For people that have escaped the paycheck-to-paycheck cycle, how much has it impacted your life?

pecuniam_hominem

Two years ago, I managed to escape the paycheck-to-paycheck cycle. I define paycheck to paycheck as you are 'waiting' to get paid because without it you will end up in severe financial difficulty. You are counting the days until you get paid.

Thankfully, I am no longer in that position.  I don't check my bank on payday to make sure it's gone in, I don't have to do my budget on that night so I pay everything on time.
I think it has been a *huge* impact on my life. I still budget, otherwise I would end up back in the cycle, but I don't worry about paying bills or if I lost my job tomorrow.

For those in that position, do you find yourself less stressed now? Or has the money stress just been replaced by something else?

For those that are still in the cycle, are you aiming to get out? How far away do you think you are? Does it motivate you?

MovingForwards

Nearly 4 years ago I escaped, by starting my life over and splitting from my now ex-husband 😁 

I had enough money to last a few months and got offered a job the next day, before I had even finished unpacking what I had taken with me.

From the minute I left I started up spreadsheets, for outgoings and savings.
They are 12 monthly, detail all my fixed outgoings, have spaces for infrequent / as hoc purchases which are filled in as and when required. I also do a nice mortgage overpayment each month. Everything is Reviewed annually.
My savings spreadsheet lists all my accounts and what each one is for, I bulk transfer money over payday and at the start of the month. If I don't spend my food budget, or spend less than I planned, I transfer the surplus over that week. As I'm working from home, each week I transfer the apportioned saved commute cost over to savings. I also round my main account and move everything 99p and under to savings.

I still have my spreadsheets, I don't have my historic debts, I now have my own home based on 3x my salary and my salary isn't great; I've quit higher paid jobs.
I furnished the last rental on the basis that would be what I was taking to my home (picked most of it up from charity shops).
I've some savings in the bank, which increase on a weekly / monthly basis as most of my money went on my purchase a few months ago.
I do check my accounts and spreadsheets daily and I know the minimum I will have saved by the end of the year. I've started working out my savings plans for next year and will finalise them in December as I've done since commencing my new life.

My way of budgeting works for me and I'm sticking with it.

My motivation then was to save and clear debts. My motivation now is to save, clear my mortgage in 10 years and know retirement will not be a concern.

pecuniam_hominem

That is a really motivational post MovingForwards.  I am glad you are doing so well.  It takes so much discipline, but you clearly have it in spades!

jonnygee2

I escaped! For me, it was about changing my work situation. About ten years ago or so I was working on a zero hour contract, some months I didn't have the hours to pay the bills. I was definitely more stressed, I was often reduced to tears because of my financial situation, even though I loved that job. At the end of some months, there was one or even two days where I couldn't eat until payday.

I think having been through that, having a large reserve of emergency savings and then some investments is a huge comfort. I am definitely less stressed and more comfortable. When I look at my savings accounts I get this relaxed feeling of 'I'll probably never have to go through that again'.

At least for me I never built up any debts or borrowed anything. I still have nightmares occasionally about being back in that situation though. 

Sandtree

Thankfully not being in the USA I do have to check my pay but receive a pay cheque.

In my experience, generally as peoples incomes go up then so do their expenses. Hopefully proportionally so they can increasingly save but very few who gain rapid increases in income bank all the extra.

Back in my student days I would be at the cash machine at 00:30 seeing if my pay had come in so that the night could continue but since then I've rarely needed to do intra-month charges. Puting most spending on cards means that I can see the total and have 28 days to work out how to pay it... in most cases obviously its just pay it from pay cheque and put the rest into saving but occasionally emergencies happen or an impulse buy gets in the way.

I've never been too worried about the money today or tomorrow. I've always been able to pay rent/mortgage, put something on the table (even if if its emergency reserves), always managed to secure work quickly etc. As I move through my early 40s however it is retirement that is scaring me more. 

Chino

Sandtree said:

Thankfully not being in the USA I do have to check my pay but receive a pay cheque.

Which in itself is unusual because those in paid employment in the UK are typically paid via BACS and not by cheque.

captainlongtoes

MovingForwards said:

Nearly 4 years ago I escaped, by starting my life over and splitting from my now ex-husband 😁 

I had enough money to last a few months and got offered a job the next day, before I had even finished unpacking what I had taken with me.

