One Example of Living Paycheck-to-Paycheck

In my post titled From the Ugh Files, I asked the following questions:

How does living paycheck to paycheck happen? (I've never done it, so I honestly don't know.) Is it an ever-increasing lifestyle as salaries increase? Or maybe it's an income hit that takes away all the slack in an otherwise decent budget? Or maybe something else? Anyone have any insights here?

Now since that post, I've detailed a bit more on people who live from paycheck-to-paycheck, but one reader sent me an inside glimpse of how it happened to her. I thought the story was worth sharing with all of you, so here goes:

I knew some basics of money, but I don't remember as a kid ever really having a talk about such things or having money spelled out.   My parents did make me pay for my own stuff when I was old enough for a job, including my college and wedding.   However I managed it I knew enough to try and not over spend, I also grew up with frugal parents.  They did not spoil us with gifts and we needed to do our chores to get an allowance.

When I was in college, I had a little savings and a combination of that, work and scholarships paid my way through College.  I went to a state school and lived pretty cheaply.  I could have done better on a few fronts but hindsight is 20/20.   I would have picked a different university, done better about applying for more financial aid and tried for internships instead of working my summer job all through college.  The go to another school option would have involved moving to another state at 18 for a year so get in state residency, probably a bit ambitious for an 18 year old. 

Even though I was mostly broke but not in debt in College, I was too trusting.  One of the worst things I did was my choice in relationships.  I got involved with people who were not good about their money and let it affect me.   I would get pulled out of my default good habits.   For example, a boyfriend borrowed money from me to buy stuff for his business.  I put something on my card for him (He didn't have one) at some online retailer, and for whatever reason they kept letting him buy more stuff from the number on file.  Once it got to $800 and no sign of him paying me back, I called my credit card company and told them I lost my card and needed a new number.   This behavior was passive aggressive, I suppose I should have talked to him about it.  We broke up and most of college was uneventful.

At the end of college, I ended up getting involved with some really bad news.   Talk about an 8 year old in a 25 year old body.  I was seduced by someone paying attention to me, I was geeky and never attracted men.  Anyway, call it whatever you will but I was stupid, I moved in with this guy because "I was in love".  He was totally bad news and had the typical abuser personality (I read up on this later).  Although he had a good job at the time we met, and treated me nicely he got fired soon after.  Somehow things ended up being my fault and I was guilted and abused physically, mentally, verbally you name it.  This guy was extremely controlling.  Not only that but he sucked me dry on credit and debt.   I wasn't able to stand up to him with the person I was at the time.   If he wanted something he bought with my money, exactly what you were talking about a possible issue for the lower 15% with an entitlement mentality.   Once when I said "I don't have any more money" after he sucked up all my savings, he said something along the lines of "If you have credit and can spend it, that is money."  This guy had no credit cards of his own as you can understand from a view like that, he also didn't like to pay credit cards even though he used their credit.   I HAD (past tense) perfect credit up until this time and he forced me to buy all sorts of crap.  

Eventually my parents were able to help get me away from him.  They got him arrested, he had some misdemeanor and they told the police where he was and the nice police people locked him up, just 1 day free from him I packed my stuff and ran off with my parents.  After going through everything with him, I was in enormous debt and had a bunch of collectors hounding me.   I don't remember how much debt I had, but it was over $150k if I am in the ballpark.   Luckily I didn't have any college loan debt and was still able to graduate despite missing the last semester of classes.   I didn't know what else to do so I filed for bankruptcy.  This was 9 years ago, thankfully it is almost off my credit. 

After I got back to normal, I got a job, worked, lived modestly and started saving again.  I managed to save up what I thought was a decent nest egg of about 6-7k and had put 4k into a Roth in E-Trade, this was my early to mid 20's.   For me, working a 30k a year job I thought I was doing great.    I got involved with another guy, ended up marrying him and we bought a house we could barely afford using my savings as the down payment and as a result I was living paycheck to paycheck for years.   I felt chained to the house and to my husband towards the end.  Although we were not stupid enough to get an ARM, we did leverage ourselves in to a house and all the extra money went to paying the house and living.   Because of this, we could not save any money and any little bump could send us over.  I suppose we bought into the "you are married, you should have a house" and the thought that our income would only go up over time.

