by Hank Coleman on September 1, 2010
While most people are familiar with the traditional approach to budgeting their money every month, you might want to break down your budget into smaller chunks if you are still have trouble. Planning your budget around your pay periods may help you get a better understanding of your expenses and the timing of their payments. Budgeting is all about cash flow, knowing where it goes, and monitoring changes. Budgeting each time you earn a paycheck can keep you out of hot water should you run into an unexpected expense.
Break Down Your Expenses By Paycheck
Like most people, I get paid twice a month on the 1st and the 15th of each month. We all have several major reoccurring expenses that must be accounted for in each pay period. For example, my mortgage and insurance payments are debited from my checking account on the first of each month. My wife’s car payment and the investment for my Roth IRA and sons’ 529 College Savings Plans are paid on the 15th. When my wife bought a new car, we asked the bank to make the payment due date the exact same date as her previous car loan payment date. That way we kept our two week budget intact.
What About Ongoing Expenses?
What about the things that you do every week? What about groceries? What about eating out at restaurants? When constructing a budget based on two pay periods, you should divide these expenses in half. If you use the envelope system to buy your groceries, you should divide the money equally. For example, my wife and I spend $400 per month every month on groceries for our family. We allocate $200 out of every paycheck for groceries and only go shopping for them every other week. This keeps our spending in check.
Use the Envelope Method to Categorize Expenses
Part of this process can be made simpler by using the envelope method to categorize your expenses. For example, after you’ve devised a budget, set aside an envelope for each expense. Label the envelopes. When you are paid, put money in the envelopes and then dispense the money accordingly. You can take any excess out to go towards savings or to an envelope for the next pay period. The envelope method is an excellent method to use if you want to keep close track of what you spend.
Shift Extra Income From One Pay Period To The Other
Establishing a budget for your money each time you are paid strengthens your cash flow. If you find that you have money left over after you are done budgeting, you’ll need to see where you can apply the excess. For instance, you may find that you can add to your investment accounts with extra money you did not spend. Or, perhaps you will find out that you need to shift money from one budget category to another. These changes can be made easily when you are budgeting two weeks at a time.
When you plan your budget by paycheck, you uncomplicate the process of spending and saving. Budgeting your money whenever you get paid allows you to make needed adjustments without feeling undue stress or strain.
by Hank Coleman on August 31, 2010
Everyone has financial goals that they are saving for. Some people want to retire early. Others want to send their children to private school or save for college tuition. No matter what you are saving for, there will inevitably be challenges that you face. Every time I walk into Wal-Mart, I have to look the other way and walk faster when I’m in the electronic section. DVDs are my downfall. I am always looking for a new movie to watch. I have to constantly remind myself that I am saving for my retirement goals.
Here are a five simple tricks that I use to remind myself not to spend money…
Silly Band Dollar Sign
Have you seen these silly bands? Everyone has them. You can get them in all kind of crazy sizes and shapes. My kids are crazy over them and wear them everywhere. Because they only wear a minimum of twenty at a time, people always comment about them. And, I see more and more adults wearing them. I even have a green dollar sign one that I wear or leave banded around cell phone as a way to remind myself not to spend money on frivolous things. It works too. I constantly see it.
Write Your Goal On Your Credit Card
I have been a big fan of writing your savings goal directly on the sleeve that comes with most debit cards. You can even buy clear sleeves for your credit cards before. I wanted to save $10,000 for an emergency fund, and I wrote “$10k” directly on the sleeve as a reminder. You can also take a permanent marker and just write the goal or reason not to use the card directly on the face of credit card.
Wrap A Picture Around Your Credit Card
This idea came from the Simple Dollar. Take a picture of your family or a picture of an item you are saving for, such as a vacation to Paris, and tape it around your credit card. The best thing to do, of course, is just to cut up your credit cards and get rid of them. But, if you cannot do that, then just make yourself as guilty as possible for using them, and a picture of your goal will work nicely.
Pictures Or Writing On Your Bathroom Mirror
Every morning I wake up and do the same routine. I brush my teeth, wash my face, and shave before I got to work. I probably spend a good fifteen minutes in front of my bathroom mirror. I also spend fifteen minutes looking at two goals that I have written in the lower right hand corner of my mirror as well. The bathroom mirror is a great place to remind yourself to reinforce good habits or to watch your propensity for bad ones. I look at the mirror every day, and I’m reminded not to hit up McDonald’s for breakfast despite how good their bacon, egg, and cheese bagel is. The bathroom mirror is a great place where you are held captive. Reinforce yourself with good messages to yourself there.
Rubber Band Around Your Wrist
Wearing a regular rubber band is kind of like tying a string around your finger. Every time you think about buying something that you know you shouldn’t, snap that rubber band around your wrist. Make it hurt. The negative connotation will help reinforce that you should not be doing that action, and believe it or not, it will help you curb your spending.
Not spending money is a hard thing to do. Reminding yourself that you are saving for a goal or a retirement dream that may be decades away is hard. Everyone wants that instant gratification. There are a few tricks that we can do to help ourselves, but you have to be open to new ideas.
Is there a way that you help remind yourself not to spend? Leave a comment and let us know…