From the minute I left I started up spreadsheets, for outgoings and savings.
They are 12 monthly, detail all my fixed outgoings, have spaces for infrequent / as hoc purchases which are filled in as and when required. I also do a nice mortgage overpayment each month. Everything is Reviewed annually.
My savings spreadsheet lists all my accounts and what each one is for, I bulk transfer money over payday and at the start of the month. If I don't spend my food budget, or spend less than I planned, I transfer the surplus over that week. As I'm working from home, each week I transfer the apportioned saved commute cost over to savings. I also round my main account and move everything 99p and under to savings.

I still have my spreadsheets, I don't have my historic debts, I now have my own home based on 3x my salary and my salary isn't great; I've quit higher paid jobs.
I furnished the last rental on the basis that would be what I was taking to my home (picked most of it up from charity shops).
I've some savings in the bank, which increase on a weekly / monthly basis as most of my money went on my purchase a few months ago.
I do check my accounts and spreadsheets daily and I know the minimum I will have saved by the end of the year. I've started working out my savings plans for next year and will finalise them in December as I've done since commencing my new life.

My way of budgeting works for me and I'm sticking with it.

My motivation then was to save and clear debts. My motivation now is to save, clear my mortgage in 10 years and know retirement will not be a concern.

Inspirational! I’m not there yet, but I don’t have the stress of debt I had two years ago and am getting by. I want to earn more to be comfortable. Not extravagant, but not worrying about unexpected bills or costs.

For the first time, the past few months I have had enough money for next month’s bills before payday. This is due to budgeting and spending less on lunches and coffees because of quarantine. I plan to keep this up!

MovingForwards

Thank you @pecuniam_hominem and @captainlongtoes I was going list more things that I do, but my post was long enough as it was!

I'm pleased I did start over as I know I still would have been in the same position now if I didn't. 

My former life is barely memorable, aside from the few bits on my credit reports, when they go and I remortgage to a mainstream lender, that's the point I reach one heck of a change. 

I had a car repair bill of over £500 this week and didn't blink. I use my local butcher for my meat shopping and started growing my own herbs, veg and salad shortly after moving in to my home.

Having the diaries as a sounding board lets me bounce ideas off myself and quite often by the time I've finished typing it on my phone, I've hatched plans and then edit what I've written before posting saying what I will be doing.

Now I can enjoy my little life.

blue.peter

Debt can certainly be incredibly stressful. For me, it was an overdraft that resulted from biting off a mortgage that was more than I could chew, and the resultant regular stroppy letters from my bank manager. Those letters only added to my stress, and were wholly unnecessary. I was keen to get out of debt even without them. I was constantly worrying about it, and had virtually no social life for a long while as a result. For me, there were two parts to getting out of debt:

1. Working hard and getting a couple of promotions, and hence a bit more money each month;

2. I instituted a crude but, for me, effective form of budgeting. When I got paid, I'd put aside the money that I needed to pay the next month's bills, plus a proportion of what I expected to have to pay for the less frequent ones, into a second bank account. (Electricity and phone bills were quarterly in those days and my mortgage payments were six-monthly.)

It was a slow process, taking four or five years, but it eventually paid off. Thirty years later, that budgeting method has evolved a little (for example, I no longer need a second bank account for that purpose), but I'm still using more or less the same methodology and it works well for me. I now own my house outright, have substantial savings and can rely on my pension. Occasionally, I have to dig into those savings. Sometimes this is for good things (like a new bit of hi-fi kit), sometimes it's for bad things (replacing a boiler, or finding a way to hide my neighbour's new fence that he had put in back to front). The money's there if I need it, though. Overall, the long-term trend remains upwards.

Getting out of debt helped a lot, and definitely reduced my stress levels. It's a big worry off my mind, and I sleep better. I was made redundant twice. Having some money in reserve meant that the first was far less stressful. It was definitely less stress than the overdraft had been. (We can ignore the second redundancy, because it came at the right time for me: I welcomed it.) I still lost most of my hair, though.

