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Ask HN: How do I Stop Living Paycheck to Paycheck?

36 points by novateg ↗ HN
I've started my journey as a self-taught web developer in 2008, I moved to New York City in 2012 and started working for marketing agency as a web developer with a pay of $15 per hour, which has the lowest for the position.

I managed to grow to Tech Director at the same company and my current salary is $110k per year, and yes, I'm still working from paycheck-to-paycheck.

How can I get out of the swamp?

P.S. I also need to mention that I do keep track of my budget. I have 3 kids (two of them are school-aged and one preschooler). And I have a monthly mortgage $2600.

Net Monthly Salary - $7000 - Mortgage $2600 - Electricity, gas, water $400 - Other bills (internet, phone, credit) $600 - Food $1200 - Child-care $1200 - Car expenses $600 - Shopping ~ $400

114 comments

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zwieback
My wife and I are planning for retirement and one of the super helpful things we started is using a budgeting app and diligently planning and then tracking every penny. I suspect you'll find a few areas you can cut back and also start putting away some amount each month.
orangepanda
I second this. Dont even try to blindly budget - first track your expenses for a few months.

Might find that the 2nd yacht isnt worth it.

frereubu
This has helped me enormously. As a sibling comment suggests, don't budget to start with, just track what you're spendind your money on for two or three months, then you'll know what you actually spend your money on, and it will help you to identify things that you might be able to change. For all that some puritanical budgeters would say, my experience has been that it's not things like take-out coffee that are the bulk of my expenses, but things like housing. Getting a better mortgage deal / cheaper rent is going to be several orders of magnitude more effective then doing without take-out coffees.

Edit: For what it's worth, I use You Need A Budget, and have my bank accounts automatically linked so much of the categorisation is done for me. Some people don't like that a cloud service has your financial information, so YMMV depending on your views on that. I was also categorising payments manually to start with (YNAB didn't have UK bank integration for a long time) and I actually found it really helpful because it forced me to be aware of what I was spending money on. I use https://syncforynab.com/ in preference to the built-in sync because it uses my bank's API and payments come through to YNAB instantly rather than on a delay. Having a budget has made financial planning significantly easier and less stressful.

jurassic
You need to make more than you spend. Your comp is very low so you need to change jobs to get your comp closer to where it should be. Not much else to say on this. Start leetcoding and polish your resume.

Edit: Yes, $110k for a tech employee with 12 YOE in a HCOL area is very very low. You don't need to work at FAANG to make significantly more than this (see levels.fyi for many examples). The existence of poor people living on less does not change this fact or mean the OP shouldn't strive to be compensated at a level appropriate to their experience.

Otek
110k$ is very low? Wow

Edit: I understand that not much now. Living in Eastern Europe I have different perspective. BUT, I think that advice: “just earn more” shouldn’t appear when someone asks how to stop living paycheck to paycheck. No matter how much you earn you should always try your best to save some money.

thebean11
In NYC for a non-entry level software job? Yeah it's pretty low.
rzarate
I agree, that's closer to what an intern would make in NYC rather than a director. I'd consider changing industries, maybe engineers are not as valued in marketing agencies as they would on other more tech-heavy industries.
Jcowell
Where in NYC are interns making 110K and where can I apply ?
thebean11
FAANG, finance companies (banks, Bloomberg etc) plus tons of mid sized tech companies (companies like Mongo, Dropbox etc). Often if salary is lower, there's a relocation bonus that puts you into six figures if you amortize it over your 3-4 months there.
joshribakoff
For something in demand that takes decades to master that less than 1% of the population can do in one of the most expensive cost of living areas in the world, so yes.
brailsafe
I would probably highlight "in one of the most expensive cost of living areas in the world". Otherwise $110k is not very low
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nine_zeros
$110k is very low for NYC. Federal, state, city, fica taxes will eat close to 50% of that income. The remaining will end up in rent and transportation. God forbid you have some recurring expenses like healthcare or a child.
lkbm
So what do the millions of households earning <$60k do? Are they going tens of thousands of dollars deeper in debt each year?
serioussecurity
In NYC? They're living without health insurance, 8 people in a 3 bedroom, with less than $500 in savings, and credit card debt, yes.

