Tag Archives: spending

How to break the cycle of paycheck-to-paycheck living

This post was originally published on June 8, 2010.

Paycheck-to-paycheck living has become all too common, especially in this economic climate. Unfortunately, it’s a vicious cycle, and when you’re in the middle of it, it can feel impossible to break out of it. It seems that every time you start to get ahead, there’s a car problem or a medical emergency or some other sudden expense that lands you right back where you started. I know from personal experience.

Nothing reminds you of how unsustainable paycheck-to-paycheck living is like losing your income. My husband and I supplemented a low income with our savings account for 8 months in 2010, and I can’t help but think about how different our situation would be if we hadn’t broken free of the paycheck-to-paycheck cycle.

The good news is, it’s not impossible to break the cycle. It takes time and patience and perseverance, but you can dig yourself out of the rut of paycheck-to-paycheck living. Here’s how:

Stop blaming your income.

One of the biggest complaints of people living paycheck-to-paycheck is that they simply don’t make enough money. It’s easy to tell yourself that your income is the problem, and that making more money is the answer. The problem with that line of thinking is that lifestyle inflation usually goes hand-in-hand with income increases when you’re living paycheck-to-paycheck. The sad truth is that it doesn’t matter what you make; you will find a way to spend it all. So stop blaming your income, and start thinking of ways to fix your situation now.

I know there are people who legitimately struggle with low income. If you’re in that situation, and you’re taking advantage of all of the government programs available to help you get back on your feet and still struggling, the only advice I can give you is do what you can to survive for now. It won’t last forever. But someday when you’re earning more, remember this time. It will motivate you to save a cushion that will protect you from going through this again.

Spend less than you make.

If you’re stuck in a paycheck-to-paycheck rut, the only way to start digging your way out is to start spending less than you make. The very first step is to build a budget and cut any and all unnecessary expenses. If you’re ever going to get ahead, you need to free up some money in your budget to give yourself a cushion. Take a serious look at your spending habits. If you’re struggling to make ends meet, it’s likely that you’re overspending.

If you’ve taken a serious look at your finances, and you continue to struggle despite the fact that you’re not eating out or making unnecessary purchases, it’s possible you fall into an income category that could qualify you for government assistance. Consider taking advantage of those programs to help you dig your way out of your rut.

Save for emergencies.

If you’re living paycheck-to-paycheck, this scenario is probably familiar: every month, you try to put money in the bank, and every month something comes up that forces you to clear out your savings account. Before you can truly break the cycle, you need to be prepared for emergencies. Once you’ve cut your spending, start putting every extra cent into savings. Don’t be discouraged if you hit a few setbacks. Just keep saving. Eventually, you’ll build a cushion of $1,000-$2,000 for financial emergencies.

Pay this month’s bills with last month’s paycheck.

The ultimate goal is to get ahead of your expenses. Once you’ve saved for emergencies, it’s time to build a cushion on your checking account. If you’ve built a budget, then you should know approximately how much you spend each month. Instead of spending extra money, put it aside to put yourself ahead. Once you’ve saved an entire month’s worth of expenses, you’ll no longer be waiting until payday to send a check or restock the refrigerator.

Be disciplined.

When you’ve got several thousand dollars in the bank, it can be hard not to feel so confident in your finances that you go right back to your overspending ways. Remember, though, your savings doesn’t change your income. What I mean is, if your paychecks equal $3,000 a month, and you have $5,000 in the bank, it may feel like you can spend $3,500 a month. But remember, your savings won’t last forever, and you’ll end up right back where you started in four months. Budget according to your monthly income. If an emergency forces you to tap your emergency savings, be diligent about replenishing what you spent. Otherwise, you’ll end up living paycheck-to-paycheck again.

How to avoid money drain

Recreational shopping has always been one of my biggest money drains. I can turn a quick stop at Target for a necessary item into a $40 splurge more easily than I want to admit. It’s a problem that I acknowledge, and I’ve been working to correct it.