Having said that, we do all still have to deal with the non-financial stresses of life - incompetent over-promoted managers; one or two unpleasant colleagues (fortunately never more than one at a time for me); moving house; bad neighbours and so on.

I'm well aware that far more sophisticated budgeting techniques than mine exist, and I'm sure that they help some people. Indeed, I recall my father using a much more detailed method in the 1970s.  It involved a large cash book in those pre-PC days. (He must have abandoned it at some stage - probably after my sisters left home. I didn't find any evidence of it amongst his papers or on his computer after he died.)

captainlongtoes

MovingForwards said:

Thank you @pecuniam_hominem and @captainlongtoes I was going list more things that I do, but my post was long enough as it was!

I'm pleased I did start over as I know I still would have been in the same position now if I didn't. 

My former life is barely memorable, aside from the few bits on my credit reports, when they go and I remortgage to a mainstream lender, that's the point I reach one heck of a change. 

I had a car repair bill of over £500 this week and didn't blink. I use my local butcher for my meat shopping and started growing my own herbs, veg and salad shortly after moving in to my home.

Having the diaries as a sounding board lets me bounce ideas off myself and quite often by the time I've finished typing it on my phone, I've hatched plans and then edit what I've written before posting saying what I will be doing.

Now I can enjoy my little life.

I for one wouldn’t mind hearing what else you did to reach this point! I welcome any advice I can get to have a comfortable amount of savings and pension provision. My aim is to continue not to worry too much about money and bills and to be able to not add to my kids’ worries as they get older. 

MovingForwards

@captainlongtoes

When planning my new life I started doing the 1p a day and 52 week savings challenges. Printing off the forms and just randomly picking the payments off, that money went into a savings account with a building society by where I was working. That, my car and what I loaded into my car, plus whatever I had already moved, was all I had to my name when I started over.

Originally I started by paying cash everywhere, I took out the weekly money on a Friday and that had to last until I paid myself the following week. If I didn't spend everything in my purse when it was time to pay myself I took out less. After not much time I ended up not taking money out as I still had the previous week's money in my purse.
I always transferred money to savings on payday.
Then split the rest between how many Fridays there were before my next payday.

I had a dedicated current account to pay my debts off when I split away from the DMC and was also picking debts off by doing F&FS, starting with the cheapest.  It allowed me to build up money towards the F&Fs. 
Took me 5 years to be able to say I'm debt free.

I now have dedicated savings accounts, a couple of regular savers and two other current accounts for my savings.
If I have to save for something, it has a savings pot. The pots I've got are communal repairs, interior repairs, garden, furniture replacement, interior modernising, car / maintenance / insurance / tax / home insurance, emergency fund and spares.

I calculate how much everything will cost, based on last year eg car and associated costs. Some are new because of being a homeowner eg home insurance, so I base it on what I paid this year and add an extra £20 as everything goes up in price at times. Some I've had to work out how much I want overall eg the communal repairs and guess a roof would be £20k but split between all owners.

With most of my accounts I can set goals, so I have. When I reach that goal, I update it to the new one and keep moving it. I would never set a £20k goal straight off as that's disheartening.

I take the goal and divide it by paydays eg £100 garden fund, 6 paydays left this year = £16.67pm.

Payday comes and the transfers are done before I even get out of bed and I move the pennies (99p and under) to savings. I have moved 1p to savings many times.
1st of the month comes and regular saver transfers are done before I get up.

A direct debit comes out my account, I log in and move the pennies to savings.

If I use my debit card, I get home and move the pennies to savings.

Don't go shopping, or spend less than my budget, move the surplus to savings.

Not back in the office yet and get to the end of the week, move what I've not spent commuting that week to savings.

My savings spreadsheet has the date each account gets the interest paid. I log into my account, check the interest and update my spreadsheet.

I do have credit cards and time my spending on them, a day or two after my statement is produced allows a bit of leeway with paying it off, or taking advantage of their special offers.

By the end of this year I plan to have £5k saved, which isn't a lot to some people, but it's a lot to me.

I have a DB pension in my current job and a S&S ISA, next year I will be adding to an old pension, moving pensions, while still saving.

I focus on long-term, what I need over the year, where I want to be financially in 5 years and what I need to do in-between, adjusting as required.