Reader Testimonial: How I Stopped Living Paycheck to Paycheck

Here's an inspiring story on how one family stopped living paycheck to paycheck. Full of practical tips to help you out.

The following is a Financial success testimonial from Alison!  Enjoy!

This year I had a goal of depositing two full paychecks directly into my savings account on top of my regular monthly 10% savings. I was discussing my budgeting and savings plans with a credit counselor and she told me she had never known someone to be successful at what I was planning…challenge accepted! This past month I was able to successfully do this and wanted to share with other frugal minded individuals how I did it so you can too.

My employer pays me bi-weekly, which means I receive two paychecks every month except for two wonderful months of the year when I receive three paychecks.  At first this provided an interesting budgeting challenge because there are a few ways to calculate a monthly salary:

1.   Take the overall yearly salary and divide it by 12 months.

For example, if I made $39,000 per year and divided that by 12 months, I would get a monthly salary of $3,250. This number is valuable for certain financial situations, but unrealistic for my monthly budgeting.

2.   Add up the paychecks received in a month.

In this scenario, if I made $39,000/year, 10 months of the year I would be paid $3,000 and the other two months of the year I would be paid $4,500.

When creating a budget, what was I supposed to do with these three different amounts: $3250, $3000, and $4500? I started by making a decision:  I do not want to live paycheck to paycheck.  I wanted to create a system that always had me ahead of the game.  I also decided to live off the amount of money I am paid for those 10 months of the year involving two paychecks and was determined to put those additional two paychecks, in their entirety, directly into my savings account.  Saving 10% of my regular monthly salary is great, but I wanted a better security net.

Here’s what I did:

  • Took my lowest monthly income number to create a realistic budget.
  • Used helpful tools such as “Budgeting Basics – How to Get Started” found on Simply Frugal and tracked my expenses to determine what was sustainable.
  • Created an overall budget that allotted every dollar of my two paychecks per month.
  • Determined what money I would need as cash on hand during a month and what I could leave in a separate bank account. For example, grocery money is cash I need to take out of the bank. Gift purchases or dental appointments, while budgeted for, are not necessarily money spent every month. I’ll call these my “planning ahead expenses.”
  • Once the budget was nailed down, I totaled all my “planning ahead expenses” and my savings, then divided those numbers in half. This is what I transfer out of my main chequing account every paycheck into sub-accounts. For example, $20 per month is budgeted for gifts, of which $10 is transferred every paycheck to a “Gifts Account.”
  • Leave the rest of the money needed for cash on hand or for bills directly debited out of my chequing account to build up my monthly float. My monthly float is every dollar that I will spend during the next month.

Through the month as I deposit each paycheck, I transfer out all of my “planning ahead expenses” and let the rest remain to build up for the next month. Because each paycheck that I deposit into my account is not needed for any immediate expenses, I am released from my dependence on it. When I deposit a paycheck, I have no thought of spending it because I know I do not need it for the current month. This freedom is essential because when one of those three paycheck months comes along, I treat the first two checks just like any other normal month by transferring out my “plan aheads” and building up my float. Those two checks set me up for the next month and that third one can go straight into my savings account without a second thought.

Using this system of building up a float is how I stay away from living paycheck to paycheck. I did sacrifice a bit of savings to set myself up in this way, but the benefits are worth it:

  • Eliminated the stress of relying on my next immediate paycheck.
  • An extra month’s cushion of money if I lost my job, in addition to my emergency fund.
  • At the end of every month, I have exactly the amount of money I need in my account to pay my bills and variable expenses for the coming month.

Sticking to this takes planning and discipline, but it is worth it when I see the big jump in savings a couple times a year! It is also worth it to know that being frugal and wise with my money allows me to do something that someone in the financial world thought wasn’t possible.

Do you have a financial success story you’d love to share to help inspire others?  Send your stories to me here.