We have a lot of things on the “to-do” list for our house – new furniture, a garage door opener, an epic garden, a riding lawnmower, and decorating to name just a few. All of these things are going to cost money. Since our mortgage payment is a bit higher than our rent used to be, our budget is a little tighter these days. Not to mention, I always promised myself that once we bought a house I’d finally buckle down and divert more money toward our student loan debt, so that’s definitely on my mind.

The point is, I certainly can’t afford to walk into Target or sign into Amazon and drop $40-$50 on crap I don’t need. When it comes to money drain, prevention is key. The trick is to avoid your triggers. Here are my main money drains, and how I combat them.

Marketing emails.

Signing up for email updates from your favorite stores and websites can help save money, because it will alert you of sales. It can also be a major money drain. If I receive an email about a big sale, I’m always tempted to buy something because “it’s such a great deal!” – even if I don’t really need anything. If you’re on a tight budget and unnecessary spending is an issue, unsubscribe to all of those emails. If an occasion rises that requires you to buy something, be purposeful about your shopping and seek out sales or coupon codes.

Daily deal alerts.

Daily deal sites like Groupon and Living Social are incredibly popular on frugal blogs right now. It’s true that they can save you a ton of money, but again, you’re not saving if you’re spending money on things you don’t need. If you’re struggling with self control, it may be time to unsubscribe and tune out the “daily deals.”

Recreational shopping.

This is a tough one for me, because browsing is one of my favorite frugal ways to get out of the house in extreme hot weather. I take a walk around a store or mall to enjoy being out and around without sweltering in the heat and humidity. Unfortunately, it usually leads to buying things – or seeing things that I want to buy, which just makes me feel deprived when I have the will power to refuse. I’m still looking for an alternative to this activity when the weather is too hot to get outside. Any suggestions?

The drugstore game.

I’ve amassed quite a stockpile of toiletries and hygiene items thanks to the “drugstore game” – matching coupons with weekly deals at CVS and Walgreens. I’m guilty of buying things I don’t need just to get a deal. Even if it’s a great price, any money you spend to buy things you don’t need is a waste, especially if you’re acquiring more items than you can reasonably use. Remind yourself that there will be deals in the future, and you can stock up again when your supply runs low. Use that money to pad your savings or pay off debt instead.

Plan a menu – and skip boring recipes.

If dining out is a big spending trigger for you, it’s time to get organized and get excited about eating at home. The two biggest reasons people spend unnecessary money on dining out is poor planning and lack of excitement about meals at home. If you frequently head to a restaurant or drive thru because there’s nothing else to eat, try creating a menu plan at the beginning of the week and hanging it on the refrigerator to remind you of what’s for dinner each night. If you plan meals, and still find yourself heading out to eat because tonight’s dinner doesn’t sound appealing, it’s time to shake things up. Try new recipes, recreate your favorite restaurant meals, or add new flavors to old foods. My favorite recipe sites are AllRecipes, Real Simple, and Food Network.

Make your favorite treats at home.

I’ve made no secret about my terrible little Starbucks habit. But when I realized my weekly fancy coffee allowance was turning into a two or three times a week habit, I decided to find another way to indulge. I make iced coffee and smoothies at home now for a fraction of the cost. If there’s an expensive treat you indulge in, find a way to satisfy your cravings at home for less money. Alcoholic drinks are usually way overpriced in restaurants and bars. Mix your own cocktails at home or buy a case of beer or bottle of wine and invite friends to your place instead of going out.

Get organized.

One thing I absolutely cannot stand: losing money due to poor organization. Even if it’s just a 25 cent overdue fine at the library, it is such a waste, because I get no value out of the money. I’m paying for a stupid mistake. Overdraft fees (which do still exist in some situations), late charges for bills, overdue library fines, and expensive repair bills for things that could have been avoided with better care and maintenance all fall into this category. Create a system for reminding yourself of due dates and service appointments for the car and home. Keep a close eye on bank accounts and statements to avoid charges. Keep your emergency fund healthy so you can afford to make repairs before small problems become expensive emergencies. Every penny you avoid losing is a penny in your pocket.

