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Today I’m excited to have a guest post from Allan Liwanag from The Practical Saver:

Why You Should Live on Last Month’s Income

Yes, it’s payday. A lot of us are going to buy the things we like to have such as gadgets, clothing, and food.

Why not, right? After all, we all worked so hard to earn this paycheck. Let’s say, it’s our way of rewarding ourselves for a job well done or just for working.

But you know what, there’s a better feeling than just getting a paycheck and spending it. It’s living on last month’s income.

Coming from someone who used to live paycheck to paycheck, I exactly know the feeling of living on previous income. It’s one of the greatest feelings in the world, to say the least.

In the post below, you’ll find out the reasons that using last month’s income is beneficial. This post will answer the questions:

  • Why you should live on last month’s income (there are good reasons to do so!)
  • How to do so with ease (you’re going to want to hear this!)
  • Why it’s easier than you might think

If you ready to learn what these benefits are, read on!

4 Benefits of Living on Last Month’s Income

My family used to live paycheck to paycheck. It’s not the best feeling in the world. I can tell you that with certainty. But things have been different. Now, we have been able to save money to cover our expenses for months to come. It feels awesome.

Here are some of the benefits of living from a previous month’s income:

1.    You’ll Have Money in the Bank to Pay Your Bills

That’s the first and probably the most important benefit of living on last month’s income.

When you do this, you’ll find that money will always be in your bank account when you need it. That’s a great accomplishment, especially that many people are a paycheck away from financial problem.

As opposed to living from paycheck to paycheck and not having any extra money for anything other than your bills and necessities, living on last month’s income provides you with surplus funds.

By living on income from months past, you are ensuring that all of your necessary bills will be paid and be paid on time.

Tips to help you learn how to pay your bills in advance on live on your previous months income.In addition to starting out your month knowing what you owe and when you have to pay it, living on last month’s income makes it possible to do so with ease.

When you have an extra income, and, then, take any surplus which you put into a separate savings account, you are providing yourself and your family with an emergency fund.

When the money is in a separate bank account and you pay bills and spend money with what is in your everyday account, you will have those extra funds at your fingertips, should you need them.

As for your everyday account, the money will be right there and you can rest easy knowing that once the due date arrives for each and every bill, you’ll have the cash to take care of it.

When you look at your last month’s income, you know what will be coming into the account in the form of income as well as what will be going out of the account for bill payments.

This makes it easy to have the required knowledge regarding your monthly bills and know that there will be income to cover it.

2. You’ll Stress Less

Financial worry is one of the biggest stress-causing factors for single individuals and married couples alike.

Also known as financial anxiety, this type of worry is extremely harmful and quite common.

When you live on last month’s income, especially if you have a fluctuating income, you know what you’ll need to get by each month.

In addition, you’ll know how much you can afford to put away for future month’s needs and lessen stress into the foreseeable future.

Living on last month’s income by having put away a surplus for emergencies means that financial surprises are less likely to come your way as you know what it takes to pay your monthly bills and can do so by living on last month’s income.

When you can pay your bills and have money left over for other things, you will stress less and enjoy more.

Enjoy stress-free living by using money from last month’s income to pay bills and purchase other items, too.

If you want even more stress-free living, you can add to your monetary surplus by taking on a side hustle gig and work from home job.

3. Bill Due Dates Won’t Worry You

When you’re able to live on last month’s income, bills won’t worry you as much as they used to.

Due dates arrive at various times each month and not all due dates will be available after you’ve been paid for the month.

This can cause worry as, in the past, you may not have had the money at the time the bills were due.

When you save money from prior month’s paychecks, you can be confident knowing that your bills will get paid on each and every individual due date, whether you’re paying your car payment or repaying student loans.

By living on last month’s income, you don’t have to worry about when each of the credit card due dates are or when the mortgage is due as you will have the cash in the bank to easily and fully pay the bills.

