Stop watching your hard-earned paycheck go straight toward expenses month after month and take control of your current financial situation! Learn how to start a budget, while living paycheck to paycheck, and take your first steps toward financial freedom. Trust us, you’ll be a budget master in no time!
One of the most frequent questions we get asked is how to start a budget when you are living paycheck to paycheck. If that’s you, don’t worry—you’re not alone! In fact, Forbes estimates that up to 78% of working people are actually living paycheck to paycheck! Say WHAT!?!?
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If this is YOU, you are not alone! We’ve been there! Living paycheck to paycheck can be so draining and can put a strain on even the strongest relationships. Stop fighting with your spouse (and yourself!) and rest easy knowing your paycheck CAN and WILL last until the end of the month and beyond! We will show you how to budget, how to control your spending and even how to SAVE LIKE A BOSS!
It’s time to take control of your finances once and for all and break free from the “paycheck to paycheck” chains! Let’s get started!
HOW TO BUDGET AND WHERE TO START
So, you've decided its finally time to start a budget but have no idea where to begin. We can help! Follow these simple principles and you'll have a working budget in no time!
KNOW YOUR “IN”COME—NOT JUST YOUR INCOME
The very first thing you need to know before creating a budget is how much money comes IN (get it… “IN”come!?) every month. This should be easy! No, this isn’t your salary, it ONLY includes what actually hits your bank accounts after taxes and withholdings. Don’t trick yourself by dividing your annual income by 12 because your numbers will be off!
START A BUDGET BY TRACKING MONTHLY EXPENSES
If you’re living paycheck to paycheck, you may not even be aware of where some of your money goes! The best way to figure this out is to go back and track all monthly expenses for the last 3-6 months. Make an organized list of all monthly expenses and make sure you don’t forget any!
Once you’ve written down all of your monthly expenditures and you have a pretty good idea where your money is going, add it all up and compare that total to your monthly income. Are you spending more than your paychecks allow? Are you spending less, but unsure where the remainder of the money is going? Is a portion of your paycheck going toward credit card debt just to make minimum payments?
If your current situation leaves you with little to nothing left after monthly expenses, there are two options for you. Either increase your income or decrease your spending. It is really that simple!
INCREASE YOUR INCOME
Increasing your income can seem like such a daunting task, but really, the sky is the limit! Just be careful not to spend too much money hoping to make money. That can be a recipe for disaster! Instead, use materials you already have or can get for free (or cheap) to start your side hustle. (Like creating digital art on the iPad pro you got for Christmas last year!)
A FEW WAYS TO MAKE MORE MONEY
- Ask for a Raise – We know this one may not apply to everyone, but depending on your circumstances at work, this may be just where you need to start! Work hard and make yourself valuable to your company—it WILL pay off, hopefully in the form of a raise!
- Begin a Side Hustle – Clean a few friend’s houses! Do you have a musical gift? Get permission to play on a busy downtown street on weekend nights for tips. Can you sew, make jewelry, or create digital art? Create a good of some sort to sell online. Open an Etsy shop and sell to people all over the world! Pick up some contract work for companies looking for tasks to be completed. Become a shopper for Instacart.
- Get a Second Job – Remember, this doesn’t have to be forever! If you can swing it, a second job can be a quick way to increase income, enabling you to pay off any debt you may have eating up your paycheck. If you’re looking for a weekend job, try waiting tables at a fancy, high-end restaurant. You may be surprised to learn how much you can make in tips in one weekend!
However you decide to increase your income, keep track of every penny just like it was a part of your monthly paycheck. It can be too easy to see that money as “extra,” spend it here and there and before you know it—it’s all gone, and you have no idea where it went!
DECREASE YOUR SPENDING
If increasing your income is not an option for you, the only other option is to decrease your spending. Don’t worry, it will be easier than you think!
If you are truly ready to be free from the paycheck to paycheck life, it WILL require some sacrifice. Just remember your WHY and keep big picture goals in mind! Take that list you made earlier—when you tracked all your expenses for the last 3 months—and start cutting!