Or they commute two hours each way from Philly.

America does not treat it's people well.

https://fortunly.com/statistics/american-savings-statistics/...

Jcowell
Errr. I think there’s a big disconnect here.

1) NYC is not just Manhattan. The outer boroughs are also NYC and are far cheaper. Not Nashville cheap but livable. You don’t need 8 people in 3 bedrooms. You can even live in jersey.

2) A lot of NYC has affordable housing and projects. A lot of communities making the basic minimum wage or not at all can live there.

3) 110K is a absolutely doable in NYC. It’s just not doable if you live outside your means.

lkbm
> In NYC? They're living without health insurance, 8 people in a 3 bedroom, with less than $500 in savings, and credit card debt, yes.

I understand that they don't have savings and have some credit card debt, but we're talking $50,000 per year. And this is over the median household income[0]. Are the people in the 25th percentile living 16 people in a 3 bedroom?

The OP has updated to say their mortgage is only $2,600/mo., so even after housing that leaves ~70k over what median household makes before rent. (The OP also reports having three kids, which is almost certainly a large part of that $70k.)

I suspect you don't spend a lot of time with people making $30-$70k. They exist, often have housing, and many of them even eat food. It's worth examining how they manage rather than dismissing this as an impossibility.

> Or they commute two hours each way from Philly.

Nope. NYC residents. Median household income of $63,998 (2019).

[0] https://www.census.gov/quickfacts/fact/table/newyorkcitynewy...

nine_zeros
Bad debt is the easy option. Sometimes they work 2 jobs or live out in the exurbs and commute 4 hours a day. Sometimes they drive for uber with their child in the front seat because they can't pay for daycare. Sometimes they engage in gambling or other under the radar activities just to supplement their income.

Some of them own their homes outright. Others live with 2 other families under a single roof. Often multiple generations live in the same house whose debt was paid off by a past generation - easing the burden.

Many people making $150k and are single live with roommates until the age of 40.

It is very easy to fall off a cliff in NYC.

ss108
Whatever they do, however they live, they aren't saving money, aren't financially stable or robust (i.e. positioned to weather emergencies), and have low material qualities of life. Why dissent while others try to help OP out of a situation where he's in a similar situation and should be making more based on his experience?
scarface74
It’s irrelevant what most people do. He is in an industry where he can make more.
jurassic
For a software person with 12 years experience in a major US city, $110k is insanely low. I’ve known people who made more than that after a 12 week bootcamp.
santoshalper
For a tech leadership position in one of the most expensive cities in the world? Absolutely. I work in a mid-priced, midwest city and that would be low for tech leadership.
globular-toast
Welcome to the HN bubble. Over the few years I've been here the talk about salaries have been getting more and more ridiculous. It started off as "three figures" then rapidly turned into 300-400k and now 110k is very low and considered poverty.

There's something about money that causes even intelligent people to lose all sense and perspective.

elliottcarlson
For a high cost of living area such as New York, with a family to support, it is unfortunately very low - couple that with their title and years of experience, it is just factual compared to the market that they could be earning near double. At $110k a year, you are looking at a $6k monthly take home; over 1/3rd of that is going to the mortgage OP posted, and they have three children. Once you add insurance, groceries, and other obligations (such as perhaps a car + insurance), it becomes very easy to fall in to the paycheck-to-paycheck life.

Yes, $110k is a lot of money, but it quickly disappears depending on where you live - for perspective, based on cost of living, this would be equivalent of earning $41k a year in Kansas City, KS/MO, or $37k in Birmingham AL -- cost of living plays a huge factor, and not accounting for that is the actual loss of sense and perspective.

ss108
Inflation, plus the goalposts have genuinely moved, plus, again, these salaries are reported from SF and NYC. Things would be different if we were talking about Austin, or even LA.
xboxnolifes
For a tech director, 14 years experience, in one of the most expensive cities in the country, yes, $110k is incredibly underpaid. I make (and so do my friends) the same amount, remotely, as a new-grad, not at a FANNG/MAGMA/WHATEVER.
scarface74
We have goof perspective. If he were a teacher, our advice would be different.

