This is a guest post, written for Consumerism Commentary by Single Ma. Single Ma is the author of Fabulous Financials, a blog presenting a chronicle of a 30-something single mother’s pursuit of financial independence.
I’m paid bi-weekly, which is typically twice per month. Every now and then, there’s a month or two sprinkled throughout the year when I’m paid three times per month. But regardless of how often payday arrives, most of my salary is already spent before I see a dime. Why? Because, excluding taxes, there are several transactions that process automatically through payroll allotment:
- $574 goes to 401k
- $185 goes to IRA
- $150 goes to emergency fund
- $74 goes to my daughter’s 529 account
- $38 goes to FSA
- $Big Chunk goes to employer benefits (health, life, pension, etc.)
By the time I receive my “real” paycheck, it’s less than half of what I actually earned, which is ok with me. All of my financial priorities are accounted for, so I have fewer things to worry about. Automation also locks in the funds to make sure I achieve my financial goals (e.g. max out 401k, IRA, and tax deductible college savings).
However, the challenge is being able to control expenses and live on the remaining ~45%. And baby, please believe, this is a challenge indeed! Just to give you an idea of what I’m working with, here are my major monthly expenses:
- $1,825 Rent (an entire paycheck + some)
- $1,600 Mortgage (always in reserve but paid by tenants)
- $300 Utilities
- $300 Food & Essentials
- $170 Transportation
None of this includes discretionary spending, such as donations, doctor’s visits, personal grooming, pet expenses, dining out, entertainment, and the occasional fabulous shoe shopping excursion. So if something out of the ordinary happens, such this month when I need new tires, I find myself strapped for cash — or dare I say BROKE — before the month is over. Because incurring debt is NEVER an option, I have to make hard and fast choices about how I will manage the rest of my cash flow. A few things I’ve done so far:
- Forgo all shopping until things are back to normal.
- Skip a bi-weekly salon visit and wash & set my own hair.
- Brown bag and invite friends to my office for lunch.
- Choose between the wine festival and the banging concert of the year.
You’re probably thinking, “I work hard for my money and I deserve…” but that mentality will cripple you financially. We can never have it all. I guess if I really wanted to, I could opt to change anything that causes me to be short on cash. Am I willing to reduce my retirement contributions? NO! Reduce my emergency or college fund savings? I don’t think so! Move to a cheaper apartment in a less desirable neighborhood and settle for a less than desirable school district. Absolutely not! Instead, by prioritizing my needs and being selective about my wants, I am able to strike a balance to live a fabulous lifestyle AND achieve my financial goals.
There was a time in my life when I lived paycheck to paycheck because I had to, but now, I do it on purpose. And I like it!
Updated September 8, 2011 and originally published February 20, 2008.