Why Don’t I Have Any Money Left at the End of the Month?


It’s not you, it’s me. Well, not really “me” – it’s the world. All the Frugal Freddy stuff aside, the reason you are out of money by the end of every month is not because you bought too many lattes. It’s because you – and the majority of us – aren’t paid enough. What's going on and what can you do to fix it?


Income

Let’s break it down (see tables at the end for details). For most of us, our incomes stay the same each month. The salary we earn, however, is not the salary that actually appears in our paychecks. After federal income taxes, state income taxes, Social Security taxes, and Medicare taxes (the last two are called FICA taxes) come out, your pay is much lower. To some degree, you can adjust the amount of income taxes that are taken out each month, giving yourself a lower refund at tax return time, but the FICA taxes are set by the government.


Expenses

So that’s what comes IN. Now for what goes out and out and out…. You have expenses that you know you’ll have to pay every month – rent, utilities, car payment, student loan, etc. Those are called fixed expenses and, unless you move, negotiate a better deal, or pay off a loan, they aren’t going to change. Then you have those pesky “variable” expenses – the ones that change all the time (usually upwards, rarely down) and that seem to be the culprits for monthly budget busting: tuxedo rental for friend’s wedding + all the travel costs; CV joints on truck; a Disney+ subscription; replacement of phone your 2-year-old nephew threw in the toilet; cases of Gatorade when you got the flu, etcetera, etcetera. Stuff never stops happening, and it all costs money. And it usually costs money you don’t have.


Example

This article is not about people in poverty who are barely managing; my heart goes out to those who are in this difficult situation. This article is about you – a college grad or highly tech-trained worker who followed the rules, did the right education courses, and nailed a supposed “good-paying job.” So why isn’t it working out?


Our Charlotte, NC- based example employee earns $57,500 a year – she just got a 3 percent raise from about $55,800, thus earning slightly higher than the average Charlotte salary. Her salary says $57,500 but after taxes and a 3 percent contribution to her company’s 401(k), her annual take home pay is actually $44,240, far short of that $57K. Ouch. Her paychecks come every two weeks, or 26 times a year, which means that in two months of the year, she’ll get three paychecks that month rather than the usual two. The biweekly amount she has to spend is $1,701.54 and the average monthly amount if you spread those 26 paychecks evenly over 12 months is $3,686.67.


When she adds up her fixed expenses there in Charlotte with $1,200 in rent, normal utility costs, and loans for car and school (fixed expenses of $2,130 or $25,560 per year), that leaves her $1,556 per month or $18,680 for year for EVERYTHING else including groceries, takeout, lunches personal items, hair, doctor and Rx bills, travel, gifts, weddings, bachelorette parties, Starbucks, vitamins, dog food, going out on the weekend, facials, nails, shoes, clothing, coats, bathing suits, office supplies, printer cartridges, life insurance, car repairs, gas, oil changes, movie rentals, and all the many, many other coststhat one incurs for normal, daily American life.


Let’s face it, $1,556 per month or $18,680 for year for EVERYTHING else is just not enough. The examples below show variable expenses for two average months in May – one with a friend’s wedding and one without. The month with the wedding ends up with a deficit of $649; the one without the wedding comes pretty close to break even, but there’s still nothing left over. If enough deficits occur, then you end up putting variable expenses on credit cards, resulting in high interest credit card debt that is hard to pay off.


Unlikely Solutions

There are no easy solutions to this one. The whole breezy “spend less than you make” doesn’t cut it when your third dear friend of the year wants you to be her bridesmaid or when your transmission goes out or when you break a bone that results in high medical bills. Cutting out lattes isn’t going to make up for $649 monthly deficits.


The ultimatenecessary answer is one that is massive and political, and certainly beyond the scope of this article. Wages have been stagnating for decades, and the average Joe and Jane have really been hit hard. (CEOs on the other hand are doing great, with CEO compensation having grown 940% since 1978; a dream is a wish your heart makes!). Typical worker compensation – your salary – has risen only 12% during that time.


So, you can’t change that inequality right now, but future policymakers and voters may eventually change it. What can you do in the meantime to help yourself?


Where can you cut, realistically? If you live in a city like Charlotte, NC (which isn’t even close to the cost of NYC or LA), it’s hard to find a safe, convenient apartment or home rental for less than about $1,300. Much of the other costs are non-negotiable too. You can try to “do better” but that’s going to mean a limited life with lots less fun and interaction with friends. And really, why should you have to live small when you, as we mentioned before, followed the rules, did the right education courses, and nailed a supposed “good-paying job.”


Better Solutions

The best solution is to bring more money into your household with a second job or freelance work. The more time you are working, the less you are spending. If you earn $200 working an event on Friday night instead of spend$200 going out, you’ll be $400 richer.


In our next post, we’ll talk about ways to increase your income. Thanks for joining me.








Kathryn Hauer, a Certified Financial Planner™, adjunct professor, and financial literacy educator has written numerous articles and several books including the “11-Step, DIY, Comprehensive Financial Plan Workbook” and “Financial Advice for Blue Collar America.” She works to help clients and readers understand and act on complex financial information to keep them and their money safe. She functions as a strong advocate and guiding light for her clients as they move through a murky and unfamiliar financial world. Learn more at her website.

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