Many people try to arrange their due dates at one or two specific times during the month to get them to line up with their paychecks.

Rather than trying to have your due dates come in at the same time each month in order to get everything paid after you’ve received your paycheck, living on last month’s income lets you pay your bills on time, no matter when the due date may be.

As you live on last month’s income, there are ways you can even think of to save money or make money fast, which will help to lessen the worry of bill due dates even more!

Not having to pay the due date game is another excellent benefit of saving surplus funds from prior paychecks and putting that money aside.

4. Budgeting Will Be Much Easier

Budgeting is an extremely important concept.

This type of financial activity provides you with a full and proper picture of your financial security and tells you what you can pay when you need to pay it, and how much you can afford.

You’ll find that when you live on the income from last month, or months prior, your budgeting tasks will be much easier.

Financial security can be yours with the right form of budgeting and budgeting is easier when you live on last month’s income.

No longer will you have to think in-depth about when to pay bills, how to pay bills, and how much you have to spend on certain items.

You’ll have that much-needed monetary buffer which will allow you to loosen up your budget and be more flexible with your spending.

When your budget is strictly set, you have very little room to work with the budget.

Your money is tight and your budget is set in stone most of the time.

When you have money from your prior month’s income, you can enjoy your earnings more and have money for other things besides just the necessities.

Final thoughts:

Living on the previous month’s income is a dream for so many people, and there are various reasons for that. Achieving that is an accomplishment that brings a lot of benefits for months or even years to come.

Getting there takes hard work, patience, and, sometimes, sacrifice. But it’s all worth it. In the end, it will bring you calmness, peace, and, most of all, financial security.

Now back to Amy

Thanks for the guest post Allan!  I’m a huge believer in living on the previous month’s income.  I’ve noticed that when I’m strategic about my money and stick to this schedule my financial stress decreases significantly.

The real reason I like it is because of months like this one when my husband needed new tires ($1,200), I needed a new cell phone ($800) and we had a bunch of smaller unexpected expenses.

Instead of stressing about everything I knew I was fine because I had already paid all my major bills for May.  It will take me two months to get back on track with paying early, but it is much better than having to dip into my emergency fund.

How to Start Living on the Previous Month’s Income

When we made the decision to pay everything in advance I started small.  I began by paying early on all of my smaller bills like utilities, HOA Fees, phone, Netflix and stuff like that.

It took me a couple of months to get all of these ahead and then I began tackling the larger bills like my mortgage.

Keep in mind that when I began using this method I had already paid off most of my debt, so it was relatively easy for me to make this shift.

If you have a lot of debt I would recommend prioritizing the lowest payments and then gradually begin working up from there.

I’ve got some friends who pay for everything except their mortgage a month in advance.  Eventually they would like to get to this point, but for now, just having all of the other bills paid in advance has made a huge difference in their financial planning.

I do have to mention that I have another friend who did the opposite.  She scrimped and saved until she had enough money to get one month ahead on her mortgage payment.

Now she always pays her mortgage payment a month in advance and doesn’t worry about the rest of her bills.

The trick is to find a method that works for you.  

Another method depending on your financial situation could be to take a month of money from your emergency fund to get ahead of your bills by one month.  I don’t know anyone personally that has gone that route, but if you have a 6-month emergency fund and feel stable in your job this is a great way to get a month ahead on your bills.

Why I chose to live on last month’s income

After a lot of failed budgets and money mistakes, I realized that for me the peace and security that came from having all of my bills prepaid for was worth the sacrifices I had to make for a couple of months to get to that point.

If you are struggling to pay your bills and want to try something new, see if you can work up to living on your previous month’s income.  I think you’ll be surprised at how much easier it makes your financial life.

Thanks to Allan Liwanag for this guest post:

“Allan Liwanag is the blogger behind The Practical Saver. An analyst by day and dedicated blogger by night, he loves to share his thoughts – based on his research, personal knowledge, and experience – on topics related to family, life, and money.”