Paycheck to paycheck. This is something thrown around quite a bit. But how do you know if you are actually living paycheck to paycheck?
When I first graduated, right into the 2008 financial crisis, it took months to find any job at all.
When I finally found work in the service industry, I was happy to make any sort of income to pay for my basic living expenses.
One Job Was Not Enough to Cover It All
It’s typical that most service industry jobs only offer part time to avoid paying for things like benefits to the employees unless you have the role of a manager.
The managers at the restaurant I worked at were constantly scrutinizing the employees to make sure they clocked in and out for every break and every time you finished a shift. It didn’t matter if you needed a few extra minutes to finish a task, you had to finish everything within your time slot. They would routinely adjust the clock-in and clock-out times to make sure no one got over 35 hours.
Once I got a second restaurant job, this eased stress and I was able to pay my bills without relying too heavily on credit cards or overdrafting my checking account, which happened quite often.
Even with this second job and random catering gigs, I still struggled to save money and pay for all my student loans. I even deferred some of them so the payments would be more manageable. I didn’t realize doing this let the interest accrue and capitalize on the principal.
At 23 years old, I had decided I was “too old” to live with roommates. I’m not sure where I got this narrative, but reflecting upon it now, it doesn’t make much sense. I rented a very small studio in downtown San Francisco that cost me about $800 a month.
Juggling my work schedule was tough. I was exhausted from working every day and I was still broke. There wasn’t much room to do anything else — build skills, look for better work, no mental space to think about my future.
Moving to NYC for “Just One Job”
Moving to New York City was something I’d wanted to do for a long time. I was also hoping to find better work, one steady paycheck instead of three unpredictable ones. When I moved to NYC, I had one goal when it came to finding a job. I wanted ONE job that I could pay my bills with and had medical benefits.
Where the Math Fell Apart
For the work I found, the salary they offered was lower than what the Craig’s List ad listed ($35,000), but I didn’t know how to advocate for myself. Also since I had no experience except restaurant work, I didn’t think I could even ask for more — not even the amount that was advertised. I was kind of disappointed in the salary, but I took the role at $32,000 a year. It was my first “grown up job” and I was proud to have just ONE job.
If I had actually calculated all my expenses, I would have realized that this salary was not enough to make ends meet.
Here’s my actual monthly budget:
- Rent: $900 (for a room without a window that was technically not a legal bedroom)
- Student Loans: $900 (not including ones I deferred)
- Food: $400
- Utilities: $150
- Transportation: $110
- Medical: $50 (I avoided going to the doctor since this was expensive, and also something I learned growing up)
Total: $2,510
Per Year: $30,120
My $32,000 salary (gross, not net) was not enough. This didn’t account for taxes — federal taxes, state taxes, FICA. As a result, these reduced my take-home to roughly $24,000-$25,000 per year. That’s about $2,000/month. But my essential expenses were $2,510 per month. And forget about other needs like having a life, there simply was no money for it.
The Math I Didn’t Do
I never sat down and calculated my actual expenses before accepting the job. My previous jobs were always hourly and $32,000 seemed like a larger chunk than I ever earned before. It was my first salaried position. I never asked myself: “Is this enough to live in New York City?”
I knew New York City was an expensive city to live in, but I never actually did any research to find out how expensive it was. It never occurred to me. I was dismayed to find rent was more than what I paid for my studio apartment in San Francisco even though now I had a roommate!
Flying by the Seat of Your Pants
Growing up, I learned finances were handled that way. You never planned anything, you just figured out things as they happened. It was always about crisis management and never strategy. I inherited this approach and it was stressful, but I never learned any other way to operate. I accepted the job without negotiating, even though the original posting said $35,000, and went into crisis-management mode again.
This is not a good strategy — I’m not even sure it actually qualifies as a strategy — yet many people operate like this. If that sounds familiar, it’s usually a pattern you inherited in childhood, like me. That’s exactly what the START journal is built to untangle.
