Author Topic: Paycheck to paycheck discussion  (Read 2123 times)

mistymoney

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Paycheck to paycheck discussion
« on: July 20, 2019, 12:42:11 PM »
Hey everyone!

Wanted to get your thoughts on this.

In 2017, a forbes article said
Quote
Nearly eight out of 10 workers (78%) live paycheck to paycheck, according to a new survey from CareerBuilder.com. That’s up from 75% last year, and it applies even to those making six figures: one in 10 workers making $100,000 or more say they live paycheck to paycheck.


What do you consider to be living paycheck to paycheck?

Have you ever been in that situation? And what did it take to get you to turn that around, and how did you accomplish that? Do you know of others that have turned that around?

I'm wondering if it is possible to really dig out of that without getting a large salary boost or doing something rather drastic, such as a large downscale on housing, selling a car, etc.

Generally - when I think of someone paycheck to paycheck, I think of someone that doesn't have those downscale options, and is already in a rut of cutting to the bone with a large percentage of salary going to interest on debts, where it is really hard to get out of.

I'm new here, and don't know a lot of back stories, so wondering about where people were at when they started if they were low in bowl, and what factors helped them turn it around.

Frankies Girl

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Re: Paycheck to paycheck discussion
« Reply #1 on: July 20, 2019, 01:52:55 PM »
I have been pretty low pay starting out, but never felt like I was one paycheck away from ruin because I did still save for emergencies. That's the part that most people don't seem to understand. The instant they get extra money through raises, bonuses, whatever... it's considered "fun" money or goes towards debt they racked up for past emergency/fun money (usually charged on cards).

Most of the time we suggest looking at what is called "low hanging fruit" meaning, the stuff that should be easy to cut/get cheaper.

Things like:

• LEARN TO COOK REAL FOOD (this one is likely the biggest money saver/will spoil you for eating out if you learn how to make things you love)
• cooking more whole foods from scratch instead of fancy boxed/prepared foods
• packing your lunch instead of buying it every day
• grocery shopping the sales and only buying necessities and buying things in more cost-efficient packaging (bulk IF it is a better deal)
• stop going out so much to socialize. Bar/eating out for social interactions can be replaced with potluck/game/movie nights in many cases
• cutting or stretching out time between things like car washes, manicures, haircuts, or learning to do things like this yourself
• researching cheaper alternatives for cellphone service, car insurance, cutting or doing without cable/internet packages, etc.
• creating a capsule wardrobe - a basic uniform suitable for work consisting of a few tops/bottoms that work well together, while allowing you to accessorize to add personal touches. Capsule wardrobes allow you to reduce the amount of clothing you have to maintain, meaning less cleaning, less stress involved in dressing each workday, less money/time overall. The number of people that use clothes shopping as entertainment/indulgence is too high. Most people have TOO MANY CLOTHES. I would challenge anyone that isn't already on the frugal path to start tracking what clothes they actually wear, and how much they actually need.
• STAYcations, or modify your actual vacation spending. SO MANY FUN/RELAXING THINGS to do in your area, but most people stress out over travel planning, then spend gobs of money they don't have to go someplace and stress all the way through (or get wasted and barely remember it). And then go back to work, stressed out from their "fun." SMH.
• free/cheap but fun things to do around town - library events/classes, church events, public events, dollar cinemas, free museum days, public/county parks host all sorts of events/classes, casual sports/exercise with friends/teams - there are usually websites or meetup groups that have lots of ideas
• thrift store shopping. I hesitate to put this one in for purely selfish reasons. I am sad the stores are getting crowded. I used to score the most amazing things - designer (even new) clothing, dishes, electronics, things I need/use daily - for pennies. Things that are dumped with tags still on them... because people LOVE BUYING THINGS but then hardly use them because they are already out chasing down the next deal at the retail stores. So gently used or brand spanking new items get dumped at the local thrift store. It's getting harder for me to find the spectacular deals I used to find, but they're still there just maybe takes me a trip or two more now. And if you are the type to scoff about how you're above shopping at a thrift store, awesome... just leaves more bargains for those of us that are waaaay smarter than all of you too-good types. :D

And it should go without saying that taking good care of things you use, fix things that need fixing, and keep up with any basic maintenance that extends the life of the things you own, instead of running out to buy more stuff makes more sense. So another really important thing to try to do to save money is learn basic life skills: sew a button, mend a seam, ironing, how to use basic tools, change air filters, get your car's tires air up at proper intervals, etc...