How to Balance Saving Money & Spending It

Money is meant to be spent, but it’s also meant to be saved. It can be hard to balance saving money and spending it. Use the following tips to get a firm grip on how to use your hard-earned money wisely, while still being able to get enjoyment out of life.

How to Balance Saving Money & Spending It

How to Balance Saving Money & Spending It

Pay yourself first

You will never save up money, if you don’t pay yourself first. If you put all your money towards paying bills and such it will be hard to build up any savings. Create a special account just for you. Be sure that each week a small portion of your check gets deposited into that savings account.

Give yourself an allowance

As an adult, it’s hard to work so hard and only pay bills. Sometimes you want a little spending money. If you’re all caught up on your bills, it’s okay to give yourself an allowance. You don’t need to spend your whole paycheck, but $20-$30 per paycheck is a fair amount to give yourself. Treating yourself to a new gadget, outfit, or even a restaurant, that you rarely make it to, will be a great refresher that you sometimes need. Life isn’t meant to be all work and no play.

Don’t blow your money

Spend your money wisely, don’t just blow it. This is a good way to balance saving money and spending it. Don’t blow your money. In other words, if you have found yourself swooning over an item, go ahead and treat yourself, on occasion. Before splurging, though, ask yourself, “Is this practical?” If the answer is no, then it is best to wait until you find something that you really want, but also have a use for. Buyer’s remorse is no fun. So, when you walk by a New Kids on the Block poster that has you reminiscing over your childhood, be sure to consider your purchase wisely, before jumping the gun right away.

Stick to the budget

A budget allows you to give yourself spending money and to pay your bills. By sticking to the budget, you’re going to do a good job of balancing and saving money. Start out by reassessing your budget, if you already have one. Make sure that your bills are covered, as well as other necessities, like fuel, groceries, and clothing.

Whatever is left of your paycheck can be divided between gifting and saving. Once your budget is finalized, it is important to adhere to it. If your allotted grocery money for the week has been consumed and you then find out that Reese’s peanut butter pumpkins have just hit the shelves, don’t even think about digging into your wallet. Wait until next week, when your grocery budget has reset. Practicing this self-control can be hard, but very rewarding.

Save your money, watch it grow

The more money you save, the more motivating it is to keep saving. Don’t be afraid to save up for something you want. Instead of running out and buying it, you can save up for it. The result is much sweeter, when you save money for something you want, instead of making a spontaneous purchase.

I’d love to know, how do you personally balance saving money and spending it?

How We Paid off More than 50% of Our Mortgage…Before We Moved In

How We Paid off More than 50% of Our Mortgage... before we moved in. #frugal #budget #budgettips

This story begins about 10 years ago, around the time my husband and I were married. It’s also a story that I have never told on Simply Frugal. In all honesty, I have never told this story before because it just seems too simplistic. But I’ll take a risk with this one and assume there are some of you out there that can relate to or need to hear our story.

You may have noticed that I have never discussed all the ways that we have personally climbed out of mountains of debt. Like most other websites similar to mine, they are sharing their story of how they knocked down thousands upon thousands of dollars in debt.

But I do not share these steps for one simple fact: Until the purchase of our new home, my husband and I have never had any debt.

I don’t share this to brag, but to perhaps tear away at the thoughts that our society suggests the idea that we need debt in order to be or appear successful.

We are by no means wealthy, but we have done well considering there have been some years with very low income.

As I mentioned, our journey to paying off more than 50% of our mortgage, began about 10 years ago when we started making smart financial choices. (Instead of ones that “society” suggested we make.) Our story may be possible because of circumstances but I also believe it’s because of our intentional decisions.

At the time of our marriage, my husband owned a condo that he then sold for a profit. We purchased another townhouse at the time of our marriage and decided the smart thing to do was to put his profits into our new home, paying off the mortgage in full. This was essentially the best decisions we have made for our family. There were so many fun things we could have done with the money. We could have been world travelers or bought a boat or fancy car. But we decided to be forward thinkers and determined that we wanted to set up our future for success which to us means no debt.