My husband was also irresponsible but not as obviously as the other winners I had picked.   I'll admit I was stupid, and I'll give the warning if you want to re-post this (anon please) that who you get involved with definitely has a huge financial impact.   The big way my husband was irresponsible was that he decided he hated his job, quit because he thought his boss hated him, was going to fire him anyway and decided to go into business for himself.  We talked this over and I said something along the lines of "OK if that is what you feel is best and what you need to do".   I also put a but statement in that that he always forgot about, which is "but we need to be able to afford to pay our bills, you need to figure out how to do the self employment and get the bills paid because I can't do it alone on my income."   The result is that he sat around at home, poked at selling stuff on E-bay a little, went riding with NASA to try and convince someone to give him a region and to support the house I borrowed money. 

Yelling at him about the money flow issue didn't work, telling him we needed to sell the house because of cash flow issues didn't work, begging him to get a job, do consulting, do anything didn't work.  In general talking to him rationally about this didn't work, there was always an excuse.   I still don't entirely understand what was going on in his head, to me numbers are numbers, if there is less coming in than going out it is a problem.   Perhaps because he didn't feel it till the end the money problem wasn't real.  I ended up taking the hit on borrowing to keep the house from being foreclosed but even when I was borrowing and had "money" I felt it, the debt and obligation felt like walking around with 100 lbs on my back.   Some of my favorite excuses were "working a low paying job isn't worth my time", "but I thought you would make a lot of money at a better job after you finished your Masters and we would be OK." and something along the lines of "You said I could do this" in regards to quitting his job, forgetting my but about being able to afford him jobless.   He also said something along the lines of I was a looser because I couldn't get a better job.  

Yes, I could have done better getting a job, but as a recent college graduate I didn't know a lot of the things you need to do to separate yourself from the pack, also I was tied to a narrow location due to him and the house.  I did better with a wider search, I'm in a different state than the one my former husband and house occupy.   Hopefully I'll do better next time I have a job search, more self confidence and better presentation of why I'm such a hot cookie you would be lucky to have me working for you.  I also realized after going through the third guy with these types of traits that I needed to do better at picking a relationship next time, I went to a therapist to help with that issue.  

Although it really does not matter at this point, I derive some satisfaction from knowing I was right and he was wrong about the money part.  It is cold comfort as I don't see why he couldn't do the math, we were spending more than we earned and this was bad.   Honestly, living with him unemployed and dragging me down financially was the most sustained stress I've had in my life.  I was constantly stressed and felt trapped by the house, that my husband was not working, and I couldn't sell the thing by myself (two to sell!).  If we had sold the house when I wanted it would have been near the peak and I would have been able to afford to support us both in a small apartment.   My best guess is he felt entitled to what he wanted.   At this point I am truly thankful I'm divorced and without children and probably lucky he didn't listen to me.  If he had, and we had sold the house when I first wanted after he quit his job in 2006 I would probably still be married to bad news. 

Long story short, I ended up with a lot of debt that I have been repaying from my marriage.   I divorced him after I made it abundantly clear to myself that he loved himself more than us or me, and he wasn't willing to be what I considered to be a responsible adult.  After getting divorced I got my finances into high gear, I was determined to save for retirement and get an emergency fund.  Two years later I have 10k in an emergency fund (liquid, once I get it o 6 mo worth I plan rolling 6 mo CD's with 1 mo at a time), 25k in my 401k from work and my poor old E-Trade account is about 2.5k after he took his cut from it.  I have approximately 5.5k of the debt remaining giving me a net worth of about 33k.   I could pay off the rest of the debt in one fell swoop to avoid paying the interest on the loan, but I think it is more important to have the emergency fund as a cushion.  I also track my expenses in a worksheet.  I bought Quicken and tried it a few times to try and automate expense tracking and will see how that works instead of the spreadsheet.  I also donate some money from every pay check to charity directly through work and I donate to a local women's shelter.  I have been matched up with a single woman and will be getting her gifts for Christmas.  Honestly, I probably don't donate enough, I am lucky not to be in a terrible situation personally and financially.

In summary, I got into trouble because of relationships and lifestyle inflation.  When left to my own devices I am fine so I get back on track OK, meaning in my normal financial habits I don't spend more than I earn.

