time that third paycheck comes, you will have one month’s worth of income saved. Your monthly income should be more than your monthly expenses, so you’ll have your one-month-ahead savings plus more!
#5 Save your raise or bonus
If you are paid on set days every month (1st and 15th, 15th and last day of the month), then the tip above doesn’t apply to you. That’s perfectly okay, because there are other opportunities to get ahead. Specifically, with raises and bonuses. Often times, people receive an annual raise at the start of the new year.
The next time you get a raise, put the difference from your current salary and your new salary directly into savings. You were living just fine without it! If you went from $48,000 to $50,000 ($2,000), that should be about an increase of $150/month (give or take taxes). Put that extra $150 into your get-ahead fund. Before you know it, you will be one month ahead on your bills.
The same theory should apply to your bonuses. Whether you get one bonus every year, or multiple bonuses throughout the year, the extra amount you receive should be placed directly into your savings account.
#6 Bring in more money
If you are breaking even every month, or saving just a little, to get one month ahead on bills faster, you will need to bring in more money. Bringing in more money doesn’t mean you have to get a second job. Depending on your current source of income, this may not be a realistic option. There are plenty of other options you can try to earn extra money. Selling old items, turning a hobby into a side hustle, becoming a delivery driver or starting a blog can all bring in extra income. Check out the following articles to help get the ideas flowing:
Once you get your month ahead amount…
#7 Empty your “Get Ahead” savings account
Once your savings account reaches the amount you need to be a month ahead, your duties don’t stop there. You will want to start this step at the very end of the month or the 1st of the next month. You will take all of the money currently in your “get ahead” savings account and move it to your checking account. This is the amount you will need to work with all month.
#8 Everything else should be saved
Now that you have your one month’s worth of bills money moved to your checking account at the beginning of the month, any money that comes in throughout the month needs to go to savings.
#9 Repeat steps 7-8 every month
Moving forward, you will need to empty your monthly bills amount out of savings and move it your checking. Throughout that month, any income you make should go to savings. At this point, you should be living off your income from last month. As more money comes your way, or your expenses decrease, you will notice that you are transferring less money from your savings to your checking at the end of each month. Now, you can move that left-over amount to another savings account to help you reach a different goal.
The great thing about this strategy is that you know exactly what you have to work with for the month ahead. If you made less money than expected, you will know that your month ahead will be a tight one. If you lost your job, at least you would be one month ahead before tapping into your emergency fund.
Are you one-month ahead on your bills and expenses? Do you have a separate savings as well? What tips can you share for breaking the paycheck-to-paycheck cycle? Post a comment below to share your thoughts, experiences, tips and questions!