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Living paycheck to paycheck isn't a great way to manage your money, but there's something to be said about having a paycheck to paycheck mentality.
We have a nice retirement accounts, an emergency fund, and are even saving specifically for a house. But we still live with a paycheck to paycheck mentality — and I'm glad that we do.
If you have automated your finances — including monthly retirement contributions, debt payments and transfers to high-yield online savings accounts — then living with paycheck to paycheck mentality is okay.
Because our finances are automated, our money is constantly doing something. It's getting added to our Roth IRAs or it's going into our housing fund or getting direct deposited into our checking accounts.
But since many checking accounts (including ours at Bank of America) pay nothing in interest, there's no reason to keep more money in there than necessary. So we only keep a certain amount in our checking account — enough to get transferred via automatic payments or to our outside savings funds and for bills.
This forces us to live a paycheck to paycheck mentality, even though we're saving for now and saving for the future.
With a paycheck to paycheck mentality, you're waiting for that next paycheck, but not just to pay the bills. It's also to invest and to stick into a high-yield savings account.
It works. Give it a shot — find out where all your money goes (start a budget), automate it, and then watch your spending.
I definitely have the paycheck to paycheck mentality and it has worked very well to increase my net worth. I consider saving essentially the same as bill payment. I try not to allow too much discretionary money to build up as my income rises over time. If I get a raise I simply increase my savings levels. This helps me to avoid getting to comfortable and keeps me away from unnecessary purchases.