How to Budget While Living Paycheck to Paycheck

September 28, 2017

Written by Nicole

I have said this before, and I will say it again. I love budgets!

The feeling of being out of control with my money sends me into a tailspin. Budgeting helps me to regain a sense of control over my money.

Traditionally budgeting is based on the calendar month. If you are creating a budget for October your budget starts October 1st and ends on October 31st.

I personally prefer budgeting a month at a time.

But, traditional monthly budgeting does not work for everyone.


How to Budget

I often receive comments and questions from people who are frustrated with the traditional budgeting process. So, the problem with traditional monthly budgeting is that most people are not paid once per month. Instead, most of us get paid bi-weekly. At the same time, most bills are paid once per month, while other expenses such as groceries and gas for the car are purchases multiple times throughout the month.

Using a monthly budget when you are paid bi-weekly can create confusion with your cash flow. This is primarily because you do not have access to all of your cash at the top of the month. You may have a large bill, such as rent or mortgage due at the beginning of the month, but unless you have properly planned out your paychecks from the previous month you may find yourself short on cash to cover that large expense.


You may be falling prey to spending leaks which eat up your cash. Or, the “extra” cash leftover from your first bi-weekly pay check should have been held in reserve (and added to money from the next check) to cover expenses that need to be paid later in the month.

Is paycheck budgeting right for you?

If you are new to budgeting, you may find it difficult to stick to the traditional one month budget. The reality is that nearly three-quarters of Americans are living paycheck to paycheck and are one emergency away from financial ruin.

Disturbing (depressing even..) but true. 

But there is hope. The budgeting process itself can help you break the cycle of living paycheck to paycheck.

Before I started budgeting regularly I had moments where I felt out of control and panicked. I wondered where all of my hard earned money was going and I lost sleep at night, worrying about my money.

Do get behind on your bills and struggle to keep up?

If so, paycheck budgeting can give you a greater sense of control over you money as a result of having a better understanding of your cash flow.

The ultimate goal is to get to the point where you are no longer living paycheck to paycheck.


Here are a few tips to break the paycheck to paycheck cycle

  • Once you create your budget, stick to it.
  • Take advantage of unexpected money. You can use it to prepay bills in advance.
  • Start an emergency fund.
  • Leave a buffer in your checking account. A small surplus of money that stays (untouched) in your account to protect against low balances (and overdraft fees).
  • Develop sinking funds to save up for larger purchases. This will ensure that an irregular purchases doesn’t wreck your budget or your cash flow.


How does paycheck budgeting work?

The key to successful paycheck budgeting is assigning every single expense to a specific paycheck or source of income. 

Step 1. Figure out how much money you earn per paycheck. 

This should be easy. Just take a look at your previous month’s pay stubs or come up with an estimate based on the average number of hours you work. If you have a two-income household you will do the same for your spouse’s income.

Paycheck budgeting in action: Mike and Stacy are both paid bi-weekly.

For the upcoming month, both Mike and Stacy get paid on the 6th and the 20th.

Mike brings home approximately $1,300 per pay period after taxes.

Stacy brings home $1,200 per pay period after taxes.

Their combined take home pay is $2,500 bi-weekly.

Step 2: Track your recurring monthly bills.

It is important to know when all of your bills are due and write them down on a calendar, planner, or spreadsheet. Be sure not to miss anything!

Examples of recurring monthly bills:

  • Mortgage/Rent
  • Utilities
  • Cell phone
  • Internet/Cable
  • Minimum payments on debts (credit card bills, student loan payments, car payment)

Paycheck budgeting in action: Mike and Stacy’s recurring monthly expenses are as follows:

Rent- $1400 due November 1st

Utilities- $250 due October 15th

Cell Phone- $120 due October 12th

Internet/Cable- $100 due October 18th

Car payment- $300 due October 12th

Student Loan payment- $300 due October 20th

Total Recurring Expenses: $2,470

Step 3: Next, budget for variable bi-weekly expenses. 

Bi-weekly expenses are not necessarily bills, rather they are purchases that need to be made throughout the month and can be split evenly between paychecks. I recommend considering setting aside this money in a cash envelope system.

Examples of variable bi-weekly expenses:

  • Groceries-e.g. if you spend $600 on average monthly, set aside $300 from each of your biweekly paychecks
  • Gas
  • Kid’s allowances
  • Personal spending money
  • Entertainment
  • Dining out

Paycheck budgeting in action: Mike and Stacy’s bi-weekly expenses are as follows:

Tithe & Offering to church- $600 per month ($300/pay check)

Groceries- $500 per month ($250/paycheck)

Gas-$250 per month ($125/paycheck)

Personal spending money-$200 per month ($100/paycheck)

Entertainment-$100 per month ($50/paycheck)

Dining Out- $100 per month ($50/paycheck)

Dry Cleaning- $50 per month ($25/paycheck)

Total Bi-weekly expenses: $1800/month= $900/paycheck


Step 4. Budget for irregular expenses.