I basically did a career reset in 2008 - a little over 12 years ago. By changing jobs and working at mostly a bunch of no name companies until 2020, I switched jobs 6 times and went from $80K -$150K and was entertaining offers at other no names companies by 2/2020 as a regular old back end C# CRUD developer - in a place much cheaper than NYC.

I did a slight pivot in 2020 that’s not relevant to the discussion.

nunez
$110k for a director is low even for Europe, so this doesn't hold water IMO.
swat535
It absolutely is, especially by US standards.

As an anecdata, I'm a director of engineering and my base salary is ~205k CAD.

At my company (based in Toronto, Canada), we have budgeted between 130k-160k CAD base + bonuses for engineering roles (depending on the experience, position, etc). Yet I consider these salaries to be pretty subpar compared to our US counterparts.

Folks, demand a fair wage. When a house costs 1.3M , it's unreasonable to get paid peanuts.

scarface74
He’s not in Eastern Europe. He’s in the US. Mathematically, we all know that he should be able to earn more.
lkbm
Their comp is presumably higher than it was a few years ago, even adjusted for inflation. The question to be asked is why their spending has increased similarly.

Half of all households in NYC live on ~$60/yr or less (2019)[0]. What's stopping the OP from having their level of spending and saving $50k (minus taxes) a year? The answer to that is also the answer to their question. "Make more money because $110k is very low" is an absurdly out-of-touch response.

[0] https://smartasset.com/retirement/average-salary-in-nyc

jurassic
OP isn’t going to fix his financial picture by skipping lattes and getting a cheaper apartment. Even if he went into hardcore miser mode he might save about $20-30k per year. Compare that with seeking market rate comp he could pretty easily double or triple his income, and be putting away $100k+/yr (and maybe a lot more than that) of additional savings with no change to his lifestyle. Seems pretty obvious where the focus should be.

The fact poor people exist doesn’t change the fact OP is likely being taken advantage of by the current employer.

bluefirebrand
Certainly, doubling or tripling their comp should be a part of OPs plan, but even if they do make tons more, they may have to adjust spending behaviour to prevent it from overtaking the higher salary eventually. Some people really do just spend every dollar they receive, no matter how much it is.
lkbm
Yeah, increasing comp is a good idea, but I assume their comp has increased multiple times over the past decade and it's had zero effect on their saving.

Something's causing a growth in spending exactly equal to the growth in income. Increasing income only helps if that function is addressed.

scarface74
Maybe 3 kids?
lkbm
Yup, that addition explained a lot.

With the further breakdown, the $1200/mo on childcare is low enough that I suspect this is a one-income household, in which case cutting back there may be possible, but I'm guessing that also causes most of the pain to fall on their partner.

scarface74
He’s a software developer in NYC. We aren’t talking about the “average” household. We are on a tech oriented site and we know what he could be making as just your standard “full stack developer”. People with 3-5 years of experience can throw their resume in the air and make more. We aren’t talking “FAANG jobs”
lkbm
I don't think you're addressing what I actually wrote. Yes, they can and should earn more, but somehow their expenses are exactly tracking their income, and identifying why is key to ensuring it doesn't continue to happen as that income grows further.
scarface74
Yes, he had three kids during that time. By not continuing to happen do you suggested he cuts off his ability to reproduce?
bluefirebrand
This may help, but it sounds like what has happened is spending has increased with each level of compensation increase.

My advice to OP is: You need to break whatever financial habits you have that prevent you from saving money, and build a habit of saving as much as you can. Just because you get a raise doesn't mean you have to change your lifestyle. You don't have to rent or buy a more expensive place to live, you don't have to lease a more expensive car, buy more expensive meals, take expensive trips, whatever it is. There is some thing you are spending your money on and you need to identify it and get it under control.

