Do you want to escape the paycheck to paycheck cycle of living? How much money should you have left after bills? Here are some helpful tips to get you started and give you an idea of how much money you should be striving to save!
Do you want to get out of the paycheck to paycheck cycle of living but just can’t seem to do it?
You’re not alone!
According to one report, 61% of the US population now lives paycheck to paycheck. Even 41% of people earning $100K a year are living paycheck to paycheck.
That 2nd statistic seemed especially shocking to me.
Even people who make 6 figures can struggle with saving and spending.
So, what should you do?
The simple answer is your expenses need to be less than your income.
As simple as that sounds, I completely understand the struggle and challenge.
Let’s unpack this a bit.
The first thing you need to adjust is your mindset to save first, then spend.
If your current lifestyle and monthly spending are not less than your monthly income, then you will struggle to break even.
If you are living paycheck to paycheck, then you will have a hard time finding money left at the end of the month (or even knowing what that feels like).
Here are some tips on what you can do to break out of this cycle and have money left to save at the end of the month.
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So, How Much Money Should You Have Left After Bills?
There is no one-size-fits-all answer to this question.
There are some people who make $40,000 a year and are able to save a LOT of money.
Others make $100,000 a year and live paycheck to paycheck.
If you do not currently have any money left after bills, then you need to start somewhere.
In order to evaluate how much money you should have left, ask yourself some questions:
- Do you have a budget?
- Do you have a steady income?
- Do you know how much you spend each month?
- Have you set any financial goals?
- Writing down your monthly income.
- Calculating your reoccuring monthly bills.
- Writing down 1 – 2 financial goals
- Do you have outstanding debt? (if yes, then one goal could be: pay off my debt)
- Have you started saving for retirement?
Take your monthly income and subtract the total amount of your bills.
If you break even or are spending more than you earn, you will need to make adjustments to your budget.
One big thing that will help is to have at least one clear financial goal. Something desirable, yet not unrealistic.
Once you have written down 1-2 financial goals, then determine how much money you need to save to reach this goal (to pay off the debt for good or pay for the item in cash!).
Now, you can look at your budget to see how you can save money and figure out how long it will take you to reach this goal.
First, start by reviewing your monthly bills.
What Bills Do You Need to Pay Each Month
Which bills are absolutely necessary?
- Debt payment
- Transportation to work
Write down the total amount of all of your necessary bills each month.
This total needs to be lower than your monthly income.
What Bills Can You Get Rid Of
Next, list all of the rest of your monthly bills.
Be as thorough as possible, including impulse purchases, so that you can get a realistic idea of how much you actually spend each month.
Then, take a look at any expenses that you can cut out.
You don’t have to cut everything out forever, but you do need to make some adjustments.
Look for ways to save by cutting out expenses like:
- monthly subscriptions
- eating out
- taking public transportation to work (or ride a bike)
You might be worried that you won’t get to have any fun, but don’t!
One tip that has always helped me was to allocate some “fun money” to spend each month. When we were first married, my husband and I set aside $40 per month for each of us to spend as we like, no questions asked.
If either of us spent the full $40 for that month, then we would have to wait until the next month. This gave us a limit and also allowed us to have some fun.
So, even though we were working hard to pay off debt and save money, we also didn’t feel like we were sacrificing everything.
You can choose an amount that works for you and your budget.
If you want a simple way to keep track of your monthly expenses, grab my monthly budget sheet here.
5 Steps to Take When All Your Money Goes to Bills
What if you still can’t find a way to save money, then here are some things you can do to make changes and start saving money now:
1. Review your Bills
First, you need to thoroughly assess all of your bills.
Take one month and write down everything you spend. Yes, this will be tedious, but it will give great insight into your spending.
- How many bills do you have each month?
- How much money are you spending each month and on what?
- Are any of these bills variable?
- Do you have outstanding debt that you owe money on?
2. Cut out or reduce expenses
Next, honestly review these expenses and see if you can cut out any or reduce any.
- Do you have any reoccurring subscriptions that you don’t use?
- Can you find a cheaper place to live (or a roommate to offset the cost of rent)?
- Can you negotiate any bills? (ask for a discount, shop around for another service provider, etc.)
One very important thing to keep in mind is needs vs. wants. So many people have their priorities mixed up in this area.
Needs: What you must have to survive (the basics: food, shelter, clothing, a basic phone)
Wants: What would be nice to have (gourmet meals, a mansion, fancier clothes, the latest model phone)
You can cut out a lot more “wants” out of your spending than you might realize.
3. Increase your income
Once you have honestly reviewed your bills and cut out anything extra, then you can look for ways to increase your income.
- ask for a raise
- look for a better job
- try a side hustle (or 2!)
4. Set Up an Emergency Fund
Do you have an emergency fund?
If yes, how much is in it? You should try to get at least $1000 to start with and work your way up to 3-6 months of living expenses.
If you don’t have an emergency fund, start one today.
Each month put in a minimum (start with $10 every month, and increase that as you can).
In the future, you will feel relieved when you have a real emergency and there is money in the fund to cover it!
- job loss
- car repairs
- unexpected hospital visits/expenses
You want to avoid relying on credit cards to pay for unexpected bills or emergencies.
5. Get Help if Needed
There is no shame in getting help. If you are still struggling or need extra assistance (or financial or debt advice) don’t hesitate to reach out to get government assistance or additional help from a financial professional.
What You Should Do with Any Money Left After Bills
Once you have taken a good look at your budget and made some necessary adjustments, you will most likely have extra money left at the end of the month. Yay!
Remember, just because you have money left, that doesn’t mean you must spend it!
So, what should you do with this leftover money at the end of the month?
Here is where extra money should go (in order of priority):
- paying off debt (especially credit card debt)
- setting up and fully funding an emergency fund (with a minimum of $1000 to start with and then working up to 3-6 months of living expenses)
- opening a retirement account
- savings for other things (vacation, home, college fund for kids)
How much Money Should you Put into Savings?
If you want to know how much money you should have left after your bills, then you are probably thinking about what you should put into savings?
Ideally, your goal should be to save as much as possible, but I would strive for putting a minimum of 10% of your income into savings.
You can’t do that? Then, do what you can and check out these tips for saving money for more ideas on ways to save.
If you have a savings account already, great!
If not, then you need to start one today.
The 50/30/20 Rule
One popular method that can help you allocate money and put some aside into savings is the 50/30/20 rule.
This was popularized in the book All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren.
Using this method, you assign:
- 50% of your income to necessities (rent, food, debt payments, etc.)
- 30% to saving and investing (retirement)
- 20% to wants/extras.
These percentages are not absolute, but guidelines.
So, if you are currently spending:
- 65% on necessities
- 35% on wants
then you can make small adjustments over time like:
- 65% on necessities
- 25% wants
- 10% savings.
Any adjustments you make to spend less means that you can put more toward paying off debt or into your savings account.
The closer you get to saving at least 10% into savings and investing, the better off you will be in the long run!
Pro tip – If your employer has matching 401K contributions, make sure to maximize this – it’s free money!
For the 20% of your budget going toward wants – spend that on what you like, but don’t keep track. Don’t make budgeting more complicated or stressful than it needs to be.
The best plan is the one you will stick with!
Start small and keep working at it!
Remember, the journey of a thousand miles begins with one step.
The question isn’t how much money should you have left after bills, but what are my financial goals and how can I reach them?
How much money do you think you should have left after bills? What tips do you have to save more each month?