skip to main content

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 ESPN.com, Business Insider, and The Motley Fool.
Read time: 2 min
Updated on April 22, 2024
couple smiling at each other while using a laptop and calculator
Instead of spending your paycheck right away, plan ahead and build 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, you probably end up plummeting down to the jungle floor. Ouch.

Living from one paycheck to another leaves you without a 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 to avoid 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.

Plan, save, and plan again

The first step is to make a monthly budget. It may seem 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.

After you make 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. For example, if your monthly expenses total $2,000 and you are able to save $700 a month, then it will take three months for you to save up. In that scenario, you would have $100 left over. Why don’t you treat yourself by blowing that $100 on…your credit card bill?

Once you save 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 pretty simple; every paycheck you receive that month will go straight to the bank and remain untouched until the following month. From then on, you will 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.

What’s next?

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.

Related Articles

California Residents, view the California Disclosures and Privacy Policy for info on what we collect about you.