How to Stop Living or Feeling Like You’re Living Check to Check

If you’ve ever had the feeling that you live ‘check to check’ or that you seem to be running on a financial treadmill and never get ahead, you understand what financial people call a ‘cash flow’ problem. By the way, people who make $30,000/year or $300,000/year can have cash flow problems. It’s not a question of wealth, it’s a question of timing and organization.

Living check to check means that once some money comes in whether it is a paycheck, reimbursement, or freelance pay, it goes right out the door the following day or two on bills that were due or overdue. Then you’re eagerly waiting for the next infusion of money to pay the next set of bills, and on it goes.

First, make sure you are spending less than you earn each month. Try to make sure you spend less than you earn by at least $500 (family of 4). This “cushion” should get you through rough spots. Second, make sure you are paying your bills in a way that’s favorable to the timing of your income.

My preference for our household and what I advise clients to do is to have two ‘bill pay’ days per month. If you take say the 15th and 30th, you will want to be able to pay all your bills either on the 15th or 30th of the month without making any of them overdue. Most bills give you 30 days to pay and you can pay whichever day makes the most sense for your income schedule as long as your payment is not late. Yes, you can and should pay early if it makes sense for your household from a cash flow perspective.

Admin days will be different for every household depending when the one or two partners get paid. For example, my business credit card is due on the 26th of the month, but I pay it on the 15th, because that’s when I do my admin.

Ending Your Check-to-Check Life Checklist:

  1. Make sure you spend less than you earn by at least $500/month (family of 4), change your spending habits until you get there!
  2. Have about $2000 (family of 4) in a separate savings account as a Rainy Day Fund (e.g. brake jobs, root canals, HVAC repairs, etc.), which is not the same as emergency savings.
  3. Have 2 admin or bill pay days/month (I like the 15th and 30th or close to that).
  4. Split your month’s bills (credit card, daycare, electric, car payment, student loans, cable, etc.) into first half and second half of the month depending on their due date.
  5. Make a calendar that shows when money comes in and when it goes out (bill due dates) so you can see your household cash flow. See what bills can be covered by your first half of the month’s income and which will be paid by your second half income.
  6. Don’t forget to put money aside for your goals or savings as I’m sure you already do…

The mere act of paying your bills all at once will allow you to see what is going on in your account each month and how close you are to spending more than you earn. The key is building a cushion and Rainy Day Fund. Soon you will see your cushion growing and you can put more away toward your goals and savings. Remember, living check to check is a choice. Do not make it.