Mostly it really is about changing that mindset of blowing every single dollar you bring in on indulging yourself because you are stressed/tired/deserve it, whatever the excuse is. What makes a person feel the need to "indulge" anyway? Working too hard? Bills piling up? Um, that's kind of a thing that feeds itself - you see that, right? If you didn't spend every penny on things to reward yourself for working so hard... maybe you could... stop working so hard?

Saving money IS one of the most indulgent things you could do for yourself because it gives you the luxury of not being chained to your next paycheck, the freedom to not constantly worry about losing your job or what happens if you can only pay one bill out of the three unexpected ones that popped up this month. A freaking fancy coffee habit or new item every day isn't going to help fix your life. It's just another link in that chain keeping you tied to that job, terrified of the next bill, or emergency you can't afford.

TomTX

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Re: Paycheck to paycheck discussion
« Reply #2 on: July 20, 2019, 01:53:49 PM »
Generally - when I think of someone paycheck to paycheck, I think of someone that doesn't have those downscale options, and is already in a rut of cutting to the bone with a large percentage of salary going to interest on debts, where it is really hard to get out of

That's an overly narrow definition. One can live "paycheck to paycheck" with a million dollar salary. You just need to have a higher spending rate.

If you wouldn't be able to pay your bills due to a missed paycheck, you are living "paycheck to paycheck"

MayDay

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Re: Paycheck to paycheck discussion
« Reply #3 on: July 20, 2019, 02:53:23 PM »
I think it is a mic of everything from legitimate poverty to stupid rich people who spend everything they make.

There are a lot of people who are already doing all that stuff that Frankie's Girl mentioned- they just don't make very much. Of course the New York Times never interviews those people for their terrible articles about middle class life!

Freedomin5

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Re: Paycheck to paycheck discussion
« Reply #4 on: July 20, 2019, 03:13:24 PM »
I used to live paycheck to paycheck. I was a grad student in LA. My stipend was a measly $500/month. I was living in a two-bedroom with three other roommates, and could not get by without a car. I once tried to take the bus to an appointment. What would have been a 15-min drive turned into a 3 hour bus ride. I missed the appointment. I managed to live within my means but wasn’t saving a dime. What helped ease things was to take a part-time job.

What helped was to increase income. My first year out of school, our net income was $2000/month. Rent was 41% of net income. Our life felt luxurious, and we were saving 25% of our net income.

2Birds1Stone

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Re: Paycheck to paycheck discussion
« Reply #5 on: July 20, 2019, 06:51:27 PM »
I was making about $24k post tax in 2010 and spending roughly the same. I could never seem to get ahead.......it wasn't until my income rose slightly, and I discovered the concept of early retirement in 2012 that I tracked spending and started using a spreadsheet to make sure I was saving *something* every month, that something eventually turned into 2-3X what I was spending in a given month, 7 years later I'm on the bring of being fully financially independent at the age of 32.

beer-man

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Re: Paycheck to paycheck discussion
« Reply #6 on: July 20, 2019, 07:54:12 PM »
Been there before. Went from both of us working making $130k combined to having a baby, wife staying home, drastically cut hours, and a pay cut in just about 2yrs. At one point we had just 5k in savings.
 We ratcheted down our spending since then and have kept in down since. Since then there have been raises, job changes, job losses, but our consistently low spending has been our major firepower towards avoiding the paycheck to paycheck feeling. 11yrs later and We are about 80%  FI and are back to a low income but it was a temporary setback for a better work environment with much better long term earning potential.


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Syonyk

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Re: Paycheck to paycheck discussion
« Reply #7 on: July 20, 2019, 07:59:09 PM »
What do you consider to be living paycheck to paycheck?

If a missed paycheck or two causes serious a serious financial emergency that puts at risk your housing, food, or transportation, you're living paycheck to paycheck.

I'd argue that if you have a 3+ month emergency fund you can live on, you're not living paycheck to paycheck.

Quote
Have you ever been in that situation? And what did it take to get you to turn that around, and how did you accomplish that? Do you know of others that have turned that around?

