CFI Blog

You SHOULD Live From Paycheck to Paycheck!

“I’ll be truthful. The weekly paycheck is the most important thing to me.”
–Bela Lugosi


When I was in the Army, I could tell when payday was, because the next Friday night, the night club in downtown Friedberg, Germany, where I was stationed, was hopping. There was beer flowing, people were happy, and it was a great time for everyone. By the end of the month, you’d have thought that the local papers had run a story about the plague being found at the same night club, because it was almost invariably empty. There were a lot of soldiers who lived from paycheck to paycheck.

Every financial planner and guru out there tells you that living from paycheck to paycheck is a terrible thing and that damnation and hellfire will strike you and the next twenty generations if you don’t get out of that trap.

I’m here to tell you otherwise.

It’s OK to live paycheck to paycheck. In fact, that’s exactly what we do.


Yup, we live from paycheck to paycheck, and I’m going to tell you why.

In accounting, there’s a term called a plug number. It’s the unknown in an equation. You usually have to work backwards to figure out what that plug number is.

When we do our monthly budgets, we have a plug number. It’s usually entertainment or gift money, and it’s through the use of the plug number that we are actually living from month to month.

I personally know that if I let Monkey Brain see money in my bank account, then he’s going to overwhelm me with this sudden, and insatiable desire to go out and buy the first 183” flat screen TV I can find. I’ve lived with Monkey Brain long enough to know that’s how he works, and that I have to do something to get around it, because his powers of persuasion are strong.

The way that I do this is by limiting the amount of money which I have available in a readily accessible bank account to the bare minimum that I need each paycheck period to get by on and hiding the rest of it in accounts which are, relatively speaking, difficult for me to access. By difficult, I don’t mean freezing a credit card in a lake of ice or anything that cumbersome (I am, after all, lazy by nature). I mean putting it in a different account at a different bank so that if I need the money, I actually have to make a physical effort to open up a different tab in my Internet browser and log into a different bank account and make the transfer. Yes, that sounds minor, but it’s enough.

run out of budget

At the end of the month, my wife and I set out our budget for the upcoming month. We identify our mandatory expenses, such as taxes, HOA fees, food, etc. We then set aside money for our irregular but recurring expenses, such as car and property taxes, Christmas, auto and home repairs, etc. That is accomplished either through an automatic or a manual transfer from our regular checking account into our set-aside account. Next, we put money away for investing. Again, it’s the same process – either an automatic or a manual transfer of money. Both of these categories of transfer occur on the same day the paycheck arrives.

I also usually yell something to distract Monkey Brain while doing the transfer.

ME: “Hey! Look! Over there! A banana wrapped in bacon!”


ME: (busily transferring money out of checking account)

Once we have done that exercise, there’s usually some money left over which we have to figure out what to do with. Since I don’t want to live the sere existence of a monk (unless it’s a Trappist monk, which might not be too bad), I like to have some fun, so we will usually save/invest some of the money and we’ll use a little bit of it to play or to pad the travel/vacation fund.

By shuffling our money around in this manner (and yes, it’s nothing more than a shell game with our money, I admit, but psychology often trumps knowledge), we squeeze all of the excess money out of the checking account and leave ourselves with just enough to live on for the month. We’ve practiced this enough that we’re usually within a margin of error of tens of dollars.

Are we actually living from paycheck to paycheck? No. We’re not. But, we are putting constraints around our spending and challenging ourselves to live within a reduced means, and, in doing so, giving ourselves some real options in the future.

Over the New Year, we took a trip back to Charlottesville to see some friends, for me to do some in-person client work, and for my wife to work in her home office for a week. I decided to challenge us and not count the trip from our travel budget (meaning that we could save up what we’d put in the travel “bucket” for a later trip). As the month drew to a close, we were getting down to fumes on our cash.

It would have been easy to give in and to say “hey, we have the money, we’ve been setting it aside, and it’s not like we’re living from paycheck to paycheck,” but we made the choice to challenge ourselves to make it.

I’m not saying that the way to a richer life is through living a cheaper life. I’ll never advocate that. I am saying that intentionality in what you do with your life will enable you to do the things which are important to you. Heck yes, we were digging out our Groupons, gift cards, gift certificates, freebies, and whatever we could find. In fact, we probably ate better during that time than we normally do!

Fortunately, that event was a rarity. We usually wind up coming in slightly under what we predicted that we would. It’s a good practice for us to see if we could live within a budget like that if we decided to retire and live off of our savings. We’re not the type of people like Mr. Money Moustache or Jacob from Early Retirement Extreme who would rather pare down our lifestyles in order to be done. All power to them. They knew what they wanted, and they went out and did it.

Instead, by constraining our available cash each month, sweeping the remainder into savings, and then starting over anew each month, we’re preventing ourselves from hopping on the hedonic treadmill which would simply serve to either move the retirement goalposts farther away or cause us to take more risks with our investments to keep up with our growing wants.

That’s how we live from paycheck to paycheck.

Do you do things to “hide” money from Monkey Brain? What do you do? Tell us about your strategies in the comments below!

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John Davis
John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.

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