How I Live Paycheck to Paycheck (on purpose) 

The phrase “living paycheck to paycheck” most often has a negative connotation. Most people interpret this as meaning you spend all your money and wait for the next paycheck to arrive to make bills, never being able to save anything.

I, on the other hand, see this mentality as one of the best ways to save.

My method is simple. It is centered around automating almost everything (I’ll explain the things I still leave manual). I set up automatic transfers to our bill account, savings account, and investment account each week I get paid. By the time I open my eyes on payday, the transfers have been made and in my checking I only see what remains.


After all my bill and savings transfers, I’m left over with the money I’m allowed to spend. I grew up having “pay yourself first” drilled into my head daily so it’s always so important to me to be sure I’m meeting my savings goals.

Here is the list of recurring bills I have each month:

  • Electric
  • Gas
  • Mortgage
  • Cell phones
  • Car insurance
  • Water bill
  • Total = 32.79% of gross pay

My husband and I have joint checking and savings accounts that we use for bills as well as our own individual accounts that we’ve always had. We deposited all our wedding gifts into the joint savings so we have an emergency fund, then add transfers to cover bills each month.

We sat down and calculated all the bills we pay each month. For the ones that vary month to month or due to time of year (like the gas bill) we took a year average. Then we divided it up into what we would need to contribute to the joint account each paycheck. We set up automatic transfers from our own checking accounts (where the direct deposit paycheck comes) to the joint account. I get paid weekly so I set up the transfer to go every week the day I get paid so by the time I wake up on payday it is already gone from my account. It shows up in the joint account the next day.

If there is anything else that comes up randomly, we cover from this account. Last month, for example, our dog was due for his checkup and all his shots so it was an extra $400.

These are the automatic transfers I set up for savings.

  • Cash Savings
  • 401(k)
  • Non-retirement investment accounts
  • Total = 28.26% of gross pay

I leave what is leftover from that in my checking for spending each week. By the next paycheck, I transfer whatever is leftover into savings. This is what I consider living paycheck to paycheck. I only ever have what was just paid in my checking account until next paycheck comes.

This also means that 28.26% is just the minimum I save. Typically it is more like 35-40%. Things come up though, as we all know, so some weeks it differs. One weekend last month I was due for some car maintenance that totaled around $300 so I was not able to transfer more.

I did have student loans on automatic debit monthly and paid extra each week. The extra was at least $75 but typically more like $150. Since I have finished my student loans I changed my automatic savings contribution to include that extra $100 I’m not paying on loans.

Once I reached my emergency fund goal when I had student loans, I kept the automatic transfer to savings. Every so often when it added up to a nice chunk I used that money to make an additional student loan payment (on top of the auto minimum and my weekly payment). This was really just a mental move. It was satisfying to have an extra few hundred or so in my savings and make another loan payment to see the balance drop even more that month.

The extras (not the fun stuff!)

  • Health (medical, HSA, dental, vision)
  • Taxes, etc. (Federal, State, Social Security, Medicare)
  • Total = 29.31% of gross pay

If you are checking my math, this reaches 94.06% of my gross pay, the rest remaining for whatever I wish.

Automatic payments

I have the mortgage, car insurance, and cell phones on auto pay. Since electric and gas vary each month, I want to review it first before I pay to mitigate any surprises and validate it. The water bill is small and I would automate it if I could, but it’s the only one that has no online payment option. They only take checks. I use my credit union’s bill pay system so I don’t personally have to cut the check and mail, the credit union does, so that’s as automated as well get for that one.

For car insurance, they do try to sneak the price up every few months but I get a $10 discount having auto pay from my checking so I leave it on and just stay aware of the charge.

Protect Against Lifestyle Inflation

This means if you get a raise or come into any money, you don’t splurge it and get yourself used to making more and speeding more. Last year I changed jobs and received about a 23% salary increase. My student loan payments were only slightly above the minimum as what I could afford at the time. I subtracted the exact difference from my new paycheck to my old and paid the difference each payday into the loans (in addition to what I already was paying). The payoff really started to pick up and I still continued living happily, not finding reasons to blow the extra money.

Since I just paid off my student loans, we have no other debt but the mortgage. We have a pretty low interest rate so we don’t plan on paying it off aggressively. My plan is to now take what I was paying weekly and add that to savings to build up my emergency fund a bit more. I have no lifestyle wants or needs (except to save!) and want to make sure the extra dollars I’ll have not going to debt will now go to savings.

Next Steps

I recently accepted a new job with an increase in pay. Between this and having no more student loan debt, I want to increase my cash emergency fund as my first goal. Once that has been met, I’ll increase my investments.

I will once again subtract the difference from my current pay to the new take home and make sure that difference is going straight to helping meet my savings goals.

How do you meet your savings goals?

4 thoughts on “How I Live Paycheck to Paycheck (on purpose) 

  1. Wow. Congratulations. You have a really methodical and comprehensive system going and it looks like it works really well. You’ll meet your goals in no time. Speaking of which, what are they exactly?

    Besos Sarah.

    1. Thank you Sarah! My first goal is to have 6 months of living expenses in my savings account. Right now I’m at about 3. Once I reach that I plan to increase my 401(k). We also have some home repairs we need to aim for, a new roof being one of them. Not cheap! So once we have our savings goals met we need to check some of those repairs off 🙂

  2. I love that I’m not the only one who does this! I budgeted so that we use our entire paycheck (meaning our balance is 0 at the end of the payment cycle just like yours) and adjust accordingly to changes in income (for example I just went down to part-time at my job, so I stopped some of our disposable expenses and then took away from our savings – which killed me! My husband is applying for a new job that pays more so when he starts that I plan on trying a new budget that only uses his income to pay for things to see if we can handle me being at home when our baby gets here (I’m due in May and this is our goal.)

    Did you and your husband have different views of money? I was raised the same way, pay yourself first and save as much as possible so I have a very similar mindset to you from what I read in this article. He, however, wasn’t really taught how to handle money – his parents horrifyingly didn’t realize this until he got a job in high school and had to start managing money his senior year and during college; they’re kicking themselves now and trying to do better with his younger siblings. It has caused a bit of a struggle with us because we are saving for a house and when his income increases I want to continue the way we are living now so we can put that extra money toward our down payment fund, but he wants to inflate our lifestyle a bit. How much is too much when it comes to lifestyle inflation?

    1. First off, congratulations on your upcoming arrival!!! My husband and I have somewhat different viewpoints. I’m definitely the more frugal one and was always taught to be aware of finances. He came from a similar background as your husband. An example, not knowing what having credit means 😐 When we applied for our mortgage his credit score was a decent amount under mine but we’ve worked together to raise it up.

      For the lifestyle inflation question, how about you strike a balance? When he gets his raise, let him treat himself to something that is fairly significant but nothing crazy. That way, he gets the reward of his hard work but it isn’t consistent new spending.

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