Sure.  It's literally the default option for Americans, with how finance is taught.  If you have any surplus at the end of the month, why, you can afford the monthly payment for that shiny new thing you "deserve."

I mostly incomed my way out, but it was combined with realizing that spending more money on things didn't lead to more enjoyment of things - so several things at once.  I could have easily kept up my spending with my income, but learned to decouple the two.  Then earning a relatively large amount of money one I'd learned that didn't lifestyle inflate nearly so badly as it otherwise would have.

Quote
I'm wondering if it is possible to really dig out of that without getting a large salary boost or doing something rather drastic, such as a large downscale on housing, selling a car, etc.

It really, really depends - but, in general, I'd say that if you're living paycheck to paycheck, it's going to take some significant action to get out of that - because what you're doing isn't leading to the free cashflow that will get you out of it.  If you're at $20k/yr and paycheck to paycheck, well... work on boosting the income.  If you're at $250k/yr paycheck to paycheck (amazingly trivial to do, really), you have to downsize or get rid of some of the fancy cars.

The best approach is to not creep your lifestyle as you grow your income.

SwordGuy

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Re: Paycheck to paycheck discussion
« Reply #8 on: July 20, 2019, 09:49:54 PM »
What do you consider to be living paycheck to paycheck?

If a missed paycheck or two causes serious a serious financial emergency that puts at risk your housing, food, or transportation, you're living paycheck to paycheck.

I'd argue that if you have a 3+ month emergency fund you can live on, you're not living paycheck to paycheck.
Good examples.   Here's a real life anecdote to highlight it.    Guy I used to work with got married to someone.   I don't know their exact income, but it had to be at least $80,000 and could easily have been $120,000 or more based on their professions.

The last 5 workdays of each month he was driving into work on fumes.  He couldn't afford even a cup of coffee because he had to use each dollar he could scrape up to keep gas in his (of course) big truck.

That's real paycheck to paycheck living.   Their finances were so tight they couldn't even fill up their vehicle with gas to go to work on a credit card. 

Hope that makes it clear.

Quote
Have you ever been in that situation? And what did it take to get you to turn that around, and how did you accomplish that? Do you know of others that have turned that around?

The first 6 years my wife and I were together we lived on 1/3 median family income and paid child support.  Money was pretty tight, as you can imagine.   I had a couple thousand in savings from mowing yards as a kid that we never touched. 

What did it take to turn it around?  Because of child responsibilities, we were limited to the area we were in. It took years of me working 6-7 days a week, 10 to 16 hours a day to build the skills to get a better paying job.   That happened the year I turned 30.

But we never went big into debt.   One lowish mileage used car loan was our only debt and that's only because the car we had died.   We kept our expenses really low and started two different businesses - one for extra income and one to take over the customers of the company we worked for that went out of business.   We got married on $50 (total budget for everything) and that was a really big expense to us.  (That would be about $129 in today's dollars.)

We were also lucky.  We were in good health and  didn't get seriously injured during that time.   We had no health insurance  -- not because we didn't think we needed it.   There just wasn't any money for that. 

Quote
I'm wondering if it is possible to really dig out of that without getting a large salary boost or doing something rather drastic, such as a large downscale on housing, selling a car, etc.

When you're as dirt poor as we were, only income can fix things.  We really couldn't have gotten our expenses much lower.   

In the example of my work colleague and his wife, they had two problems.  One, a legitimate one, was a special needs kid who had some medical issues.    The other was a keeping up with the Joneses problem and just spending too much money doing that.  They made enough they could do one of those things but not enough for both.   


Bee21

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Re: Paycheck to paycheck discussion
« Reply #9 on: July 21, 2019, 06:05:20 AM »
I am a serial immigrant and I survived a long period of low wages. The first 2 years of my working life did not make a living wage even though I was university educated and working full time. I was working 3 jobs, just to survive.  I guess it was close to what you describe as paycheck to paycheck living  (an upgrade) after I arrived to Australia (was making 19$ ph doing an entry level admin job, but working only 1 job, yay), but I always had savings. I technically sacrificed most luxuries for the sake of having a financial cushion, because I was single and alone on a different continent and paranoid of ending up homeless and jobless. Small apartment, no car, no eating out, no clothes shopping, no makeup, no entertainment....my only luxury was a gym membership. I used the library a lot that year. I paid cash for grad school that 18 month period, furnished the apartment,  took 3 trips (one international- I did budget for these) and somehow still managed to save 15k on top of the compulsory retirement savings. I still remember, I had about 30 dollars left over every fortnight for unplanned spending. I was once asked to contribute 50$ for a group wedding gift and I could not buy groceries that week. It did not occur to me to dip into savings, I just ate out the freezer and the pantry. I think my food budget was about 25 a week.

