Living paycheck to paycheck sucks. And yet, millions of Americans—more than half of U.S. consumers—currently live this way. Whether due to uncontrolled spending habits or simply not generating enough income (or a plethora of other difficult circumstances), “waiting for payday” is simply a reality for HALF of the country.

Like many people in the early stages of their careers, I used to be among them. After years of hard work and honing in on my own finances, I am happy to report that is no longer the case. Until recently, that is, when I’ve rejoined the 54%… on purpose.

Kind of.

How (and why) I started living paycheck to paycheck

It goes without saying that to live paycheck to paycheck by choice is a very fortunate position to be in. And even from this privileged vantage point, it’s no picnic. By no means do I intend to disparage those whose financial situations are currently more dire than my own. We’ve all been there, and better times are ahead.

With that out of the way, my recent financial regression was born of a desire to aggressively increase my savings rate and help fast-track my progress toward financial independence. So, again, not quite the same as trying to keep the heat on and food on the table.

My increased monthly contributions to my 401k and my Vanguard brokerage account were partly a penance for having engaged in a few more speculative bets over the first half of the year. I figured that if I upped my contributions to a slightly uncomfortable amount each month, I’d look back on the first half of 2021 as an exceptional period of saving and investing rather than as that one time when I tried buying something called ASS.  

And… it worked! My increased allocations to both an S&P 500 (in my 401k) and Total Stock Market (VTSAX) index fund have already yielded outsized returns in the first half of the calendar year. And, of course, I don’t plan on touching that money for many years. The long-term results will be very fruitful.

Introducing stress into your finances

The only problem? I overextended myself a bit. With automatic investments withdrawing from my accounts every month, I slowly gave myself less and less wiggle room to work with in my regular spending. Combine those contributions with the fact that I’ve been enjoying the summer months a little too much, at the great expense of my expenses, and I found myself needlessly introducing financial stress into a situation where it didn’t belong. Last month, I barely had enough left in my checking account to cover my credit cards (paying the full statement balance—NOT the minimum payments). My investments are looking healthier than ever, but I’m very cash poor.

In some ways, it’s been good to feel that stress again. It’s a reminder of how it once felt—and how it still feels for so many people—to constantly swim upstream financially. There never seems to be enough money coming in to cover the latest unexpected expense. This stress forced me to get creative with how I might go about earning extra income in a short period of time. It served as a good thought exercise that made me acutely aware of how thankful I am to be gainfully employed. In the end, I found no creative solution. I simply borrowed against my speculative self from months past. I locked in some sweet, sweet crypto losses and emptied my minimal TopShot gains to help cover my bills. And, admitting defeat to the Savings Rate Gods, I slashed those investment allocations back to more realistic levels.

Re-building an emergency buffer

At the end of 2020, I made a big to-do about turning my somewhat bloated emergency fund into an “opportunity fund,” shoveling that money toward my Vanguard brokerage account instead. Some of it went to VTSAX and some of it went toward individual growth stocks and the ARKK ETF. I timed everything just about perfectly at the top. Whoops.

But the point is, I wanted to do something with that emergency fund rather than let it sit in an online savings account, making next to nothing in interest. After all, why settle for a half percent annual gain with your extra cash when you can immediately reduce it by 25 percent via some riskier investments in your Opportunity Fund? No brainer!  

At the time, I was becoming somewhat of an Emergency Fund Zero kind of guy—a mindset that Joel at Budgets Are Sexy similarly shared. After a few months of walking the budgeting tight rope, though, I’ve been forced to appreciate the value in stashing some cash. I wouldn’t necessarily call it an Emergency Fund, as to me that implies a rather large amount of money in a separate account. Let’s instead call it an Emergency Buffer. For me, that number is probably about $10,000 in my checking account—roughly three months of living expenses if I’m on top of my budget (spoiler: I haven’t been).

Lessons learned?

To recap: the benefits of living to paycheck to paycheck—somewhat on purpose—are increasing your saving/investing rate and reminding yourself of the struggle that once was. The negative? Living paycheck to paycheck still sucks, regardless.

If you’re currently living paycheck to paycheck—and not on purpose—I sympathize. But take solace in the fact that any ole Impersonal idiot can dig their way out of it, as I once did. And, be it far more of a first-world problem this time around, as I’m doing again.