What are your biggest money drains? And how do you avoid them?

Photo credit

Why I’d rather spend less than earn more

This post was originally published on May 13, 2009. Now that I’m a stay-at-home mom, this post is truer than ever for me. I needed a reminder of why my priority will always be finding ways to cut our spending instead of increasing our income. I thought I’d share it with you, too.

When you’re working to save money or get out of debt, there are two main ways to do it: spend less and earn more. When you’re struggling to make ends meet, the solution is to cut your spending or find a way to increase your income or some balance of both.

I’ve always favored the spend less approach on my blog and in my life. I’m not a big fan of Dave Ramsey’s advice to go to extreme measures to increase your income. I’d rather work hard to cut spending than pick up a second job or extra hours to increase our income. Here’s why:

My time is worth more than money.

If we took on night jobs or weekend jobs, we could speed up our debt repayment and savings. But at what cost? We’d lose our only real quality time together, our only time to relax and recharge. As I said yesterday, frugality is about improving my quality of life. Working nonstop isn’t what I think about when I think about my best life.

Being short on time can cost money.

When you’re constantly rushing around, you’re more likely to cling to convenience. From picking up take out at the end of a night shift to paying more in childcare to cover your long hours to skipping money-saving habits like menu planning and coupon clipping because you don’t have time, rushing around can get expensive.

Higher income leads to more spending.

Obviously, the point of frugality is to avoid increasing expenses as income increases. But the harder you’re working to bring in that extra income, the harder it can be to tell yourself, “No.”

Even if you can avoid spending money on unnecessary things, there are some natural upgrades that come along with a better income: home ownership, vacations, little luxuries. If you put more of your focus on earning than saving, it’s likely that those little upgrades will add up to a lot of extra spending. By focusing on saving instead of earning, we’re living comfortably without being tempted to splurge to much. As our income naturally increases and we continue to spend less than we make, we’ll find a way to fit these upgrades into our budget.

What about you? Would you rather spend less or earn more?

How much are you really spending?

At the beginning of this year, Tony was hired for a full-time teaching position, and our income doubled. That sounds like we’re making a lot more than we really are considering the fact that Tony was seriously underpaid as an adjunct professor. But for us, it’s a lot of money, and it’s finally enough to cover all expenses, save a good bit of money, and treat ourselves every now and then.

Along with the income increase, our goals increased, too. Now that we can afford to fund our savings account again, we’re working toward the lofty goal of saving for a down payment and other necessary costs that go with buying a house. We’ve set a tentative deadline for two years.

Aside from buying our car — an admittedly huge expense — and an increase in rent, we haven’t increased our major living expenses at all. We budgeted carefully for the car payment and the increase in rent, and these increases were offset a bit by a reduction in health insurance premiums, so those two things don’t affect our monthly savings allotment anyway.

One thing I’ve noticed, though, is that big expenses aren’t what really affects my budget. I always think carefully before adding a big expense. We carefully looked at our budget before adding a car payment to it, and we thoroughly discussed how much we could afford in rent before signing our lease. I know what to expect when I add a big expense. What gets me though, is the hundreds of tiny little purchases I make throughout the year. The amount is so small that I don’t give a second thought to swiping my debit card, but at the end of the month (or year), it adds up to a significant chunk.

For example, if you buy a soda from a vending machine every day on your lunch break at work, it doesn’t seem like a big deal. It’s just 50 cents a day. But that adds up to $2.50 a week, $10 a month, and $120 a year. Is a soda a day really worth $120 a year to you? If the answer is yes, then great! But most of the time, when I really think about purchases like this, it’s not worth the money to me.

My biggest vices?

  • Starbucks beverages – At $4 each, the expense adds up quickly even if I only indulge 2 or 3 times a month.
  • Movie rentals at the local video rental store – Sometimes we run out and rent a movie if it’s not available on Netflix Instant Play or Redbox. This is mostly TV shows or older movies. We pay $2-$3 a pop a few times a month for the convenience of watching something now, but if we just put it in our mail queue and wait, we wouldn’t have to pay extra at all.
  • Cute baby clothes on the clearance rack – I’m guilty of paying as much as $5.50 for a pair of pajamas just because they’re cute. Yes, it’s clearance, but he really doesn’t need any more clothing. Even if he did, I could get a much better deal at a consignment store.