I got a better paying job in the end, but I kept the scarcity mindset. I think what helped me during those austerity years was that I treated savings as a bill. It never occurred to me not to set a few hundred dollars aside each pay. I simply viewed it as a matter of survival. And minimalist living helped a lot.i did not miss the clothes (I did not know the term that time but I had a capsule wardrobe and always look presentable), the recreational shopping (the bus ticket to the big shopping centre would have been 7$). It was a pain not to have a car, but I simply couldn't afford it. And I missed my regular facials, in Europe they used to be affordable, in Australia I was lucky to afford a haircut every 4 month. So yeah, the struggle is real, but you can manage on a low income with some discipline. Or at least I could somehow....It was hard.

I still find it funny that people making 60k a year can't make ends meet. Or couples on 150k a year who have no savings. People living in giant houses complaining about the cost of living. The Australian version of the Guardian was running a series about people on benefits struggling on 270  (or more) a week after housing costs, and  I just realised that I was actually living on a breadline.

I used to comment on case studies here, but I stopped. People just don't understand what basic living expenses are and sometimes you have to cut everything to the bone just to survive. And you need very little to survive and can still manage a few luxuries. I try not to be judgemental, but I am, with this background I can't help it but I don't want to do frugal shaming either.


Steeze

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Re: Paycheck to paycheck discussion
« Reply #10 on: July 21, 2019, 06:16:48 AM »
Did the live in your car, food stamps, soup kitchen dirt bag life for a while during and after college. Mostly due to alcohol and drug use combined with a snowboarding problem. I was 100k in student loan debt and had negative cash flow for several years.

When I got my first real career job 2 years after college things started to turn around. I was cash flow positive for the first time since I was in high school. Started paying back some personal debt owed to friends that helped me stay solvent along the way. Fast forward 3 years and I was at my current job making 1.5x my original salary. Student loans paid off with a pitiful 401k balance. I had positive net worth for the first time since I financed an ATV when I was 12 (thanks dad!). Fast forward another 3 years and I am making 2.5x original salary and DW and I are maxing our retirement accounts and socking cash into a taxable account.

Thing that helped: #1 is generous firends that always gave me a place to stay, food to eat, and a job when I needed extra cash. Food stamps and soup kitchen for keeping me stable during the worst of times, the dean letting me into engineering school despite not passing the entrance exam, sallie Mae for making it all happen, working full time all through school, addiction education counseling, a bad knee keeping me from enjoying snowboarding, and late stage Lyme Disease taking the wind out of my sails and slowing me down .. really though, an engineering degree and the salary that comes with it are what got me out of the hole, but no amount of money would have helped me if I was living the lifestyle I had from 16-26 years old. More money would have probably killed me had I not gotten my life in order.

« Last Edit: July 21, 2019, 06:22:41 AM by Steeze »

mistymoney

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Re: Paycheck to paycheck discussion
« Reply #11 on: July 21, 2019, 08:57:01 AM »
What do you consider to be living paycheck to paycheck?

If a missed paycheck or two causes serious a serious financial emergency that puts at risk your housing, food, or transportation, you're living paycheck to paycheck.

I'd argue that if you have a 3+ month emergency fund you can live on, you're not living paycheck to paycheck.
Good examples.   Here's a real life anecdote to highlight it.    Guy I used to work with got married to someone.   I don't know their exact income, but it had to be at least $80,000 and could easily have been $120,000 or more based on their professions.

The last 5 workdays of each month he was driving into work on fumes.  He couldn't afford even a cup of coffee because he had to use each dollar he could scrape up to keep gas in his (of course) big truck.