You can avoid living paycheck to paycheck on almost any kind of budget, but if you always let your spending expand to what you can afford it won't matter how much you earn, you will always feel broke.

A common thing I see with my friends who are kind of bad with money is they don't make a calculation of what they need versus what they want. They see stuff they want, they check if they have the money to afford it, and they buy it. It's a bad habit to be in, and you have to be able to say "I am going take the cost of that thing and put it into a savings account instead"

6510
A big bag of flour, big bag of onions, keep your yeast growing, 4 or 5 cheeses, big pot of sambal, a salami sausage, ham, bacon, some fish, mushrooms, a variety of frozen vegitable mixes, tomato ketchup, big bottle of olive oil. Oregano, thyme, pepper.

mix the dough close to batter. Put flour on a baking tray and spread the dough onto it. Grill on highest settings for 4-6 minutes while you chop the ingredients. Remove the dough from the oven and flip it upside down. Spread a spoon of ketchup over it. Spread out 1-3 spoons of vegetable mix, move them around so that you get zones of flavours, put a tiny slice of salami on one area, make areas of ham and other meat or fish. Add some shrooms, some onion, garlic, poor some oil over it, add garlic, herbs and make zones of cheese. Have the zones overlap or stand alone. It takes a while to perfect the ratios. It should take 6 minutes to prepare the ingredients while the dough is under the grill. Keep the ingredients together in a bowl or box in the fridge to save time.

put the art work in a hot air oven but keep the grill on for speed. 6-8 min should be enough. Also enough time to clean everything up for the next pizza.

Do this ritual 2-4 times per day so that you have a structured routine that doesn't require thinking about it.

It will start out as a soggy mess because you keep putting to much of the ingredients on it. 1/2 cm of salami is enough for a zone. 1 slice of ham, 1 slice of bacon. More and the different combination of flavors each bite should have blends into one unidentifiable mess.

The spoon of vegitable mix will produce a bite with a slice of carrot on it. You are eating flour and carrots. But since it is just a single bit it adds to the adventure.

Most ingredients last a reasonable while and you use so little of them that the eventual cost is just the cheese.

I've done this for a good while on my own but you get to make 3-5 of them at a time.

Keep adjusting the ingredients and ratios for each mouth and do different versions for each.

For $150 per month you will eat like a king and get fat.

throwaway22032
Find someone who earns half of what you do (after tax), live like them, put half in the bank before you do anything else.
tartoran
I hear you, frugality is an important aspect. But putting money in the bank doesn’t really seem like the best idea, especially now that inflation is running wild. I don’t know what the answer to that really is though. Investing is an idea but also a risky business too if you don’t know what you’re doing.
throwaway22032
The topic is "how do I stop living paycheck to paycheck", not "how do I build an empire".

If you save 30K and lose 3K to inflation that's still 27K more than not bothering at all.

pacoWebConsult
Firstly, you're being underpaid and living in a high COL area. Find a new position either remote or with correct market valuation for your level in NY if you don't want to move.

Secondly, you can pretty much follow the typical line of advice when it comes to personal finance. Build an emergency fund, pay off highest rates of debt first, contribute the max to your 401k/roth ira/hsa, invest the rest.

mgerdts
This typical advice can be found at places like reddit.com/r/personalfinance and Suze Orman’s frequent PBS specials which you can probably find on YouTube or video.pbs.org.
sixhobbits
$110k per year for a tech director in NY sounds ... low from what I know of the market there.

Maybe interview, 2-3x your salary and keep the same the living standards?

tartoran
Yes, at the first bump up in salary most tend to bump up their spending as well and you end up where you started more or less. It’s very important to learn frugality in order to break that cycle. Yes, for OP $110k in NYC is not very much at all considering the hi COL and taxation in NYC.
thebean11
Either spend less or make more. Have you started interviewing yet? You can get a lot more than $110k in NYC.
Bostonian
I don't think this question can be answered without knowing how your money is being spent. Some people try to force savings by depositing say 10% of pay in a brokerage account (first a 401(k) or IRA should be maxed out) and the remainder in a checking account used to pay bills.
magicalhippo
I've set it up so there's an automatic transfer between my main account (where my pay arrives) and my savings account. This way that money is not immediately available.