I think I've learned from this, I live in a 2 BR apartment now that I share to try and keep costs down although I can afford a 1 BR by myself, where I live it would likely be at least $300-600 more a month for a 1BR or more depending on how good of a deal I got.   I spend some of the extra money on myself and have fun, but save some of it also and use a 401k contribution to force a minimum savings every month.   I also save by having $600 come out of my paycheck to the emergency fund every month.   I could always do better cutting expenses, but I don't feel the need to frugal the fun out of my life.  This is different than before where I felt guilty whenever I bought something plus feeling angry at my husband when I was living paycheck to paycheck.   Truly, the learning that I was making me unhappy and I was letting him was great.   Once I decided to take control of my life I was and have been much happier.

Comments

[Financial Samurai]

That was a long story, that wasn't too short! :)

Lifestyle inflation ironically gets easier to control the more things you get, b/c you reach an upper limit.

Try our "going broke to win big method". It's helped me save a ton over my years, and excites me everytime I see almost NOTHING in my checking account, but hundreds of thousands in my savings in a different bank.

[tom]

Thank you for that story.

I wonder if this is "average" for paycheck to paycheck stories... relationships and lifestyle inflation. I imagine the latter definitely is, but the reader above has convinced me that relationships play a huge role.

[Jeff]

In light of what you've been through, I'm impressed by your present financial state and direction. I'm happy that you sought out a counselor when you realized that you were susceptible to bad boys. Unfortunately, I have a friend who is much closer to retirement age and still can’t prevent her husband from dragging her/them down financially. He seldom has steady employment, spends far more than they bring in and has very large CC balances which he’s very secretive about. All this after her highly-compensated first husband left her with very little net worth after many years of marriage.

(At the risk of sounding overly critical, my recommendation for the next step in your career would be to work on your writing skills. I found your story somewhat difficult to follow, and it had a fair number of typos and misspellings.)

[Apex]

You have learned a lot from your experiences and I am impressed by where you are currently based on all you have been through.

I hope you give yourself credit for how well you have managed to get yourself financially healthy even after the parasitic relationships you have had to come through. I know people in perfectly healthy relationships as old or older than you who are doing worse.

My advice to you is to keep doing what you are doing financially. It sounds like you are doing things just right. Saving, living below your means but still spending enough to enjoy life ..... Perfect! For your next relationship, please consult the advice of friends and family to help you see through what appears to have been a previous blind spot for you. You are clearly a person who has her life together and you deserve someone of equal maturity. If you can avoid getting saddled with loser #4 you are going to do great!

[Juliet]

I couldn't agree more that your choice of partner has a huge impact on your financial well-being. I am just glad to have found this out BEFORE I got married to my perpetually debt-ridden ex. I'm single now, in my early 20s, and paying off the rest of my debt. I lived with my ex for a year, and before that we dated for 4 years - his bad habits helped shape my introduction to finances, not to mention the fact that I racked up consumer debt while we lived together. Luckily I'm on the right track now and know what things to watch out for. Very scary!

[Old Limey]

Financial Samurai:
You stated: "I see almost NOTHING in my checking account, but hundreds of thousands in my savings in a different bank."

I go along totally with keeping very little in a checking account because they pay a pitiful amount of interest.
My checking account seldom goes over $1,000.
However, keeping hundreds of thousands in savings at single bank detracts from your credibility.

My wife and I have several million in Banks, in high yielding CDs purchased in 2008, but it is spread around at many different institutions so that we stay underneath the limit of FDIC insurance for IRAs which is $250,000/customer. Since most CDs pay interest every six months, and the interest on a 5.5%, $250,000 CD is $6,875 every 6 months, the most either one of us keep at any institution is kept below ($250,000 - $6,875), or $243,000 rounded to the nearest $1,000 below $243,125.

I had one bank closed by the FDIC last month and I didn't lose a cent because they gave me back my principal plus all accrued interest.