That's real paycheck to paycheck living.   Their finances were so tight they couldn't even fill up their vehicle with gas to go to work on a credit card. 

Hope that makes it clear.



That is pretty ouch! I guess we don't know if the cc were maxed, or they didn't/wouldn't use credit?

I'm guess max only based on the big truck detail!

mistymoney

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Re: Paycheck to paycheck discussion
« Reply #12 on: July 21, 2019, 09:09:08 AM »
What do you consider to be living paycheck to paycheck?



Quote
Have you ever been in that situation? And what did it take to get you to turn that around, and how did you accomplish that? Do you know of others that have turned that around?

The first 6 years my wife and I were together we lived on 1/3 median family income and paid child support.  Money was pretty tight, as you can imagine.   I had a couple thousand in savings from mowing yards as a kid that we never touched. 

What did it take to turn it around?  Because of child responsibilities, we were limited to the area we were in. It took years of me working 6-7 days a week, 10 to 16 hours a day to build the skills to get a better paying job.   That happened the year I turned 30.

But we never went big into debt.   One lowish mileage used car loan was our only debt and that's only because the car we had died.   We kept our expenses really low and started two different businesses - one for extra income and one to take over the customers of the company we worked for that went out of business.   We got married on $50 (total budget for everything) and that was a really big expense to us.  (That would be about $129 in today's dollars.)

We were also lucky.  We were in good health and  didn't get seriously injured during that time.   We had no health insurance  -- not because we didn't think we needed it.   There just wasn't any money for that. 

Quote
I'm wondering if it is possible to really dig out of that without getting a large salary boost or doing something rather drastic, such as a large downscale on housing, selling a car, etc.

When you're as dirt poor as we were, only income can fix things.  We really couldn't have gotten our expenses much lower.   


Good job, and a great parable.

mistymoney

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Re: Paycheck to paycheck discussion
« Reply #13 on: July 21, 2019, 09:22:39 AM »
I am a serial immigrant and I survived a long period of low wages. The first 2 years of my working life did not make a living wage even though I was university educated and working full time. I was working 3 jobs, just to survive.  I guess it was close to what you describe as paycheck to paycheck living  (an upgrade) after I arrived to Australia (was making 19$ ph doing an entry level admin job, but working only 1 job, yay), but I always had savings. I technically sacrificed most luxuries for the sake of having a financial cushion, because I was single and alone on a different continent and paranoid of ending up homeless and jobless. Small apartment, no car, no eating out, no clothes shopping, no makeup, no entertainment....my only luxury was a gym membership. I used the library a lot that year. I paid cash for grad school that 18 month period, furnished the apartment,  took 3 trips (one international- I did budget for these) and somehow still managed to save 15k on top of the compulsory retirement savings. I still remember, I had about 30 dollars left over every fortnight for unplanned spending. I was once asked to contribute 50$ for a group wedding gift and I could not buy groceries that week. It did not occur to me to dip into savings, I just ate out the freezer and the pantry. I think my food budget was about 25 a week.

I got a better paying job in the end, but I kept the scarcity mindset. I think what helped me during those austerity years was that I treated savings as a bill. It never occurred to me not to set a few hundred dollars aside each pay. I simply viewed it as a matter of survival. And minimalist living helped a lot.i did not miss the clothes (I did not know the term that time but I had a capsule wardrobe and always look presentable), the recreational shopping (the bus ticket to the big shopping centre would have been 7$). It was a pain not to have a car, but I simply couldn't afford it. And I missed my regular facials, in Europe they used to be affordable, in Australia I was lucky to afford a haircut every 4 month. So yeah, the struggle is real, but you can manage on a low income with some discipline. Or at least I could somehow....It was hard.

I still find it funny that people making 60k a year can't make ends meet. Or couples on 150k a year who have no savings. People living in giant houses complaining about the cost of living. The Australian version of the Guardian was running a series about people on benefits struggling on 270  (or more) a week after housing costs, and  I just realised that I was actually living on a breadline.

I used to comment on case studies here, but I stopped. People just don't understand what basic living expenses are and sometimes you have to cut everything to the bone just to survive. And you need very little to survive and can still manage a few luxuries. I try not to be judgemental, but I am, with this background I can't help it but I don't want to do frugal shaming either.

sorry that you stopped commenting! Not sure what frugal shaming would look like :P, but I want to see it.

