Today, I had the pleasure of reading No Debt Plan's article on living off of last month's income and I just had to share it with you. Every one needs to read this article. Then, once you finish reading that article, you need to read No Debt Plan's follow up article - Help Me Understand That Life Changing Concept.
In these articles, Kevin provides a great strategy for simplifying your life.
If there is nothing else I can share with you on this blog, let it be this: keep a one month income buffer....Here’s how it works: don’t spend the money you earn this month. You are going to spend it next month based on your monthly budget. That means you should be living this month on last month’s income. It sounds confusing, but it really isn’t. I think it is a simple system if you can get your head around it.
When I first read Kevin's articles, I got a little lost in Kevin's method for building up the buffer. After reading it twice, I saw what he was doing.
But, for me, the real importance of the articles was not the method of saving the buffer. Instead it was the buffer itself.
Stop Living Paycheck To Paycheck
I have written several times here about the need for an emergency fund. Kevin's method takes this one step further. Instead of just having an emergency fund, you also build a buffer in your checking account so that you are only spending last month's income.
I am not sure if I would build this buffer before the emergency fund or after. I will have to think about that a little more. My gut feeling is that you should build your emergency fund first. But, maybe not. You might get a bigger lifestyle impact from the buffer.
Either way, Kevin's articles are must reads. And, I am going to start implementing this buffer.
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