[Christy]

I can relate to this story. I too fell for the wrong guy, and it was paycheck to paycheck (my paycheck of course) the whole time I was with him. Anytime there was extra money, something would come up to spend it on. And the things we "needed" to have. . . went on MY credit. I was naive, but he was also very manipulative. I left him when our daughter was 3, and had nothing except bills to show for the 5 years we spent together. I spent several years after that living paycheck to paycheck as I worked my way up through my job and tried to pay the bills. He never paid child support so it was really tough, especially paying for full time daycare. Now my daughter is 10 and I feel I'm are finally on track. The ex still doesn't pay child support but my income is up significantly and I have made some better money and relationship choices since those days. Thanks for the story.

[MC]

I think this is very common for women!

I have a similar story, but fortunately the financial damage was limited by my ex and I keeping separate bank accounts & credit cards all during our marriage (because even way back then, I could see he was a financial disaster). So while he still "lost" approx 300K somewhere, my credit rating at least was fine when we split and I was ruled not liable for his credit card debt.

If I ever marry again, I'm getting a pre-nup. Or maybe I'll just "live in sin"! Marriage is far from a great financial deal for many women.

[Crystal]

@MC
I know too many men who were saddled with the all the debt during the divorce to think this is mainly a female issue.

One of my male coworkers was left with $20,000 of credit card debt from his ex-wife. She actually bought a $3,000 tanning bed and gave it away as a gift when she knew that he was leaving her for cheating. It took him 3 years of living WAY below his means to get back on track.

Another male coworker was left with $15,000 of credit card debt and a credit score between 500-550...it took him 10 years to get everything back in order. It took him longer since he has a more entitled personality. He didn't hit it as hard as my friend above.

According to anyone I've ever talked to about it (including his own parents), my biological father spent money that my parents did not have and never put my mother before himself. I also know for a fact that he paid less than $3000 total in child support even though he should have been paying $350 a month for 17 years. He would be a perfect example of a crappy partner.

With my step-father, I get to see first hand that an awesome partner makes you a happier and healthier person. He and my mother have been married for 19 years and they are both better for it...not to mention that he and my mother managed their money well enough that she hasn't been employed in 18 years and he just retired in his mid-fifties even though my youngest sister is a freshman in highschool.

My husband and I are both financially frugal...even if (totally knocking on wood) our marriage ever ended, we'd be better off than if we built our wealth separately.

Financially inept people of both sexes drag down their counterparts just as financially adept significant others add to a marriage's wealth.

[brooklyn money]

This is a really inspiring story. It takes a strong woman to survive not one but two parasitic partners. I also have to add a plug for Suze Orman who is by no means perfect, but her focus on the role that money plays in relationships and how women often put themselves last financially is really important I think to understanding how people (women and yes, men too) end up in financially destructive patterns/relationships.

[Apex]

Good post Crystal. Losers come in all shapes and sizes.

[Jan]

Thank you for sharing this story. It's certainly a lesson I will not forget.

[WorkingHusband]

My wife sits at home all day and I work, but I don't think she's a loser. Kind of sexist to say that a man staying at home is a loser.

[laura]

Old Limey, you should try CDARs. that way you have one account and you're still FDIC insured up to 20 million.

[Old Limey]

Laura:
I maintain our total investment portfolio at just one institution, the oldest and most respected Mutual Fund company in the USA and they don't offer CDARs, at least to retail customers like myself. Even so, for our IRAs, I prefer the flexibility I have of laddering out the maturities of our CDs as desired. When I bought them over one year ago it was no big deal selecting the ones that suited my needs from a very large number that my institution offered. At the current time they offer 105 CDs with interest rates between 3.80% and 0.10%, far too low for my liking, so I am reinvesting the income they generate and the proceeds from any that mature in mortgage securities backed by the U.S. government with a much higher yield.

[mysticaltyger]

Like the poster here, I also grew up in a frugal family and was a person who enjoyed saving....until I met a guy who wasn't like that. I thought everyone grew up like I did...with parents saved money, paid cash for cars, & generally lived below their means. Boy, was I wrong!!!!

I think that this long post illustrates that there's more to money than appears on the surface. People who are not confident and/or are emotionally insecure are likely to have money problems, either because they can't control themselves, or because they end up with partners they can't say no to.

I think to a very large extent, money problems are really just a symptom of deeper emotional problems.

[Strick]

WorkingHusband - If you need your wife's income to pay the bills and she really just "sits at home all day", I think you need to reconsider her loser status or you're the sexist one.

