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What does it mean to live paycheck to paycheck?
I have heard this statement most of my life and I am sure most of you have, but what does it really mean?
What is means is that if you and your family go without just one paycheck, then you would not be able to pay your bills and take care of your family. Is your family living paycheck to paycheck? Have you ever really thought about how you would manage if you were in this situation?
If you were one of the many people that recently lost your job due the recent COVID-19 pandemic, then maybe you were in this situation. Unfortunately for some, a one time stimulus check just won’t cut it.
The best way to try to prevent this from happening again is to save up money for an emergency fund. “But if I’m living paycheck to paycheck, how do I save any money?’ you might ask. It can be difficult to do this. Most people find that if they do what’s called a “zero based budget” they will “find” money they didn’t realize they had. There is also the option of cutting out some unnecessary expenditures temporarily to get through a rough patch. Most people don’t like the word, “budget” because they feel like it restricts them, but people find that having a budget gives them permission to spend.
If you are telling your money where to go instead of just blindly spending, you can have better control of your money. Most people actually find that once they write down all the income and expenses they have, they may actually have extra money that they are actually “blowing” that can be put towards and emergency fund or paying down debt.
There are actually some budgeting apps/websites that you can use to help you with this. Some are free and some cost you. The Everydollar app is free (unless you want your transactions imported from your bank) and also has an app and a website version . There is also one called YNAB which offers a 34 day free trial. It also has an app and a web version.
If you have never tried to budget before, these can seem hard to use at first. Mainly they just ask for you to put down your income and then all your expenses. Delegate all the money you have until you come up with a “zero” balance and then enter in each transaction that you make and tell the app which category to spend the money from and don’t spend over the amount you have in that category. If you spend over the amount in a particular category, then you have to transfer money from another category to cover it. This way, you are never spending more than you know you have.
There are also categories that are called funds that you can put money in every paycheck to “save up” for an upcoming expense (or Emergency) that comes up only quarterly or yearly. This way you can see that money is in that category for spending later and it will prevent you from spending it now just because the money is in the bank.
It will probably take a few months to get your budget and your spending in check, but you should be able to see the benefits of having a budget shortly.
The old fashioned way of doing a budget was taking envelopes and putting cash in them and labeling them with the name of categories like “groceries” etc. and only spending what is in each envelope. If you need more than what you have in one envelope, then you would have to borrow from another, then you may be short in the other envelope when it came time to use that fund. This would be a way to keep your spending in check so you would never overspend. The apps/websites are the new “digital” versions of envelopes.
Give one or all of the budgets a try and see which one, if any you like and good luck with your budgeting!!