A few dollars here and there doesn’t seem like a big deal at the time. We’re making more money, we can afford it, right? But these purchases add up. All together, if I buy 4 Starbucks beverages, rent two movies, and buy one outfit, that’s $25 a month I could have been saving toward our house. That adds up to $600 over the next two years that could go toward a house. The $25 isn’t the problem; the problem is that I spend $25 without even thinking about it.

This isn’t to say that I believe in total deprivation. You guys know that I’m all about budgeting for life’s little luxuries. The point is, it’s important to budget for these things. You wouldn’t drop $600 without thinking seriously about it, so why should this be any different?

Sit down and think about the little mindless purchases you make. How much are you really willing to spend when you think about it?

I enjoy treating myself to the occasional Starbucks beverage, but $16 a month seems like too much. If I limit myself to one per month, that’s only $4 a month. That’s much more reasonable to me. Even better, I could cash in MyPoints or Swagbucks (referral link) on Starbucks gift cards and get them for free.

When I really think about those movie rentals, I remind myself that I’m already paying $120 a year to rent through Netflix. I’m not willing to spend any more than that for entertainment, so I should really skip those stops at the video rental store and just wait for the things we want to watch to come in the mail.

And Judah is going to look cute in whatever he wears, whether I pay the clearance retail price or a fraction of that at a consignment store. So I should stay away from the clearance racks and be more strategic in my clothing purchases for him by shopping consignment sales and setting a seasonal budget for how much I can spend to keep him clothed.

It’s important to be mindful about every penny you spend, whether it’s several thousand dollars for a car or a few dollars for a coffee. Every penny counts, and if you’re wasting money on things that don’t really matter to you, it’s easy to sabotage your goals for the things that do matter.

Photo by alancleaver

More expensive isn’t necessarily better

I’ll be 19 weeks pregnant tomorrow. That’s halfway to full term. I’ll also be finding out the sex of the baby if he or she cooperates (fingers crossed). We could be moving to our new place as soon as this Saturday. Which means I’m out of excuses. It’s time to start shopping for baby stuff.

Yes, we have friends and family who will likely want to gift us with various baby items that we’ll need. But the last thing I want to do is exploit anyone’s generosity. Furthermore, our families just aren’t very big, and money is tight for everyone right now. Ultimately, the responsibility to provide for this baby is ours, and we’re trying to do it as frugally as possible.

Over the weekend, I started researching cribs and car seats and various other musts for the baby. I found some pretty incredible deals on cribs at Wal-Mart. This one was particularly compelling, and I really liked this one, too. (No one is paying me to stay that, either.)

I checked out the specifications. Both of these cribs meet safety standards dictated by the Consumer Product Safety Commission for cribs. They do not feature drop sides as many of those models have been recalled due to the safety concerns. There’s no reason to believe that these cribs are any less safe than the fancy ones that retail for $500-$600. So why do I feel guilty for considering a basic crib for my baby?

I know that this baby isn’t going to care if the crib has a fancy finish or if it scratches easily. I certainly don’t care about those things. I just want to make sure that the baby has a safe place to sleep, and I want to choose a crib that complies with all of the current safety standards. These cribs do at a fraction of the price of fancier models. And honestly, when it comes to recalls and possible problems, expense doesn’t seem to be an issue. Even the most expensive cribs can be recalled.

Over and over I’ve read about how having a baby doesn’t have to be expensive. And I don’t believe that it does. But as parents, especially first-time parents, we face an overwhelming amount of pressure to spend a lot of money for the baby, and we feel guilt for attempting to cut costs. But why? After all, I don’t believe the baby will be happier in an overpriced crib if it means we have less money to provide other necessities, like a place to live or health insurance.