Because of our choice many years ago, we had a very low cost of living, which enabled us to save even more money. (Even in the very low income years.)

So, cut to March of 2017, we purchased our new home using the profits from the sale of our townhouse and the savings we had in the bank. That allowed up to pay off more than 50% of our mortgage!

As you can see, our story is not typical of most frugal websites out there today. It’s  also quite “simple” because we happened to buy and sell at “the right times” allowing us to profit.

But… I also attribute our success so far to the spending choices we make on a daily basis. Here are our “rules” for spending that I hope will help you decide with future purchases:

1. Pay with Cash

When we want something or need something, we always pay with cash. Now, we do use a credit card, but we only use it if we already have the money in the bank. Over the years, every purchase we have made (aside from our new home) has been with cash.

2. Buy Used

Looking around our home, many of the things I’m looking at have been bought used. Our couch set, our dining room table, toys, our vehicles even. (Though we do keep those outside. 😉 ) When it’s time to make a purchase, we look for something used first.

3. Buy on Sale

If we can’t find what were looking for used, we wait for a sale. Everything goes on sale eventually! Why pay full price if you don’t have to?

4. Determine Wants vs. Needs

My husband wants a new TV for the basement. We still haven’t purchased one because we have determined that there are other purchases that we need to make that are more important. The way we have set up our finances allows us to buy wants, but that doesn’t mean we instantly go out and buy something just because we want to. We do our research and think through the purchase. Now, I’m not perfect and I struggle with buying more small wants than my husband. Something both of us wish to change. 🙂

5. Have an Emergency Fund

My husband and I don’t feel comfortable if we don’t have a certain amount in the bank. We highly recommend having an emergency fund. The amount you have in this account is up to you, but it should only be used in real emergencies.

All in all, it takes practice, thoughtfulness and a shift in mindset. Be a future thinker instead of a present thinker in terms of your finances. It wasn’t until I completed my very first No Spend Challenge many years ago that I had that mindset change. The challenge helped me to switch my mindset from shopping for entertainment to realize the enjoyment of having money in the bank.

My hope is that our story is an encouragement to you. If you’re in a less than ideal financial spot, it doesn’t always have to be that way!

I’d love to hear your thoughts on this. Please share in the comments below!

8 Inexpensive Hostess Gift Ideas to Show Gratitude

The holidays mean get togethers, dinner parties, and all sorts of festive gatherings. If you are attending any one of these events, it is always a nice idea to take the hostess a gift for all of her or his hard work. Hostess gifts use to be a common thing of the past, but many people just aren’t sure what to give these days. No worries, as we have compiled a list of 8 inexpensive hostess gift ideas below perfect for your gift giving needs. Check this list of hostess gifts out and consider one of these suggestions next time you are invited to a holiday event. Your hostess is sure to appreciate it!

8 Inexpensive Hostess Gift Ideas to Show Gratitude

8 Inexpensive Hostess Gift Ideas to Show Gratitude #giftideas #hostessgift

1. A potted plant.

You can find small potted plants at most grocery stores for about $5. Take one of these plants and wrap the pot in some decorative paper. This is always a nice idea as a hostess gift, and a plant will last longer than cut flowers will.

2. Some scented soap.

Try for some nice foaming hand soap found at stores like Bath and Body Works for just $4 a piece. Add some twine or ribbon to the bottle and a gift tag and you are all set. These always come in handy in kitchens and bathrooms.

3. Decorative candles.

It seems as though everyone loves candles. Give your hostess a scented candle in a soft and not overpowering scent. This Seracon Maple Votive Candle is a popular one on! They can use it that night for the event or save it for when they are ready to relax and wind down.

4. Decorative hand towels.

These are always cute for kitchen and bathrooms, and can be found for as little as $1 at your local dollar store. Snag some decorative towels on sale even and keep them on hand so when events arrive you have them for your hostess.

