Break the Paycheck-To-Paycheck Cycle

One of the sure-fire ways to break the paycheck-to-paycheck cycle is to live on last month’s income. By using the money you make this month to pay for expenses in the next month, you instantly lose the anxiety of waiting for your next paycheck or worrying you will overdraft on your account. In fact, you might even forget your payday!

Living on last month’s income is like having a one-month emergency fund. If you ever lose all your income, you can rest assured knowing you can survive for at least another full month.

This is a concept I was introduced to by my favorite budgeting software, You Need A Budget (aka YNAB). The rule is simple, but can be tricky to implement for people who are already struggling to live paycheck-to-paycheck.

My Story

Before I started budgeting, I never gave much thought to my spending. As far as I was concerned, I was making enough money to pay all my credit card’s minimum payments, rent, and other bills with enough left over for food and other necessities. I only got concerned when I started reaching my credit limit.

Even with a maxed out credit card, I still would find a way to open up new card with an enticing balance transfer deal. I’d transfer my credit card balance over to the new card with the intention of not spending anymore on credit and paying off my debt. That never happened. Since I had no plan for my spending, I’d find myself quickly burning through my paycheck and putting the rest on my freed-up credit.

Eventually, I reached a breaking point. Half of my income each month was going towards debt, I was losing sleep, stressed over reaching payday, and frequently over-drafted my checking account costing me hundreds of dollars in fees.

Budgeting didn’t come naturally to me, but I had lots of motivation to keep learning and trying new tools and techniques. It took over a year to start paying off some debt and freeing up enough money to save for next month’s expenses. Soon enough, I was an entire month ahead on my budgeting. The paycheck-to-paycheck lifestyle was over!

How to Stop Living Paycheck-to-Paycheck: Tips and Tricks

It’s possible for anyone to build up enough savings to live on last month’s income, it just takes discipline. Here are some pointers.

1. Before you start saving for next month’s expenses, put together a budget

Start by writing out all the necessary expenses you have each month such as debt payments, utilities, food, clothing, fuel, insurance, etc. This will be a starting point to determine how much you need to save to consider yourself one month ahead.

2. Set aside any extra money you can each month

Find ways to save any extra money from your paycheck into a “future month” or “buffer” fund. Once your buffer fund equals your necessary monthly expenses, you can use that money to budget for next month’s expenses.

3. Put bonuses or “extra” paychecks into your buffer fund

If you get paid bi-weekly (every two weeks) then you will have 2 “extra” paychecks each year. Normally, you receive 2 paychecks a month, but 2 months every year you will get a 3rd paycheck. If you budget 2 paychecks each month, you can use the 2 extra paychecks you get throughout the year to build up one month’s worth of income. This method might take longer, but you can guaranteed yourself enough savings.

4. Keep budgeting

I find it’s much easier to grasp this concept of living on last month’s income if you use the envelope system of budgeting. Find a tool that will help you stick with your budget month after month. It could be Excel, a piece of paper, actual envelopes, or an online program. Personally, my wife and I have used You Need A Budget (YNAB) for the past few years to manage our money. We have continuously lived on last month’s income and can’t imagine budgeting any other way.


Congrats! You have built up enough of a buffer so the money you make this month won’t be spent until the next month. Enjoy the feeling of not worrying about getting to payday. You’ve finally broken free of the paycheck-to-paycheck cycle. Believe it or not, you will forget when your payday is, and you’ll see more money in your checking account than ever before.

Imagine your life no longer stressing about when you’ll be paid next. Are you motivated to start your one-month buffer fund?