the paycheck to paycheck budgeting method

Living paycheck to paycheck does not sound like something to strive for. For many this is a term that means they are struggling waiting on payday every time. And yes, there are plenty of times I have been waiting on payday!

But, with intentional “paycheck to paycheck” budgeting, you can be in control. It’s a term that I’d use to describe how I budget and how I make the Dave Ramsey plan work for us.

Have you ever thought that the ideal world would be one where you don’t even notice when you get paid because you have that much money in your account at all times? Sounds nice, right?

I used to think so. Then I considered the waste and impulse that goes hand in hand with having excess money all the time.

If you had $22 in your account, you probably aren’t going to go out to eat with the family that night. You may cook at home with what you already have instead. And you’d avoid throwing good food out.

You get where I’m going with this. If you have more money than you need for your basics, then you may find yourself swiping your debit card 10 times a day on things you don’t need at all.

Instead of living in the world where you can spend without care, I decided the ideal world is one where you can be intentional with every paycheck and build wealth or payoff debt (whichever stage you’re in) while still living comfortably and planning splurges/fun things.

So, I budget and look at our spending from a paycheck to paycheck standpoint. Here are my tips if you’d like to try it:

1. Write out your monthly earnings broken up into paychecks. We are lucky that our two bi-weekly paychecks hit at opposite times, so I can budget for a once a week payday. If you have X amount from your paycheck for the first half of the month, write it down. If you have a paycheck that varies in hours or includes commissions, write down the low to average amount. Now instead of looking at an entire month, look at each pay period individually.

1. Write out when all of your debts come due each month. Example: you may know that daycare is due every Friday and your mortgage is the first of every month. Utilities bills come in the mail around the 10th and the internet is due on the 15th . Write all of those constants down along with the date due. Then choose a dollar amount estimate for things like weekly groceries, gas, out to eat, and even a miscellaneous. Just get familiar with what comes due when and how much you spend on basics each pay period so there are no surprises.
2. Move each payment around each paycheck. You probably don’t want to pay the mortgage, the utilities, and the car payment all on the 1st of the month if you get 4 different paychecks that month. They may all be due on the first of the month, but you can plan ahead. Our mortgage is due the 1st but we pay it on the 20th of the month prior because that’s the paycheck I chose to designate for the mortgage. Spread things out so the obligations are evenly spaced and you never feel maxed out at any given point.
3. Budget down to zero. This is a Dave Ramsey concept, but he does it monthly. I find it easier to be accurate if I do this with each paycheck. Let’s say you know $1000 comes in this pay period and you already know that this paycheck goes towards daycare – $200, utilities – $200, groceries – $100, gas – $100 and misc. – $100. So you know that you have $300 between now and the next paycheck. I like to think of it like this: that money needs a job to do and you have to choose. Don’t waste it because it’s “extra”, do something with this money—save it or pay down debt! TIP – I like to be wait until the day before the next paycheck is due and then I find a home for the money. That way if something truly last minute comes up, you’re okay.
4. Treat every pay period as its own. If you are going on vacation that same week of the scenario above, then I would not do anything with that “extra” $300 because it’s an unusual week with heavier spending than normal. If you have a week where you have been invited to your parents’ for dinner, then spend less at the grocery store and buy one less meal. If it’s t-ball registration that week, budget for it. This is my favorite part of budgeting paycheck to paycheck. Each week is different, and the idea is to adjust the plan every time. Its okay to say there was nothing leftover that week because it all had an intended purpose. The purpose doesn’t have to be saving, it can be having fun! It’s also okay to realize you had a low-key week and didn’t use the miscellaneous fund or gas money and you have even more “leftover” to reach your goals!
5. Start all over. Once a paycheck has been used to pay debts/bills, food, entertainment and whatever else was planned for that pay period AND you have done something intentional with whatever was remaining, (be it $50 or $500!) you’ll start all over again with a fresh paycheck and a plan for that period.

Overall, this method has worked well for us and allowed us to focus on my car and get it paid off in a year. Almost every paycheck, some “leftover” went to the car no matter how small. And yes that means I often times submitted 4 small payments in one month. Sure, I could have spent 5 years paying it off and probably not budgeted at all, but I am almost positive any “extra” money I had laying around would have disappeared. Instead, we were intentional and paid the car off which allows more “extra money” each month for another goal.

Don’t be afraid to make budgeting work for you. I follow Dave Ramsey concepts such as paying off the smallest debt first via the debt snowball and the idea of budgeting to a zero balance, BUT I found it was difficult to do one full month at a time. Things pop up and those things cost money. A pay period at a time has proven to be more my speed, which is why I like budgeting paycheck to paycheck.

I don’t usually write about money because it’s not something everyone likes to talk about…but I just enjoy budgeting. I like having goals for the future and working on those as a family. And I like knowing that I’m not spending just to spend and filling my house up with stuff I don’t need (I am an aspiring minimalist but you’d laugh if you saw the playroom!).

Most importantly, we also like to live a little and do not follow Dave Ramsey’s “gazelle-like intensity” motto. I think there is a huge middle ground option that people don’t talk about enough.

Knowing where your money goes is half the battle. My advice to anyone who wants to start budgeting is to pay attention to that, write it down, and make any adjustments needed. And then when you’ve figured out what that “leftover” amount is after basic needs, do something with it. Spend it, save it, pay off your car early. Just knowing what you’re doing with it puts you in control.

“You must gain control over your money or the lack of it will forever control you.” – Dave Ramsey