The husband in this story may not be a loser but a risk taker that will not settle for a low paycheck and an unhappy job. There is of course another side to this story, but the info given does make him look like his lazy and not in touch with reality.

Absolutely loved this post (b/c of the detail, esp. that actual numbers were often given, which makes it infinitely more interesting)

[Concojones]

@original poster:

Seems like you are a proven, disciplined money manager, so you're ahead of the pack on that account. What you need to work on is assertiveness. It is very obvious you're letting other people dominate you. Abusive partners are the symptom, not the cause. The real cause: you're giving in too easily, you're not standing up for yourself, you're avoiding confrontation on every occasion. You didn't mention it, but I am sure this behavior pops up everywhere: while with co-workers, friends, and perhaps even parents. There's a saying that respect is earned, not given. This means that on every interaction we have with someone, there is an implicit negotiation/shift of the power balance. If you give very easily and very often, you are actively creating an abusive situation. So far the theory. What I suggest in practice:

1. play a very assertive person for the next 30 days with no compromises or excuses. I guarantee this will open your eyes in a way no therapist can.
2. next time you move in with someone, split finances (if only because it's a good ongoing exercise in assertiveness: you'll have to discuss who pays what every time)
3. change your circle of friends. It seems like you've surrounded yourself with friends who keep you down. I'm not talking about your former partners here, but the friends that should have opened your eyes while you were in trouble, and didn't. It's important to have friends that you admire because they will pull you up (people unconsciously take over the attitudes of their friends, so be picky).

P.S. you could print your post and feed it to your therapist. Compare analysis and proposed solutions to mine.

[Beastlike]

Wow, this story makes me happy my wife and I met in Highschool where we molded each other financially over the last 15 years.
Then again, I think I would realize within the first month or so, my girl's work ethic/financial goals and get out before she got me broke!

[Mneiae]

I'm so impressed by this story and I really love that you've posted it. Thank you for sharing this with all of us!

[Old Limey]

Beastlike:
I met my wife while I was in high school back in 1950, we got engaged in 1954 and married in 1956 and we couldn't be happier. Over those years we have also molded each other in a lot of ways. We didn't need to do anything about money because we were both savers and both frugal, but we have certainly moved into unison where politics and religion are concerned. In other areas we recognize each other's skills and are happy to let whoever is best at something take it over. In other words, and purposely mixing my metaphors, a great marriage needs to be a partnership that runs like a well oiled machine. For example my wife has never used a computer in her life, I have used computers from the very earliest days that they existed. My wife is a fabulous cook, consequently I don't even know how to make a nice sandwich, and that's the pattern for many other functions.

[CathyG]

I think it's interesting to note that in this story, it is the fact that the OP got attached/married which brought her down financially. In most of my own and friends' experiences, getting attachmed is what helps a lot of people move UP out of financial difficulties. The old adage "Two can live as cheaply as one" comes into play.

I guess the real difference is in choosing a partner who has the same financial goals and work ethic as you have. What a great lesson.

[Financial Samurai]

Old Limey - You haven't read my "Going Broke To Win Big" post then, which encourages people to have multiple bank accounts to optimize their returns and minimize their costs.

Without going into too much detail, I have multiple bank accounts, exactly for the reason you stated... which is the $250,000 FDIC cap. I don't think we'll ever need the FDIC to bail us out, but my accounts have somewhere around that range +/- $100,000.

I don't mind having $350,000 in one bank b/c of my belief Citibank, for example will always get bailed out by the US gov't, and therefore, their depositors will be fie. Worst case, I lose $100,000, which ain't going to happen.

[WorkingHusband]

Strick,

Why would I need my wife's income since she doesn't work? That doesn't make sense. I make good money and I give my wife the freedom to work or not work. She chooses not to.

[E]

I don't know that this story is typical.
Living paycheck to paycheck just means that you need each paycheck in order to meet your financial commitments, that you have no cushion. I have been in this condition a few times. First, when I went out on my own after college, it took a while before I made enough money to pay for the basics like rent, car insurance, and groceries. My parents helped for a while, but even after I could pay the bills I never made enough to save, and endured several periods of unemployment. I acquired a lot of debt during my unemployment, so that when I was working more of my money went to debt and I still couldn't save. This went on for many years.
Now I have paid my debt and make enough money that I can save some every month. Finally I have a small cushion and could continue if something happened and I didn't get my next paycheck. However I could only miss one or two at this stage and then I'd be in trouble again. So while I am not living paycheck to paycheck at this time in my life, I have done for many years and could easily do so again. It can happen to anyone.