Different POVs are always valuable, imho, whether or not a person immediately sees the light or make changes.


Villanelle

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Re: Paycheck to paycheck discussion
« Reply #14 on: July 21, 2019, 10:10:28 AM »
I think the question of whether you can turn things around without a salary increase depends on the situation.  If you make $$150k/y and are yo to your eyeballs in debt, you could easily be living paycheck to paycheck (in that, at the end of the month, you have no cash left and you aren't putting anything away).  In that sort of situation a salary increase probably isn't necessary.  Cut expenses, negotiate and rearrange the debt, and over time you can recover on the same income.  If you make $25k (and have few other assets) you probably need more money to make much headway.

frugaldrummer

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Re: Paycheck to paycheck discussion
« Reply #15 on: July 21, 2019, 10:55:58 AM »
Having once lived in a very high income neighborhood I can vouch for the fact that a surprising number of those people were still living beyond their means even with large incomes.

While I agree it's much harder to save on a low income, many low income people still have room to squeeze 5 or 10% out of their budgets, which would allow them to save up a $1,000 emergency fund over the course of a year or so. Once that savings is in place, other costs of being poor (like overdraft charges on checking accounts and fees to turn utilities back on after getting shut off or not being able to buy in bulk for savings)  become less as well.

I lived as a poor student for many many years so I'm familiar with saving strategies on a lean budget. Food is still one of the first places people can squeeze, home cooking is essential. Toiletries can not only be switched to a cheaper brand but in most cases you can use half the usual amount and get the same results; same for soaps and detergents. Thrift store shopping and a simple wardrobe. The book The Tightwad Gazette would be great for anyone on a small income.

A second job or taking in a roommate are ways to raise income if you can't squeeze your budget any further.

MrThatsDifferent

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Re: Paycheck to paycheck discussion
« Reply #16 on: July 21, 2019, 10:57:28 AM »
Technically I live paycheck to paycheck because I use zero based budgeting  and all my money is allocated. Now, I don’t really match the definition because paycheck to paycheck presumes you have little or no savings or investments. My entire childhood growing up was paycheck to paycheck, and that was remarkably stressful on the whole family.

KentBent

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Re: Paycheck to paycheck discussion
« Reply #17 on: July 22, 2019, 08:01:11 AM »
I think that almost every person has had a period in his life when he had to live paycheck to paycheck. However, there are people who decide to live that way the whole their life while others overcome this condition by making changes in life. Some choose to limit their spendings, others to increase their income. The main key here is your choice.

LovinPSDs

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Re: Paycheck to paycheck discussion
« Reply #18 on: July 22, 2019, 01:59:57 PM »
So I'll make a comment, in regards to being paycheck to paycheck.  While we aren't exactly right on that boarder, we are often times pushing closer to it than I feel comfortable.  Much of that I believe is because we are doing the things we're "supposed to do".  Some of our tactics may not match others, but Tithing, investing heavily, paying off our mortgage, etc.. these things chew up money FAST.  It's not that we don't have any, it's that we are intentionally putting it towards things where it's not liquid. 

My more recent goal is again to build our emergency funds up, but I just thought I'd offer my perspective.  There isn't much left over at the end of the month, but it's intentional.

TartanTallulah

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Re: Paycheck to paycheck discussion
« Reply #19 on: July 22, 2019, 04:12:04 PM »
I've done the high-income, high-outgoings form of living paycheck to paycheck. I had a costly divorce, bought my XH out of the house we'd shared (resulting in a big mortgage), and kept all the children. I then met and married a man who had let his XW keep everything when they divorced, paid a chunk of his income as child maintenance, and had three children who visited often and came on vacation with us. For years we'd regularly have to put an embargo on spending towards the end of the financial month, and there were times when I worked lots of extra hours to keep us afloat. We never used credit cards or non-mortgage debt.

Eventually I accepted that we couldn't afford such a big house and we relocated and downsized, clearing the mortgage. That helped a lot. Gradually my children left home and my husband's maintenance obligations ceased and he found paid work since we no longer needed a SAHP.

I'm glad now that for most of my working years my pay was being top-sliced for my DB pension before I even saw it. I would never have saved otherwise.