Irregular  expenses vary from household to household and are paid once per year or intermittently. For example, my husband and I pay our car insurance once per year. To avoid being ‘surprised’ by this annual expense, I set aside money periodically throughout the year in a sinking fund to make sure that I have money available when the bill is due. Because these expenses are irregular it is necessary to save incrementally.

Let’s say you spend $1200 dollars for Christmas on average. Divide the annual amount by 26 (the number of paychecks you receive per year).

Based on these numbers you would need to set aside roughly $46 per pay period if you began saving in January. Irregular expenses have great potential to wreck your budget so spend a few moments on this step.

Irregular expenses may include:

  • Car insurance
  • Christmas spending
  • Vacation & Travel
  • Gifts
  • Car maintenance
  • Kids summer camp

Paycheck budgeting in action:  Mike and Stacy’s irregular expenses are as follows:

Car insurance: $1820/year=~ $70/paycheck

Christmas: $780/year=~$30/paycheck

Vacation & Travel: $1560/year=~ $60/paycheck

Gifts: $520/year=$20/paycheck

Car Maintenance: $1,300/year= ~$50/paycheck

Total Irregular Expenses (Sinking Funds)= $5,980/year=~$230/paycheck 

Step 5: Assign each expense to a paycheck.  

Finally, pay close attention to due dates to ensure that money is available to pay the expense before it is due. If large monthly expenses cannot be paid with one paycheck, you may find it necessary to set aside cash from multiple paychecks. For example, your rent or mortgage is typically the largest expense and you may not be able to cover the cost from a single paycheck. Instead you may need to set aside half from paycheck #1 and half from the next paycheck.

Paycheck budgeting in action:  Mike and Stacy’s cash flow looks like this:

Total Monthly Income for October: $5,000

Total Monthly Expenses for October: $4,730

Monthly Surplus: $270.00(Woohoo!)

Paycheck #1: $2500

Pay Date: October 6th

Expenses to be covered with Paycheck #1:

  • Cell Phone- $120 due October 12th
  • Car payment- $300 due October 12th
  • Utilities- $250 due October 15th
  • Internet/Cable- $100 due October 18th
  • Student Loan payment- $300 due October 20th
  • Bi-weekly Expenses- $900/paycheck
  • Irregular Expenses/Sinking Funds: $230/paycheck

Total Expenses: (Paycheck #1)- $2,200

Surplus: $300

Paycheck #2: $2,500

Pay Date: October 20th

Expenses to be covered with Paycheck #2:

  • Rent- $1400 due November 1st
  • Bi-weekly Expenses- $900
  • Irregular Expenses/Sinking Funds: $230/paycheck

Total Expenses:  (Paycheck #2)- $2,530


Because Mike and Stacy are projecting a deficit for Paycheck #2 they need to be sure to save some of the surplus from Paycheck #1. Remember, it’s not extra money!!

Alternatively, Mike and Stacy may choose to adjust some of the allocations for each paycheck to eliminate the shortage in paycheck #2.

Overall, Mike and Stacy still have a $270 monthly surplus! This is definitely a budget win.

Step 5: Give every remaining dollar a name.

If there is any money remaining  after budgeting for all expenses, designate the surplus for a specific purpose based on your financial goals. If we don’t name every remaining dollar we are much more likely to blow the money on junk or stuff that we don’t need.

Ways to take advantage of surplus money:

  • Start an emergency fund or beef up and existing one
  • Accelerate debt pay off by making extra principle payments
  • Begin saving for retirement
  • Save for large purchases such as a car or a downpayment on a home

When creating your budget, if a deficit is projected (expenses exceed income), go back to steps 2 and 4 to see if you can scale back on any existing expenses. It’s not fun. However, in order to correct the deficit sacrifices need to be made. You don’t want to reach for the credit cards to cover the short fall later.

What are your biggest budgeting challenges? What type of budget do you prefer? 

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  1. Tam

    Hi Nicole, I just found your YouTube channel and am so happy that I did. I’m just starting to get financially in order but I have a issue with keeping my budgeting because of how I get paid. Our company changed our payroll dates to the 7th and 21st of the month, however our pay is now by how many days are in that pay period. Which is the 1-15 & 16-end of the month. So my paycheck vary by how many days are in that pay period. What is the best way to accurately budget?

    • Nicole

      Hi Tam! Thank you so much! I’m glad that you find the YT channel helpful. My advice would be to budget based on an average amount per paycheck. This is typically what I recommend for people who have irregular income.