5. A book.

Does the hostess love to read? Even Dollar Tree has a nice selection of hard back novels and cookbooks. Book Outlet is another great place to get discounted books. Find one you think they will enjoy and include a heartfelt note with it. It is sure to be appreciated!

6. Tea or coffee.

Coffee and tea comes in so many flavors, so put a small sampling together for your hostess. If you wish you can even include a cute mug from your local dollar store. Your hostess will no doubt think of you when you she takes a sip.

7. Cozy socks.

Who doesn’t love cozy socks? After throwing a party, your hostess will enjoy having a nice pair to slip into. (These ones are so fun!) Gift your hostess with some cozy socks found at most dollar and discount stores and they are sure to appreciate the gesture.

8. An inexpensive gift card.

Even a $5 gift card to a local coffee house is a nice hostess gift. You can place the card in a dollar store mug if you wish or just a heartfelt card. Everyone loves gift cards, and even a $5 – $10 one is a nice way to show your appreciation.

As you can see, you don’t need to spend a lot of money to show your hostess you are grateful for their hard work. Consider these 8 inexpensive hostess gifts and see how easy they can be to give!

I’d love to know what some of your favourite hostess gifts to give are. Let me know in the comments below!

How to Pay off $1,000 of Debt in One Month

Do you have a lot of debt? Want to get it paid off? You can get serious about paying off debt. In fact, you can pay as much off as you want. Starting with $1,000 in just one month. It may sound crazy, but lots of people have done this and so can you.

How to Pay off $1,000 of Debt in One Month

How to Pay off $1,000 of Debt in One Month

Only Keep $1,000 in Savings, Use the Rest

Unless you are planning a big purchase, where you will need a hefty down payment, there is no reason to leave thousands of dollars sitting in a savings account. The average savings account yields very little interest. One $1,000 creates a pretty comfortable safety net in case of emergencies. Any extra money that remains would be best spent chipping away at your debt.

Sell Expensive Items in Your Home

How many TVs do you have in your household? Two, three, or even four? Chances are that they don’t all get used, frequently, if at all. So, why hang onto all of them? Sell the ones that don’t get much use and put the profit towards one of your bills. Do you have a piano or organ collecting dust in the spare room?

The money you could make from selling it will get more use by hacking away at your bills, than if you were to keep it. Look around. We all have items sitting in our homes that are used so rarely, they are often forgotten about. If it doesn’t have much value to you, list it for sale and see what you can get out of it.

Stop Using Credit Cards

Credit cards can be useful in an emergency. However, if you are using them for everyday groceries and shopping sprees at your local mall, then you will likely be finding yourself getting deeper in the hole. Credit cards are borrowed money. Generally, borrowed money doesn’t come free. When it comes to credit card companies, they intend on you paying just the minimum amount back, so they can hit you with interest.

This is how they make their money. Just remember that each time you use your credit card, you are really paying more than the retail price of your purchases, by the time you add in the interest. Even when used in an emergency, you are still going to be paying interest. It is best to build up your savings, so that you don’t have to pay more than asking price for anything.

Make as Many Payments as You can in One Month

Credit reports don’t show how many payments you make in one month, but they do note how much you have paid, total. If you find yourself having leftover money at the end of the week, make a payment. These payments will accumulate throughout the month, bringing down your total debt faster. Doing so, will also make sure that your money goes somewhere important and doesn’t accidentally get spent on a random purchase.

Tighten Up Your Budget in Every Other Area

Cable is one of the most common cuts that people make in their budget. Many people replace cable or satellite tv with much cheaper options, such as Netflix. Eight to ten dollars for either really doesn’t sound like much, but it adds up. Every little bit counts and by getting rid of Netflix, you will also have more time to focus on more important things in your life. It’s not just TV though. What about the fast food that you may be eating frequently? Meal prepping has become quite popular.

Using these tips are great ways to pay off $1,000 of debt in one month. When you really look into your budget, you may be surprised at how much money you’re really spending.

What is your number one tip for paying off debt?