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How (and Why) to Live On Last Month's Income

Written by
Alex Huntsberger
Alex Huntsberger is a personal finance writer who covered online lending, credit scores, and employment for OppU. His work has been cited by, Business Insider, and The Motley Fool.
Read time: 2 min
Updated on July 31, 2023
couple smiling at each other while using a laptop and calculator
Instead of spending that fresh new paycheck right away, plan ahead and build yourself a financial buffer…

If you’re living paycheck to paycheck, it can feel like you’re Tarzan swinging through the jungle. Every time you reach the end of one vine, you reach out and grab another. But what happens if you go to reach for a vine and there’s nothing there? Well, the answer is you probably end up plummeting down to the jungle floor. Ouch. (And gross. Jungle floors are gross.)

Living from one paycheck to another leaves you without any kind of safety net. If you lose your job or have an unexpected expense, you’ll have to start piling on debt in order to keep going. But what if you had enough money in the bank that you weren’t living paycheck to paycheck? What if you were living a few paychecks ahead? This is called living on last month’s income. And it’s a great way to start giving your finances some much-needed stability.


The first step is to make a monthly budget. This is one of those things that feels daunting until you actually get started. Once you sit down and map out how much income you receive each month and what your regular expenses are, you’ll feel better because you can literally see your needs and plan for them ahead of time.

Now that you’ve made a budget, you can start proactively saving. You’ll know exactly how much you need to save in order to cover a month’s worth of expenses. If your monthly expenses total $3,000 and you are able to save $700 a month, then it would take three months for you to save up. Plus, in that scenario, you’d have $100 left over. Why don’t you treat yourself by blowing that $100 on…your credit card bill?

Now that you’ve saved enough money to cover a month’s expenses, wait until the next month and then use that money to cover that month’s expenses. It’s really pretty simple. Every paycheck you receive that month will go straight to the bank and remain untouched until the following month. From now on, you’ll always have a one-month buffer between the money you are earning and the money you are spending. It will also help you stay within your budget.


Congratulations, you are living on last month’s income. So, is that it? Nope! Now that you are practicing fiscal responsibility, it’s the perfect time to practice even more of it.

Make sure that your budget includes saving additional money every month and start building an emergency fund, preferably at least six months' worth of expenses. Make a plan for paying down your debt and look at the possibilities for a debt consolidation loan.

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