How to Live on Last Month’s Income & Why You Should

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One of the best ways to make sure that your budget is totally set is to live off of the income that you had come in last month. It’s a sure fire way to make sure that you have cash in the bank and that your bills are totally covered. To live on last month’s income can be sort of daunting though if you’re not prepared for it right this second. In fact, if you’re not 100% ready for it, it can take some fancy footwork to get your budget ready, but I promise, you’ll be much better off if you do it than if you don’t.

Are you living off of last month's income? You should be! I'm going to show you how to and why you should want to!

The idea behind living off of last month’s income is that if you’re a month ahead on the pay your receive, you’ll have an entire month “free” in case of an emergency. It also allows you to save more in the long run. I don’t know about you, but there’s nothing better for me financially than being current on everything, having a backup plan and being able to save more money easily. Once you’ve got the pattern that you need down, you’ll find it’s quite freeing for you too I’m sure.

To start, you’ll need to take a good, long look at your budget. Since things will be kind of tight for the first month or so while you set yourself up, you’re going to want to make sure that 1. you’re using the best type of budget for your family and 2. that you cut ANYTHING that isn’t absolutely necessary out of it. Let’s be real about something too; your kids don’t need to buy school lunch everyday. They can pack. You don’t need to buy that new pair of shoes new, buy used if you HAVE to have them. You don’t need those cable channels or that expensive plan. Use Hulu Plus and go pre-paid. If you truly want to start setting yourself up for financial success, you need to be ready to make some changes. As my hubby says, you’re going to need to “embrace the suck” of living on a tight budget for at least a month, possibly longer.

In the immortal words of Baloo…

“Look for the bare necessities, The simple bare necessities, Forget about your worries and your strife”

Now, you’ll budget like you normally would, just without the extras. The money that you have left over, that you would normally put on those luxury items, will go into savings. Here’s the iffy part…the amount of money you put into savings will depend on how much money you have left over. (Obviously) If you’ve only got $20 left over than of course, it will take you longer to save what you need. If you’ve got $5k left over, well then you should be good.

Once you’ve got your budget done, you’ll know exactly how much money you need for one month’s bare necessities. By bare necessities, I mean food, utilities, shelter and a way to get to and from work. Now, go back and add those luxuries you think you need to that amount.

THIS is the amount you will need to save to live off your previous month’s income.

Did I confuse you? I can see why if I did. First I told you to cut all of those expenses and then I said to add them back in…here’s why:

The first set of numbers…the bare necessities is what you need to have at a MINIMUM in your savings account. This is the number that if you lose your job, take a pay cut or have some other emergency, you can fall back on and know it is there, safe and sound.

However…no one enjoys living without a few bucks to spend on enjoyment or having to scrape for groceries. That is where the 2nd number comes into play. This is the number you should shoot for in your savings account. Having this amount saved will let you keep those luxuries in your budget, but will help you to know for certain that you’ve absolutely got your minimum amount in there to fall back on as well.

Once you’ve got your amount saved up, it’s time to start living on last month’s income! Use the money in your savings account to pay your bills and take your income that you receive for the current month and stash it back for next month.

Confused again? Man, I gotta stop doing that! Look at this example:

  • You need $2500 to live comfortably. At the end of May, your savings account has $2700 in it.
  • You will use that $2700 to pay your bills for June leaving you $200.00 extra in your savings account.
  • In June, you earn $3,000. You will put ALL of this $3,000 into your savings account to use for July’s expenses.
  • In July your bills total $2200.00. That leaves you $800 in your savings account.

and so on…


As time goes on and your expenses change, you’ll start to see your accounts getting fatter and fatter by using this method! I’m not sure about you, but a fat bank account is the one kind of fat I don’t mind being!

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Stacy Williams

Stacy Williams is a 37-year old wife to a USAF Gulf War Veteran, mother of two teen girls and fur-mamma to a rescued pit bull. The face and brain behind the frugal living and lifestyle blog Six Dollar Family, she also owns and manages Long Haul Wife, Republic Preparedness, The Genealogy Queen and a handful of others sites. By the age of 30, Stacy had overcome a drinking problem, a drug addiction, divorce, survived domestic violence, and had built a life for herself and her daughter after spending 10 months in a homeless shelter. Stacy is passionate about homeless advocacy and addiction education.  Her first book, also called Six Dollar Family is available on Amazon.

Learn how to earn a full-time income from home by learning how to start a blog just like this one! Click HERE to check out Stacy's step-by-step tutorial.
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  1. Michelle Hogan says

    I am reluctant to say this, but I am going to go ahead and give honor for the direction…this was an answer to prayer!
    This morning I woke up knowing it was time to buckle down and look at our debits and credits, look at our needs and wants, and make the necessary adjustments.

    Recently my husband got a promotion and we moved to the country. Our living has never been so wonderful, and in this wonderfulness I noticed my spending had increased which is in a complete different direction than what we talked about and agreed to when moving to the farm.
    After much prayer over the last few months I knew change was coming, and today I happened to run across your post while reasearching recipes. I almost delayed in clicking and reading, but I knew He was encouraging me to go further.

    Thank you for taking the time to share your wisdom. It has come at the most perfect time for me and my family. It is time for a realistic budget, and good stewardship with what He has blessed us! Your approach is simple and that I can follow!

    • Michelle, I’m so very glad that you felt led to this post and that it helped you so much. I certainly hope you’ll visit more as the days go on and allow me to help you continue your (new) financial journey.

  2. I really appreciate this article. You wrote it years ago, but it’s relevant to my life right now. My plan is to have paychecks deposited in the savings until it becomes one month’s worth of expenses. Then at the beginning of each month have that amount transferred into the checking account and pretend like we get paid once a month. Getting paid once per month will force us to stick to what was budgeted for instead of living paycheck to paycheck. Sometimes when I am trying to explain it, it can sound confusing, but makes perfect sense to me. It’s just one of those things that you just have to do so you can show the results and the peace of mind that comes with it.

    • Stacy Ott-Barr says

      Tiffany, It makes perfect sense and isn’t confusing at all. I think you’re on the right track. My concern though is whether you have two incomes coming in or only the one.

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