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how to stop living paycheck to paycheck

How to Stop Living Paycheck to Paycheck

Feb 1st, 2021 • Gayle E.

I finally broke down and created a budget. The problem I have is I run out of money before the end of the month and have to use credit cards for necessary items like food or gas. What am I doing wrong? 


First, congratulations on taking the time to create a budget. That’s a giant step in getting your finances in order. 

It sounds like you’re suffering from two very common issues that new budgeters often encounter: 

  • How to create a budget that is based on real expenses
  • How to track your spending during the month

Let’s talk about creating a reality-based budget first. This means your initial numbers are based on your history of spending. This is really important because it gives you a place to start so you can understand how you spend your money. We do this through a spending inspection which is simply an analysis of your past three months of financial transactions. 

How to start?

  1. Pull out the past 3 months of transactions (bank and credit card statements)
  2. Categorize them into the Ideal Budget categories  (see below)
  3. Total each category add divide by three
Hey Money Ideal Budget Chart
The Hey Money Ideal Household Budget

This exercise will give you an average ‘spend per month’ per category in the ‘Ideal Budget.’ This chart is based off of your take-home pay. It’ll provide an excellent way to understand how you’ve been spending your money, as well. Are you surprised by any of your spending? Most people are! 

The next step is to build your budget. Begin by looking at how your spending compares to the Ideal Budget guidelines. Wherever your numbers are significantly higher than the guidelines, this presents an opportunity for reduced spending. This might create some challenges but we’ll talk about how to stick to these target numbers next. 

The second common issue many new budgeters struggle with is tracking expenses. You see, having a budget is very different from using a budget. Having a budget means you’ve taken the time to understand what bills you have, how you’ve spent money in the past and how much you should spend in the present and future. Creating a realistic budget is no small feat.

Using a budget means that your budget is now a dynamic tool in your financial toolbox that guides your daily decisions about money. This is how you reach your goals.

Once the budget is established, your challenge is to track what you spend. The problem many people have is that they aren’t aware of how much they’re spending and they end up surprised at the end of the month when they’ve overspent their budget. By tracking, you’ll be real-time monitoring your spending to avoid surprises at the end of the month.

So exactly how do you track spending? Well, pretty much any way you like. I’d say an automated system to minimize your efforts is ideal because we all know that the more time something takes to do, the less likely we are to do it. There are a number of free tools like Mint or Clarity, as well as fee-based apps like YNAB, My Lunch Money app or Mvelopes, to name a few. 

You can even use paper and pencil to record your spending each week.

The goal is to be aware of how much you’re spending each week so you can adjust if necessary to avoid overspending for the month, and ultimately stay on a budget. 

If you can start with a budget backed by some data and keep track of your spending, you’ll be able to increase your chance of sticking to your budget.

Of course I would be remiss to not mention Hey Money. As a Hey Money expert I talk to people just like you everyday. I really enjoy helping people clear out the clutter, create a budget that works, and keep them accountable each month. Managing your finances can be as simple as following a few best practices, but having an expert to walk you through the process is invaluable. To learn more about how you can create a Hey Money account for just $19.99 a month, go here.

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