Anyone else budget like a poor person?

[HotTubes]

Whenever I see those public polls about "living paycheck to paycheck" I say "yes, that's what I do."

That's what most poor people do - Get their pay and pay their bills, and try to live off the rest.  I certainly did that when I was poor (how poor?  How about making $586/month and working full time?). 

In fact, I still budget that way. I live paycheck to paycheck, but now I pay myself first. Over the years the amount has varied, from $5 to many thousands, but my mother's simple advice to "pay yourself first" is still good advice, and maybe a little easier for the non-FIRE-minded people to digest.

[SunnyDays]

This is basically what I did.  I decided how much I wanted to save every month, put that away and lived on the rest.  I was making enough that I never felt or lived "poor," but I certainly could have spent a lot more than I did.  Not frittering away money on small things allowed me to have the big things I wanted.

[seemsright]

We call it zero sum. Investing comes off the top, we budget the rest. Savings is a bill always has been.

[cool7hand]

For most of our pre-FIRE life, we lived off the budget we set right out of graduate school. When we received pay increases, we invested them. Kind of the inverse of conventional consumerism. If only we'd known some of the Mustachian hacks to decrease spending and what we've learned about low-fee index investing sooner than 2014ish!

[ixtap]

No.

We now budget in such a way that sometimes the paychecks don't even cover rent. For example, we may hold on to the cash bonus and front load the 401k. In poverty, any lump sum usually goes to catching up.

We don't look forward to a tax refund as forced savings and we don't panic when the taxes due with our return are as much as our monthly spend. We may groan and adjust our W4, but we don't panic.

We have no concerns about using the credit card when the money isn't in the checking account, as we know what our options are to have the money in the checking by the time it is due.

I got new tires, new hoses, new serpentine belt, etc. all at the same time!

I still spend a similar amount as someone with a small fraction of our household income, but I don't do it like I did when that was my income.

[HotTubes]

Okay, interesting.  I've used my mom's advice with younger friends who aren't "savers" because they don't consider themselves "savers" - lifestyle-wise they don't accept that moniker, so it's flipping the angle and saying that you should consider yourself a "bill" and pay yourself first. 

"Why would you pay everyone else but not yourself?" seems to have some salience with the spend, spend, spend group.

[yachi]

Okay, interesting.  I've used my mom's advice with younger friends who aren't "savers" because they don't consider themselves "savers" - lifestyle-wise they don't accept that moniker, so it's flipping the angle and saying that you should consider yourself a "bill" and pay yourself first. 

"Why would you pay everyone else but not yourself?" seems to have some salience with the spend, spend, spend group.

I guess that makes some sense.  In my experience, paycheck-to-paycheck looked more like ending up with unexpected expenses and putting them on credit cards, or borrowing money, or going without something important, but also spending like mad when there is money.
In contrast, the way we handle our budget, savings takes second place to things like required maintenance (house or car) and medical expenses.  We also will not carry a credit card balance into the next month in order to preserve a savings rate because it wouldn't add up.  In practice, our 401(k) savings rate isn't changed frequently, but I'll manually pull money from the checking account into a brokerage account if it accumulates.  Sometimes I pull too much and have to move it back before the next paycheck.

[KathrinS]

I earn a variable amount each month due to being self employed, so I do the opposite. I pay my bills, transfer 'spending money' for groceries and other purchases to a separate account, and invest anything that's left over.

This works well for me because I'm a natural saver and usually under-spend my already low 'spending money' category by 25-50%. Basically, I'm very good at only spending on things I actually need. But I see how paying yourself first would work well if someone has a regular income and tends to be more of a natural spender.

[Tigerpine]

You might like this book:
https://en.wikipedia.org/wiki/The_Richest_Man_in_Babylon

To answer your question, I remember being poor, paying my way through college, and supporting my girlfriend at the time.  The way I look at money now is categorically different.  At the time, I was really living on the edge, and supporting another when you can barely support yourself makes it doubly difficult.  I remember that I saw money as being in one of two categories, soft money (credit) and hard money (actual money).  Every month I tried to minimize my use of hard money to make sure that I have enough to pay the bills that would take no other form of payment.  For example, credit card minimum payments, rent, etc.  Whenever I got a windfall, I'd pay off as much debt as I safely could, but I was always mindful to have a little hard money on hand so as to not have a late payment by mistake.

Nowadays, things are very different.  Before credit let me survive from month to month.  Now it's just a convenience.

[Steeze]

I have a decently tight budget ($2k-3k / mo in NYC), and invest the rest automatically, in line with "pay yourself first" but man, it is nothing like being poor. Shit, I buy the expensive free range eggs now hahaha. I can remember being mind blown when I saw $4.99/dozen eggs.

Too broke to eat, in search of free food everyday. Living around a schedule of what churches to go to when for free meals, what food banks are open on what days of the month, what bagel shops throw out their food when, when is the blood bank open for plasma donations, when do the food stamps get reloaded, buying a cell phone at the gas station that only lasts a month and then not having a phone for another couple months, stealing sandwiches from the grocery store, living in a car, living in a tent, couch surfing for months. Only eating when you are at work, skipping meals to save money, looking like a skeleton, not having health insurance, getting sick and staying sick for months even years, chronically ill with something that could have been prevented. Throw in a healthy amount of cigarettes, weed, and cheap booze to really screw things up. Get $20 bill in a birthday card and its like hitting the damn lottery, you could give me $5,000 right now it wouldn't be as good.