I’ve realized that shopping for the baby is going to be a intricate balancing act. For things like cribs and car seats, safety is my top priority. If I can’t find a car seat with high safety ratings at a low price, then I’ll have to spend the extra money. But safety is my only concern. If I can find an off-brand item that’s just as safe for a lower price, I’m not going to feel guilty about it.

The consumer culture constantly pushes us to believe that more expensive is better. Sometimes that’s true, but not always. We have to be smart consumers, and we have to learn to balance price with quality. I’m not going to spend twice as much for some unnecessary bells and whistles if I can find a product that will do the same job for half the price.

Of course, as a new mom, that’s easier said than done.

Photo by caseysworld

The importance of slowing down

canon-xsI have always been pretty decisive. Usually it works in my favor. I trust my instincts, and when I have to make a decision, I can usually pretty quickly make up my mind. This week, this decisiveness led to a pretty crummy mistake.

When I bought my digital camera, I wasn’t sure how into photography I would get. But it turns out I love it. I’ve had a lot of fun with my camera, and I love that we have photographic memoirs or our lives now.

We recently made the decision to add a camcorder to our tools. We really want to be able to shoot videos when we’re in Europe, and we definitely will want one when we have a baby. I’ve been looking at pocket HD camcorders in the $200 range (like this one that I really like and have been considering purchasing).

This morning, I started looking at the newer model of my camera, which shoots HD video. I realized that if I could sell my camera body without the lenses for $400, I would be able to upgrade to the newer model with HD video capabilities and higher quality still shots for only about $200. I was so excited, that I acted impulsively (which is pretty out of character for me).

I listed my camera in the Amazon marketplace, and I was surprised that it sold within minutes. But by the time I got to the post office on my lunch hour to ship it out, I was starting to have doubts. Was I really ready to drop $200 on another camera? How would I take pictures of Christmas in the meantime? Was this the right decision?

It turns out, my hesitation was an indication that I should slow down. After I’d already shipped it, I received an email from my buyer. He realized that the description said I was selling the camera body only without the lens. He didn’t want to buy it anymore. But it was too late.

He’ll be able to send it back, but I’m out the $20 I paid to ship it to him and I probably won’t have my camera back by Christmas. And now I’m having second thoughts about whether I want to sell it and upgrade yet at all. This is something that could have waited until the spring since I don’t even need the HD camcorder until May.

And now my beloved camera is somewhere between here and Minnesota instead of being safe in my camera bag.


I learned a valuable lesson about slowing down. When I get an idea, I tend to get tunnel vision. Sometimes I act too quickly. I need to learn to take a step back, think through the situation, and make sure I have all my bases covered. Luckily this time it only cost me $20 (hopefully). But I really hate when I lose money because of a stupid decision, don’t you?

Live like you’re broke — but don’t forget that you’re not

New shoes

Last week, my $2.50 flip flops that I’ve been wearing all summer bit the dust and one of Tony’s two pairs of shoes started to fall apart. I realized over the weekend that I haven’t bought a new pair of shoes in almost two years (aside from the running shoes I bought in January), and it’s been a year since we last bought Tony sneakers with birthday money from his parents.

I looked objectively at what Tony and I were wearing on our feet. We looked like a couple of college kids with some tattered shoes. I suggested to Tony that we should go shopping for some shoes, and he looked at me like I’d grown another head.

“Should we really be spending money on something like that right now?”

When I outlined the facts for him, we both realized how ridiculous it was not to buy new shoes.

  • We each have only three pairs of shoes — Sneakers, dress shoes, and gym shoes.
  • It’s been over a year since either of us bought shoes.
  • Our sneakers are falling apart.
  • We are not broke.

It’s kind of silly that we had to remind ourselves that buying one pair of new shoes each year isn’t unreasonable. We may not make a lot of money, but we make too much to walk around in shoes that are falling apart.

We spend so much time trying to convince ourselves that we’re broke because it makes it easier to resist overspending, but every once in a while we have to put things into perspective.