[Jess]

I think one issue with the "paycheck-to-paycheck" thought process is that people think it means once the bare necessities are taken case of, there's nothing left over, therefore it must be bad. I lived on approximately $300 a month my senior year of college (thanks to Mom and Dad for paying rent!): ~$130 to car insurance, $20-$25 a week to my "I should get on this bus" online savings account, and most of the rest to utilities, gas for the car, and groceries (I didn't go out much). Now that I have a "real" job with benefits and a 401(k), I make quite a bit more than $300/month. I still strain on the budget front: I moved out in September and pay about $1200/month between rent and my student loan payments (overpaid to the nearest $100 because I read PF blogs like this one), and the rest of my paycheck goes into my savings account. My eventual goal is to live - comfortably - on a check-to-check basis. I mean, don't we all? Isn't that the purpose of a budget? To account for all (or most) dollars coming in? Rent/mortgage, food, savings, utilities, transportation, investments... I would think that it's not always a bad thing to have "nothing" left in the checking account at the end of the month because it's all gone where it was supposed to go. Each paycheck gets maximized to be as useful as possible.

[Kat]

I was a single mom with limited income, and lived on just over minimum wage for years. It was not even paycheck to paycheck-there were days I ate popcorn so I would be able to make the rent. the two reasons- Cost of daycare and medical bills. I made two dollars a month too much to qualify for food stamps, daycare help or state medicaid for my child. In cases like this, when your child is sick, you go to the emergency room and then of course you can't pay. My credit was basically trashed till my son was in his twenties and the old medical stuff dropped off. His wife has a tubal pregnancy 6 days before the health insurance kicked in. It took the 5,000 he had in savings and has trashed his credit as well. The total bill was over 150,000 for the ambulance, emergency surgery etc. he has not yet recovered financially from this.

[Amanda]

I was shocked at the question posed behind the story and a little annoyed by the story as though it's representative of people who live month to month. I started working at 14 And lived on my own in high school because my mom was sick and my dad died when I was younger. I lived month to month not because of any choices I made but because I grew up in poverty. I think there are many people who grow up in poverty and that's why they live month to month. I do appreciate the story but feel it does a dis service to people in Poverty if that is how we relate to most people living month to
month as being middle class people who make Choices that put them there.

[rinter]

Thanks for the story. It provides a valuable lesson to those with questionable finances: to always keep a clear head financial-wise and be aware of your money and whoever you meet, what their financial habits are.

[-bewilderedgirlfriend-]

This is -one example- and everyone has their own story. I grew up in a family where saving money was the norm, and if I wanted to spend money (even if it was my own!) I had to get permission (usually by explaining logically why I wanted/needed the item). My fiance grew up in a very different environment that I can not even imagine. His parents lived paycheck to paycheck and this is how he was taught to do things. You cover your obligations and whatever is left is to have fun with! WOO! Savings was not even discussed or talked about. I have been slowly working with my fiance to get him to understand saving money and the stress it can relieve, but it is a long process. At least he knows he is "not good with money" and leaves a lot of the planning and budgeting to me, but it will be nice when we can both understand it some day.

[mysticaltyger]

@ Amanda....I agree with you to an extent....But the thing I see poor people doing that really kills them financially is having kids too young and/or having them out of wedlock. So even with a lot of poor people, there are many instances where better choices could have been made. This also goes back to the idea that peeople with emotional problems often have financial problems as I mentioned earlier on this thread.

[financial pro]

old limey you are b/sing..there are no cd's in 2008 that pay close to 5%..you'll be lucky if you get 2%. Nice try.

[summberblue2u]

I'm 41, married for 17 years and we are FINALLY 'getting it'. We have 2 teenagers that are savers and I really POUND this into them, savings, no credit - only buy what you can afford, etc...

I wish my husband and I had had good money rolemodels but all adults we were around spent every dime they made.