What's preventing you from doing the same with say $100 a month, then gradually increasing that until some target level?

CobsterLock
there's a ton of information missing here, but my simple way is to not really stop living paycheck to paycheck, but instead hide the money from myself before i can spend it. To me this means high contributions to retirement accounts, auto transfers in to brokerage account, and auto transfers into a separate "large spending" account. That way I'm free to spend guilt free anything left in my checking account.

The automation is really the key for me, move the money before I can spend it. But NYC is also an expensive place to live, and I could easily see 110k not being enough to live there. but maybe someone else has more relevant experience

CobsterLock
and i also have the mental block that if i have less than 1k in my checking i should be wary. and also tons of credit card alerts for large transactions going in and out
bkanber
This is the exact technique I used to save up and pay for a wedding and a house. Consider your savings/investments as one of your monthly bills. Set a maximum balance for your checking account, everything in excess of that goes into investments or retirement fund.
CobsterLock
a max balance is a cool idea, i gotta try that out!
scarface74
No one is saying the obvious answer. By definition, you can only decrease your spending so much. There is no theoretical limit to how high you can increase your income.

$110K for any experienced developer anywhere in the US is extremely low - especially one with 12 years of experience.

gizmo
I don't think this is a situation where you can't figure out what you need to do. If you sit down and think for 5 minutes you'll know. Maybe you're asking because you want a quick fix, when the reality is that changing bad habits always requires a sustained effort over time.

There is no swamp. There are those decisions that bring you closer to your goals and the alternative is self-sabotage.

Millions of words have been written on how to loose weight, how to eat healthier, how to start a business, and how to live within your means. There is nothing any of us can say that hasn't already been been said a thousand times before. If you want to change you'll take appropriate action and if you don't you won't.

Otek
Try budgeting. I’m using and can recommend YNAB but really excel or sheet of paper will do just fine. Plan every dollar you spend upfront and then adjust, learn and repeat. After few months you will know much more about where your money goes and that should help you control it better. Good luck!
Finnucane
What are you spending money on, and how strictly do you budget your monthly spending?
nvilcins
Eat in. Drive an older car, or bike. Work remotely. Live where rent is not astronomical. Reduce alcohol consumption, especially at bars/clubs.
hnrodey
1. Need to identify the monthly cost of your lifestyle. Housing, bills, credit card interest payments, loans (auto/boat/RV/peloton/etc), insurance, kid activities, food, etc. In other words, how much money does it take each month to run my family (or if no family, just yourself).

2. Each month you must put some amount of your earnings in to an account for savings. While the savings account grows over time the balance will eventually become multiples of the value from #1.

For each multiple you have from #2, you are then resilient for a single month. And now breaking the paycheck-to-paycheck cycle.

I'm sure someone will disagree or offer different advice but this is how I see it. Another person might suggest to aggressively pay off your home or have zero debt. All are of which are noble goals.

dutchbrit
What do your monthly expenditures look like?
novateg
Net Monthly Salary - $7000 - Mortgage $2600 - Electricity, gas, water $400 - Other bills (internet, phone, credit) $600 - Food $1200 - Child-care $1200 - Car expenses $600 - Shopping ~ $400
thebigspacefuck
Increase your monthly income or lower your monthly spending. Easiest is to find a new job. If you have 14 YOE as developer you should be able to find a higher paying job as long as you've continually grown your skills. Put your résumé on Hired.com and put in a desired salary of $200K to gauge companies' interest then adjust up or down as needed. Do a few practice interviews on Pramp. Read up on System Design here https://github.com/donnemartin/system-design-primer. Watch YouTube videos on DS&A and practice coding on LeetCode.
kemiller2002
The fastest way is to make more money. You'll probably need to switch jobs. Barring that, you need to look at your expenses. Do you have credit card debt? Start paying that off as fast as you can. Then start paying off the lower interest rates.

