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How to Live off of Last Month’s Money

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Just a few years ago, I couldn’t have imagined this: letting paychecks come and gather in a bank account without touching them until I was ready – the next month. 

Image shows several bills, from $1 to $20 rolled on a table. Text overlay reads "How to live off of Last Month's Money"

It’s a reality and foregone conclusion now, but I have to admit, it wasn’t easy getting to the point where we could do this. 

Is it because we make a lot of money now? Well, truthfully, we do make more now than we did 10 or even just 5 years ago – after all, you don’t stay at a minimum wage job your whole life – your goal is always to move up, right? 

But I believe it would be harder now to implement this lifestyle change than it was when we first did it because we also spend a lot more money. Back then, when I was learning how to be both poor and happy, we didn’t have Netflix or smartphones (gasp), and we didn’t go out to eat – our favorite “date night” was sneaking off to Sonic after 8:00 P.M. in the summer for a 99 cent mini milkshake – and we never ever went to the movie theater.

Obviously, today, there would be a lot more work involved in cutting back to get a month ahead on our finances. 

So before we talk about how to live off of last month’s money, let’s talk about why. Because the honest truth is, if you don’t have a strong reason why you’re doing something inconvenient, it’s all too easy not to follow through on it. 

Image shows two hands cupped, holding a white ceramic piggy bank with a dollar sticking out.

Why should you live off of last month’s money? 

  • Knowing exactly how much you have to budget. “Budget” isn’t a dirty word. It doesn’t mean depriving yourself. It simply means allocating funds to certain places – telling your money where to go. Living off of last month’s money means you’re only planning to spend money that’s already there, available to spend. You know exactly how much money you have to budget toward cell phones, groceries, the electric bill, tumbling lessons for the kids, and everything else. No guesswork, and no waiting for a check to come in before you can pay for something.
  • Peace of mind. If there’s a delay in check clearing, or getting to the bank, or any other reason why the money is a little late getting into your pocket (bank account), it doesn’t matter because you won’t be using that money until next month anyway. Your current bills are paid.
  • It gives you a real, clear picture of your financial situation. When you plan your monthly spending using projected income or spend money as soon as you get it, it’s easy for your numbers to get muddled. You might lose track of exactly how much money is coming in compared to how much is going out, and it’s difficult to be 100% sure you’re not overspending. Spending only what you already earned last month guarantees you know exactly how much you have to spend and that you don’t overspend without knowing it.
  • It gives you stability. Do you ever stress about job loss or sudden reduced income? When you’re living on last month’s money, that stress is greatly reduced because no matter what happens today, your bills are all paid this month. Period. This gives you a chance to get back on your feet without dipping into savings at all. That stress if you do lose a job can be completely eliminated by the way, by building up a savings account with 3-6 months of living expenses for exactly that situation. This is something we should all work toward after we get to the place where we’re living on last month’s money and can start telling that money where to go. 

So now that we’ve covered the why, how do you actually get there? Because let’s face it, it’s a rare person that makes twice as much as they spend in a month. 

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How to Live Off of Last Month’s Money

It’s like saving up for anything else – you put some of your paycheck back every month (or however often you get paid) toward the goal.

Calculate how much you need. Tally up your monthly bills, including flexible bills like grocery spending and entertainment. This is the number you need to aim for. Once you have that much saved, congratulations! You’re a month ahead, and by living on that money for the next month, you can stay a month ahead – forever!

Here are some ways you can reach that goal faster:

  1. Reduce your spending. This is not fun – we all know that. But for most of us, in order to get an entire month ahead on our finances, we’re going to have to seriously reduce our outflow for a while. One of the ways to reduce outflow is to conquer your grocery spending. How much you spend on groceries is very individual, and no two families have the same grocery budget, but everybody can get their spending down to their personal minimum. The next thing to look at is entertainment – Netflix, Disney+, Satellite or cable, etc. It’s true you might get a little behind on your favorite TV show, but remember this is temporary – you can catch up later, and it’s worth it!
  2. Sell your things. If you’ve been putting off listing your clutter (anything you still own that you don’t want/need qualifies as clutter) on eBay, Craigslist, or the Facebook marketplace, now is the time to do it! If there are things in storage that you don’t use but have never thought about selling, now is the time to think about it! Collect that cash and put it in the bank right along with your regular paychecks. Do not spend it! This is part of your strategy for getting a month ahead!
  3. Institute a spending freeze. We already talked about reduced spending, now we’re talking about no spending at all. You can apply this to one category – a good one would be clothes and shoes – or all categories and have a successful no-spend week – or even month. Maybe you want to put a ban on buying candy bars at the grocery store, or maybe you want to try a grocery no-spend week to get your pantry and freezer cleaned out, using the money you’ve already spent. But using a spending freeze – either a set number of days long or “until we accomplish our goal” long, is an effective tactic for saving money and getting a month ahead on finances.
  4. Pick up extra work or a side hustle. Dave Ramsey uses the example of getting a pizza delivery job to pay off debt, and I like it. I’ve seen so many people – usually men – turn up their noses at jobs they believe are beneath them, and it’s downright silly. You’re not too good to find a temporary side gig that will get you long-term financial gains. Granted, these kinds of things can be disruptive to your family life, which is why it’s important to make the job truly temporary by making sure that money goes where it’s meant to, and not used up. Side hustles can also be much less official, like raking leaves, shoveling snow, mowing yards, helping weed gardens, babysitting, dog sitting, dog walking, etc. Just get serious about making extra money!
  5. Be 100% committed. Let’s face it, as soon as that money comes in, there’s going to be a reason to spend it – and it’s probably going to be a darn good reason. Which is why you need to be 100% committed. Keep in mind that the number one key to financial success is an iron will – and where there’s a will, there’s a way.
Image shows a hand holding several $20 bills with text that reads "How to Live Off of Last Month's Money"

What To Do Once You’re A Month Ahead 

How do you stay a month ahead? How do you budget with last month’s money? 

Here’s how I personally handle finances: 

  • Each month, all of our income goes into one dedicated checking account. Since we’re self-employed, our money comes in small waves throughout the month, and there’s no one big check. 
  • On the first of the new month, I log into my online bank, tally up our income for that last month, and begin dividing it. 
  • 30% goes back into our business expenses checking account (since we’re self-employed)
  • 15% goes into a savings account for taxes (again, this may be different for a w2 employee than it is for us self-employed folks)
  • That leaves me with 55% to divide between living expenses for the next month – another checking account – and our savings accounts. And throughout the coming month, we’re only allowed to spend what’s in that dedicated living expenses checking account. 

Knowing that you have the money you need to cover your expenses for the 30 days ahead gives you stability and security – peace of mind – that you may have never known before, and it’s worth every sacrifice you make to get there. 

One important little tidbit – in order to live on last month’s money, you have to, have to, have to be committed to spending no more than you have in that living expenses account. Credit card debt – even if you use credit cards – or otherwise living above your means cannot be an option. 

How Long Will It Take to Get A Month Ahead? 

 Unfortunately, that’s not something I can answer without knowing how much money you make, how much money you spend to survive, how much you spend discretionarily, and other factors such as whether you’re also trying to get out of debt. 

The best thing you can do is calculate those things for yourself and come up with a rough outline. 

Having an approximate end date to your “belt-tightening tactics” can be super helpful to give you the willpower to see it through because, let’s face it, this is hard, and having an end in sight helps make it easier. 

But this is hard. We don’t expect it to be easy, just like any self-improvement. 

But we expect the result to be worth it. 

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