COMMON “OPTIONAL” EXPENSES
- Cut Cable and Other Subscriptions – We like to think of television and entertainment as a basic need sometimes, but it isn’t! Cancel all of your subscriptions. This includes cable, Netflix, Hulu, Pandora, Spotify—anything you subscribe to for entertainment! It may only be a few dollars here and there, but you’d be surprised how much those total up to. Remember, this isn’t forever!
- Sell Your Car – We know it sounds crazy, but it can be done! If your situation allows you to walk or bike most places, do it! Not only will you save a ton of money on that car and on gasoline, you’ll probably get in killer shape, too! Bonus!!
- Downsize Your Home – We did say this would require sacrifice, right?? Your mortgage or rent is probably your biggest monthly expense. A super quick and easy way to significantly decrease spending is to lower that cost. If you rent, look into renting a smaller home for a year or two and take advantage of that huge savings. If you own your home, find out how much equity you may have and use that to your advantage, too! Sell and rent for a year or two while you get your finances under control.
- Cut “Luxury” Spending – This includes eating out, pedicures, manicures, clothing, expensive makeup and even haircuts! Anything that is not a basic “need,” needs to go! You can do it!
Restricting spending on an already tight budget may not seem like fun, but it’s really not about limiting yourself. It’s about making sacrifices here and there to allow you to afford the things in life you never dreamed you could!
So, you’ve committed to increasing your income or decreasing your spending… or, better yet, BOTH! What now?
START A BUDGET AND FOLLOW THE 70% RULE
Now that we understand how much money you actually make and where it all goes, it’s time to make a budget! Here at Fun Cheap or Free we live by the 70% rule. The greatest thing about this principle is that it will work for ANY budget and it tells you exactly what to spend, save and invest!
We won’t go into the 70% rule in detail here but do yourself a favor and read all about it HERE! Here’s the basic concept: 70% of your income goes toward monthly expenses, 20% goes into savings or debt and 10% gets invested. EASY PEASY.
This principle is a literal life changer! Pay off your high interest debt first, then watch your bank accounts grow! Worry less about unexpected expenses when you have money set aside to cover it. It may take a little sacrifice to get there, but we promise you’ll be glad you did it!
HOW TO BUDGET WITH OUR SIMPLE ENVELOPE SYSTEM
We believe when it comes to learning how to budget, the simpler the better! That’s why we came up with the easiest envelope system ever! Instead of trying to keep up with a bunch of budget categories, this system only uses three. These include family expenses (expected monthly expenses and bills), grocery, and other. YEP, that’s it!!
Learning how to budget with this simple envelope system breaks down your spending in weekly chunks instead of trying to track the entire month. No more running out of money at the end of the month because you overspent during week two! Check out our simplest budgeting system for all the juicy details! Could it be any simpler?? We don’t think so!
LET BUDGET BOOT CAMP HELP
Still feeling a little overwhelmed and need a more detailed step-by-step? Check out our Budget Boot Camp program! It's an incredibly fun series of 27 videos on how to whip your wallet into shape.
We are so sure you'll love it we have a 100% money back guarantee if you don't save at least what you paid for it! Use the code FCFBLOG and save 10%.
We know changing a bleak financial situation can be overwhelming and can even feel hopeless. It’s up to you to make the change! Follow these guidelines by increasing your income, decreasing your spending and using our 70% principle and you will find yourself with a savings account in no time!
Now that you know how to start a budget living paycheck to paycheck, that doesn’t have to be your reality anymore. So, get to work on your goals! Tell us your budget goals in the comments below and let's make them happen!!
Check out these other helpful posts, too!
- Need to save some extra cash fast? Learn how to do a spending freeze and save a bundle!
- Learn to host a party without busting your budget!
- Now that you’ve got this down, it’s time to teach your kids to save money! Download the FREE printable!
- Understand how to set financial goals and why you need to do it now!