The fastest way to start saving money is to learn how to cook and don't eat out or buy prepared food as much. You can make fresh food that is cheaper if you know how to buy raw ingredients and make your own. If you drink alcohol, cut down on how much, or find a cheaper (not necessarily worse) option to what you drink.

cableshaft
> The fastest way to start saving money is to learn how to cook and don't eat out or buy prepared food as much.

Sometimes easier said than done. I cooked a lot over the pandemic, but when I switched jobs six months ago, it started mentally draining me enough that cooking after work has become a real challenge. Still managing to cook 2-3 times a week, most weeks, but not more than that right now. Used to do it 5+ times a week.

Thristle
Cooking 2-3 times a week should be enough to make food for the whole week

you can still prepare the lighter meals (dinner/lunch depends on country) the same day since it has much shorter prep time

you should be cooking more than 1 meal per cooking "session". cooking every single day it not going to happen anyone who is employed in a "normal" job

cableshaft
If it were just up to me, I could survive on sandwiches or grilling some chicken and veggies on a grill 5x a week real quick, nbd. But I'm married, and my wife not only insists on hearty cooked meals (or takeout, which we already spend a ton of money on), but she's also not a big fan of leftovers.

Two meals for each of us per cooking "session" is our current norm (dinner, then lunch the next day), although I almost had to throw away leftovers last night because she wasn't in the mood to eat it for three days (I kind of forced it last night), but more than that and it's probably just going to be me eating it and still having to cook something else for dinner (or she spends money on takeout) anyway.

orev
Cook once in the weekend in a big batch, and eat the leftovers during the week. Most of the effort of cooking is prep, heating up the pan, etc., and that doesn’t change much if you double a recipe.
hnrodey
You are remarkably underpaid (as others have noted). You could easily add $30k yearly increase (on the low end) with a job change.
globular-toast
Spend less. Without seeing a breakdown of your expenditure it is impossible to give more specific advice. If you don't have a breakdown, make one.
garyfirestorm
I’m sure you might know python. If not it’s pretty easy to learn. I think python for finances is an excellent book and you could build your inflows and outflows very easily. You could also project the future savings/expenses and their effects on your bank balances.

Edit - it’s ‘Personal Finance with Python’ Max Humber

quaffapint
The hardest part I've found with budgeting if you have a significant other is getting both parties on board. Then even if you get them on board you need to be together on the amounts and the methods. The budgeting part is easy once you get passed that. I've tried things like YNAB in the past, but without the other person on board and/or using it, it just became useless.
mdavis6890
Only one way: You must save a substantial portion of your income (e.g. $2000/mo) FIRST. Then treat everything after that as optional, and work with your family to prioritize those things that are important (mortgage would be at the top of my list).

This will be hard, and it will force you to question assumptions about what you really "need." Also, try to keep in mind that there are other families with 3 children living near you that only have $90k in income, and they manage well enough.

Edit: And as others have mentioned, keep looking for a higher paying job. This will help tremendously, as long as you learn to save first, then spend, rather than the other way around.

iamwpj
A critique of the dieting advice, "just eat less" is that it doesn't apply to many people. On the surface a comment like that is presumptive. In 2016 when I realized I was more overweight than I ever thought I could be, I stopped eating out, stopped eating junk food, and stopped eating seconds. Eating less was the advice I needed.

Make sure that the advice you need isn't just: "buy less".

Aside from that, budgeting everything is a great place to start. There's apps that can help, but a spreadsheet could do it too. My advice is to not pay to start saving. The more granular you can be the better too. If you have some small debts then I recommend setting aside just enough for rent and food then working to pay those off immediately. There's no shortcut to building out a budget, so you'll have to itemize your spending and do the math to get your baselines -- then work from there.

ss108
$110k in NYC with kids? I think moving is the move, even if you end up making less. Obviously due dilligence is required to know for sure whether it'd make sense.

Also try to up skills to crack $150k