Pattern aside, the numbers were still the numbers. Even as frugal as I was, there wasn’t anything else I could cut to make this budget work. I can’t just not eat and I couldn’t not have a metro card. My job was 10 miles away from where I lived. It was not feasible to walk to and from daily (though I did do this once when Hurricane Sandy knocked out the power in the city for a few days and many subways stopped working in lower Manhattan. To say it was scary walking around in the pitch black city at night during Halloween is an understatement.)
A few years in, I realized I was still in the same place. I wasn’t making enough to cover my bills and I needed another job. There was no way for me to save anything, or pay more than the minimums on my credit card debt and the student loans I hadn’t deferred. If you want to read the full story about my debt revelation and how I got out of it, you can read it here.
I didn’t work any of this out until years later. Here’s the math I wish someone handed to me at 23, so you don’t have to learn it by accident.
How to Calculate If You Have an Income Problem (or a Spending Problem)
Step 1: Add up all of your essential monthly expenses.
Be honest about what’s essential. This includes:
- Housing (rent or mortgage)
- Utilities (electricity, gas, water, internet, phone)
- Insurance (health, car, renters, home)
- Food (not takeout)
- Transportation (car payment, gas, public transit)
- Debt payments (student loans, credit cards, personal loans)
- Medical expenses (regular medications, ongoing care)
- Childcare (if applicable)
- For women: basic grooming costs (haircut every 6-8 weeks, basic makeup if required by your job, nails if part of professional expectations)
Note: Grooming is included here because society holds women to different appearance standards than men. A woman working in finance or corporate might be expected to maintain manicured nails, professional hair, and makeup in a way her male colleagues are not. These expenses are not frivolous, they’re job requirements. These should be included.
Step 2: Calculate your net income.
Next, take your gross salary and subtract taxes. The IRS website has a tax bracket calculator. Or use a rough estimate: subtract 25-30% for federal, state and FICA taxes.
Gross salary: $32,000
Estimated taxes: 25% ($8,000)
Net income: $24,000
Monthly net: $2,000
Step 3: Compare
Once you’ve got both numbers, compare them. Sixty percent isn’t arbitrary — it’s a common benchmark for what essential expenses should max out at relative to your take-home pay, with the rest going towards savings and wants. I’m using it here as a gut check, not a hard cutoff: if you’re already past it before you spend a dollar on anything else, the math is telling you budgeting alone won’t fix it.
If your essential monthly expenses are:
- More than 60% of your net income: You have an income problem
- Less than 60% of your net income: You likely have a spending problem
In my case: $2,510 is ~126% of my $2,000 net income. I had a massive income problem.
Step 4: Be honest about the implications.
There’s a large difference between these two problems and the solution is completely different.
If you have a spending problem, you can cut your spending to stability. You can spend less on non essential things. You need to adjust your budget. The solution is internal — you need to control your spending.
If you have an income problem, cutting back won’t save you. The math doesn’t work here and budgeting won’t fix it. You need to earn more money. This might mean asking for a raise, switching jobs, moving to a lower cost-of-living area or adding income.
If it’s an income problem: ask for the raise even if you think they’ll say no — it plants a marker for the next review. Price out one specific side-income option this week instead of a vague “I should side hustle.” Or run the actual math on relocating to a lower cost-of-living area, because it’s often a bigger lever than people assume.
If it’s a spending problem: pick the one category eating the largest share of your net income and cut it in half for the next 30 days before you touch anything else.
Why “Just Budget Better” Doesn’t Work for Everyone
For years, the personal finance industry has told people that budgeting is always the answer. Spend less, cut back on lattes and avocado toast! Stop buying handbags and clothes. Get a roommate. This is true advice, but only if you are actually overspending. It doesn’t work if your income is fundamentally too low.
For women — especially women of color — this distinction matters. We’re often told our financial struggles are due to poor spending habits. “You just need to manage your money better.” But women are consistently paid less for the same work. We sacrifice earnings for caregiving. Our problem isn’t usually that we’re bad with money. Our problem is we don’t make enough. If you want to learn more about this, see my posts on mindsets and emergency funds.
Most people have one or the other. Some unlucky people have both.