That is broke - That is what my early 20's were like on and off. Sometimes things were good too, but you're always one bad decision from being down and out. When I was in my early 20's I made a lot of bad decisions.

And the budget back then? Something like, my first paycheck of the month I'll buy the biggest bag of weed I can, I need to sell enough bags so I can buy food and smoke for free for the month - second paycheck goes to rent. Otherwise my budget would have been negative.

[SunnyDays]

I have a decently tight budget ($2k-3k / mo in NYC), and invest the rest automatically, in line with "pay yourself first" but man, it is nothing like being poor. Shit, I buy the expensive free range eggs now hahaha. I can remember being mind blown when I saw $4.99/dozen eggs.

Too broke to eat, in search of free food everyday. Living around a schedule of what churches to go to when for free meals, what food banks are open on what days of the month, what bagel shops throw out their food when, when is the blood bank open for plasma donations, when do the food stamps get reloaded, buying a cell phone at the gas station that only lasts a month and then not having a phone for another couple months, stealing sandwiches from the grocery store, living in a car, living in a tent, couch surfing for months. Only eating when you are at work, skipping meals to save money, looking like a skeleton, not having health insurance, getting sick and staying sick for months even years, chronically ill with something that could have been prevented. Throw in a healthy amount of cigarettes, weed, and cheap booze to really screw things up. Get $20 bill in a birthday card and its like hitting the damn lottery, you could give me $5,000 right now it wouldn't be as good.

That is broke - That is what my early 20's were like on and off. Sometimes things were good too, but you're always one bad decision from being down and out. When I was in my early 20's I made a lot of bad decisions.

And the budget back then? Something like, my first paycheck of the month I'll buy the biggest bag of weed I can, I need to sell enough bags so I can buy food and smoke for free for the month - second paycheck goes to rent. Otherwise my budget would have been negative.

Hm.  Maybe you were too broke to eat because you were spending your money on cigarettes, weed and booze?  Which changed first, your finances or your priorities?

[Wolfpack Mustachian]

In some ways I am more frugal than people I know who make less money - not truly impoverished but maybe making $40-45k for a family of four, LCOL area. However, I know that saving money like I am and living frugally as I do in no way compares to people who are truly impoverished, living paycheck to paycheck on minimum wage jobs. I have a cushion. I don't have to worry what I'll do if the car battery dies suddenly or my child falls from a tree and breaks an arm. I would not compare my perspective to that.

[Steeze]

I have a decently tight budget ($2k-3k / mo in NYC), and invest the rest automatically, in line with "pay yourself first" but man, it is nothing like being poor. Shit, I buy the expensive free range eggs now hahaha. I can remember being mind blown when I saw $4.99/dozen eggs.

Too broke to eat, in search of free food everyday. Living around a schedule of what churches to go to when for free meals, what food banks are open on what days of the month, what bagel shops throw out their food when, when is the blood bank open for plasma donations, when do the food stamps get reloaded, buying a cell phone at the gas station that only lasts a month and then not having a phone for another couple months, stealing sandwiches from the grocery store, living in a car, living in a tent, couch surfing for months. Only eating when you are at work, skipping meals to save money, looking like a skeleton, not having health insurance, getting sick and staying sick for months even years, chronically ill with something that could have been prevented. Throw in a healthy amount of cigarettes, weed, and cheap booze to really screw things up. Get $20 bill in a birthday card and its like hitting the damn lottery, you could give me $5,000 right now it wouldn't be as good.

That is broke - That is what my early 20's were like on and off. Sometimes things were good too, but you're always one bad decision from being down and out. When I was in my early 20's I made a lot of bad decisions.

And the budget back then? Something like, my first paycheck of the month I'll buy the biggest bag of weed I can, I need to sell enough bags so I can buy food and smoke for free for the month - second paycheck goes to rent. Otherwise my budget would have been negative.

Hm.  Maybe you were too broke to eat because you were spending your money on cigarettes, weed and booze?  Which changed first, your finances or your priorities?

My priorities were all messed up for sure, but it was pretty normal to live that way, so I thought. I was partying hard 3-4 days a week from age 15-25. The Lost Decade - don't remember a lot of it. Became sober by court order around the time I finished college, then eventually landed in a good career a couple years later after I was off probation. Smooth sailing ever since. helped that I married a girl that has never partied before, that really turned things around for me. Now? Life is on easy mode - hard to fail at this point.

[HotTubes]

^  that's great

[shelivesthedream]

No. We've had our income cut to pretty much the poverty line by the pandemic but we are still in no way poor, even though we check anxiously each month to check we haven't spent more than our income. Because we have a £5k float in our current account which we built up over several years and over £100k in investments. There is no emergency that would make us homeless. There is never any question of skipping a single bite of food. Poor people have a worry over money that we will not have, despite our tiny on-paper income. Any windfalls get us further ahead, not allow us to catch up. Even if we just tread water, we're treading water on a fantastic level of security.

[GuitarStv]

No way.

Poor people living paycheck to paycheck are forced into dumb financial decisions out of necessity.  They buy things in smaller quantity that are more expensive.  I'm cheap, not dumb.

[charis]

I don't budget at all, I guess, but I adjust our auto savings/investment contributions so that the "spending money" coming in just barely covers our average monthly expenses. The rest, 65%, goes directly to 401ks/457/IRAs/HSA/529s/savings.  Anything unusually large expense or additional investment funds would be pulled from savings if we can't cash flow.