Don’t deprive yourself of basic necessities in the name of frugality. Walking around in tattered shoes or clothes to save money isn’t frugal — it’s cheap, and you deserve better than that. Frugality is about conserving, making the most of each dollar you spend, and shopping for the best deals. It’s not about depriving yourself.

We spent Saturday shopping for new shoes, and we ended up picking up two pairs of Converse sneakers on sale at Shoe Carnival for buy one, get one 50% off. Not only did we get a great deal on comfortable shoes, but we reminded ourselves that we are not as broke as we let ourselves believe.

Should you keep a cushion in your checking account?

nickels and dimesA little over a year ago, we moved most of our money into our savings account. We didn’t want to keep very much money in our checking aside from what we need to cover our monthly expenses.

I decided to leave a $1,000 cushion in our checking account. The idea was that $1,000 would serve as the zero mark. It would just sit in the account, unspent, serving as a cushion so we’d never overdraw our account in the event of a miscalculation.

Fast forward 14 months. Each month we went just a little over budget. $50 one month, $25 the next month, $100 the month after that. The motivation to stay completely on target wasn’t as strong because there was extra money there. Now, our $1,000 cushion is gone. Even though we have a pretty health savings account, it feels a lot like living paycheck to paycheck.

I’ve considered putting a little money aside each month in the budget to rebuild our cushion, but here’s the thing: I don’t know if I want a cushion.

Even though I don’t like the feeling of an empty checking account at the end of the month, we’re less tempted to overspend a little here and a little there when we’re cutting it so close. But it still feels like living on the edge. One error and we could be hit with overdraft fees (our bank hasn’t yet allowed opt-in and opt-out for overdrafts like Chase and Bank of America).

I feel like we’re stuck between two crappy choices: the risk of overspending vs. the risk of overdrafting.

I’ve decided to open a new savings account with my bank (our main savings is with ING) and put $100 or $200 in it to reduce the risk of steep charges in the even of a miscalculation. It’s unlikely since I watch our spending so closely, but I don’t like worrying about it.

The thing is, our dwindling cushion wasn’t due to error. It was due to poor judgment. As long as we had “extra” money in our account, we were more likely to make poor choices. As I said last week, we don’t make big purchases, but we nickel and dime accounts to death.

How do you handle this dilemma? Do you keep a cushion in your checking account, or do you move all of your extra money to savings to protect it?

Photo by heypaul

Why I’m happier on a tighter budget

Yesterday I confessed that we kind of blew our budget this month.

After a summer living on cash, we went a overboard once we started using our debit cards again. It wasn’t that we went completely nuts and totally disregarded our budget. It was much sneakier than that. It was a few things here and there at the grocery store, because we can afford it now, right? It was stopping on the way home from work to pick up a few things because why not?

For us, it’s never something huge that blows our budget. We’re too careful about big purchases for that to happen. Big purchases are always planned out, saved for. What blows our budget are the fifty or so purchases throughout the month. $1 here, 50 cents there. Then suddenly we’re a week from the end of the month and we’re already out of money.

Living on a cash budget, that didn’t happen. Each and every purchase was given the same consideration as a major purchase. Even if it wasn’t, we were protected from spending next week’s budget today because we didn’t have the money on hand. All we had was what we were allowed to spend for the week.

As I’ve said before, my favorite part about living on cash was that there was no Monday budget dread. I didn’t look at the budget on Monday morning and kick myself for overspending on the weekend. We withdrew what we wanted to spend, and that was what we spent. It was so much less stressful for me to have those decisions made ahead of time instead of keeping track of everything in my head. I could just enjoy the weekend without adding things up in my head, because I knew that we were spending the right amount.

My point is, we have decided to live on a cash budget going forward. With so much to save, we can’t afford to let a hundred little purchases eat away at our savings. We’re getting serious for the next 15 months so we can have it all: Europe, a stress-free move, a healthy emergency fund, and our own home sooner rather than later.

And instead of feeling restricted by our tighter budget, I feel free from the stress and worry of trying to keep track of all of our purchases in my head. Life is too short to spend it worrying about every little purchase.