  2. Richshawn Pratt

    Biggest thing I don,t pay rent !! Maybe have three things to pay off!! I should be more far ahead then I am!! At this point I ask myself am I really ready for a house payment !!

    • Nicole

      Hi Richshawn! Well it sounds like it may be an issue of focus and intentionality. Have you tried writing down a list of financial goals that you would like to accomplish?

  3. Rita

    Thanks this helps a lot! Considering I’m getting married in a week and we will definitely be living pay check to pay check (two bi-weekly incomes) Knowing this information is truly helpful.

    My biggest issue is student loans. I guess the only solution is pay it and be patient.

    • Nicole

      Hi Rita. Glad it helps! I totally relate to the student loan debt. Congrats on the upcoming wedding!

  4. Paula Wisor

    My husband is one of those rare people who still gets paid weekly. This month (June) is the first month we’ve ever done a budget. Looking to budget for July, we find that his last paycheck of this month (on June 29) will actually be the money we’ll be spending in the first week of July (our “weeks” are going to run from Friday–when he’s paid–to Thursday), so I’m not including it in our June budget, but the July one instead. I see that how his paychecks fall and the bills it will cover will require some “different” planning for us, but we’re sure that we’ll figure it all out in time. Another thing we find useful for us is to have a monthly budge AND a weekly budget…both on written sheets (old-school here!). The weekly sheets take into account WHEN different bills are due throughout the month. For example, most budget sheets put the mortgage right at the top of expenses, but since the mortgage money will actually come out of a paycheck at the END of the previous month, I list that expense in the last week of the month. The gas bill is actually the first bill we pay each month, so we put it at the top of the budget sheet. I find it helps me remember when I’m paying a bill and organize accordingly. We have several household items that we purchase from Amazon and I can tally up the different weeks’ expenses and see which week has a smaller dollar amount of expenses and make my Amazon purchase that week, rather than a week that we’re already fairly overloaded with expenses. I do have to agree that, since we’re finally on a budget, I feel like I’M in control of my money, rather than it controlling me!

    • Nicole

      Hi Paula! Yes!!! to the sense of control over your money when budgeting. When done right it gives you such a peace of mind. Thanks for sharing some of your tips as well!

  5. Eboni Harrell

    Hi Nicole,

    What budget would you recommend if I get paid bi-weekly and my husband gets paid monthly? Should we budget based on his paycheck and save mine or vice/versa?

    • Nicole

      Hi Eboni. That’s a great question. If you and your husband are able to live off of one income then I would recommend saving his once per month paycheck and then budgeting based on your bi-weekly paychecks. If you are new to budgeting it will probably be easier for you to budget bi-weekly as opposed to once per month.

      • Eboni

        Thank you so much. I’m very new to budgeting, never write or track anything. However, I’m not getting any younger and I guess it’s better to start now that not starting at all.

        • Nicole

          Hey Eboni! Glad to help. Yup- today is always the best time to get started.

  6. sam12587

    I used to be good at budgeting. What has hosed me up since the recession is utility bills are not only going up(additional fee’s, restructuring their billing methods, etc) but wildly fluctuating due to the economy in ways I’d never experience & I can’t seem to get them to go down to what I think they should be at. I’ve debated on even just turning off the breaker panel during the day – my dryer & fridge are both touchy to electrical fluctuations though.

    Health insurance not covering as much messes with me too at times. You go to the Dr for a physical and then you get bills in the mail a month later for assorted lab work that is no longer covered. The financial impact of medical expenses makes me want to never see the Dr for anything as it seems most appts end up costing 150-200 when the dust settles.

  7. Estephanie

    How do you budget for a weekly paycheck schedule and a biweekly paycheck schedule?

    • Nicole

      Hi Estephanie. It’s the exact same process as described above in the article. The budget will be based on the amount of income you’re anticipating and the expenses that will be due during that timeframe.

  8. Jacqueline Weyler

    I started feeling like I had control over our finances again, but then the bank charges overdraft fees and puts us in the hole which causes a snowball effect if you do not have cash to bring you back above water. What I find the most difficult is automatic withdrawals. Even though I know about the bill, they seem to cause havoc on my plan. I also never know the exact amount my fiance may spend on things like beer, that I try to budget for, but he exceeds the spending limit. I feel like I’m sinking.

    • Nicole

      Hi Jacqueline. Can you get rid of the automatic withdrawals until your cash flow is better?

  9. Patricia Lewis

    Good Morning Nicole. I just found your information about budgeting. I am new at this as well. I am 66 years old and retired military. and want to live and do things differently. I had thought there was no way out, but a wrong mind set is dangerous to any one. I have decided to make better choices for myself. Thank God for your business. I need help.

    • Nicole

      Thanks so much Patricia! It’s never too late to take charge of your finances. Congratulations on taking the steps to mend your mindset and get your budget in order.


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