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Is your budget failing?
Are you tired of trying every single budget under the sun but nothing is working?
Do you still find yourself living paycheck to paycheck and struggling to make ends meet?
This article will discuss the budget by paycheck method that I have used for several years in my financial journey. Managing your money has never been so simple when it finally “clicks”.
Budgeting is really simple. But what no one will tell you is that sticking to your budget is very very hard.
Anyone can crunch numbers but not everyone has the discipline or the tools needed to succeed.
What I am going to provide you with today is a tool. A tool, a method, a system that I have used to budget my paycheck year after year.
With this way of budgeting, I have been able to successfully manage my money and pay off $26K worth of debt in just under 2 years on my income alone.
I didn’t sell my car or my house or refinance my home to pay off debt. I didn’t make any drastic decisions to make this happen.
I simply made a plan for my money, saved where I could and reminded myself of WHY I wanted to become debt free.
It’s a wonderful feeling to be debt free. To clarify, I am debt free besides my mortgage. Mortgage aside, the feeling of not having to owe anyone else is priceless.
So before you start your financial journey, I want you to find your WHY.
It is so important to keep yourself motivated during this process because there will be times where you will fail, especially in the beginning. There will be times when you will slip. It happens even to the best of budgeters.
Keep going back to your WHY and you will find yourself making progress little by little.
Before we get into the
Ready to get started?
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Why Everyone Needs a Budget
Here’s why you need a budget. It’s your plan, your blueprint, your strategy, a manual laid out in front of you. It’s yours to follow and if you plan it right and stick to it, you will succeed. `
Here’s a little back story.
I was really good at budgeting all through high school and college. Then, I had kids. My lack of discipline and disregard for financial order overcame me as I struggled to find myself in my role as a new mom.
Suddenly, the new best rocker was more important and used furniture just wouldn’t do for my new baby. I opened credit cards and charged what I couldn’t afford.
Eventually, it caught up with me. Two kids later, I found myself in $26,000 of debt from student loans, a car loan, and credit cards.
And while I had this debt to carry on my shoulders, it still didn’t hit me. I was still living my life, spending where I wanted, charging where I needed it.
Until one week, I found myself 4 days left until payday with no groceries, an empty tank of gas, and no money in the bank. I was officially living paycheck to paycheck.
The point is, you need a budget no matter what.
It doesn’t matter if you are rich, it doesn’t matter if you are poor. It doesn’t matter if you are living paycheck to paycheck or not. It doesn’t even matter if you are debt-free, you still need a budget.
Eventually, bad habits will catch up with you and you will be kicking yourself wondering why you didn’t budget your paycheck this whole time.
So now that you know why you need to create a budget, I’m going to tell you what kind of budget to create that makes sense.
Let me preface to say that my way is not the only way, but, it works for me and I’m sharing it with the world in hopes that it will help someone else.
The Reasons I Budget Paycheck to Paycheck
I am a paycheck budgeter. Paycheck to paycheck budgeting is pretty much what it sounds like. Every time you are paid, you sit down and create a budget or plan for your money.
For me, I get paid bi-weekly. This means that I get paid every other week, 26 paychecks per year.
I sit down with my planner and my budgeting printables and make a plan for my money every time I get paid.
Budgeting paycheck to paycheck works because:
- It forces you to sit down and evaluate your finances more frequently
- Paycheck budgeting allows you to manage your money little bits at a time
- You avoid running out of money at the end of the month
- Budgeting paycheck to paycheck allows you to quickly make changes to your budget if the need arises
- You get to really manage your cash flow
- Finally… you will gain a better understanding of where your money is going
How Paycheck Budgeting Works
I like to combine the calendar method and the budget by paycheck method to visualize my plan.
The reason why I still use a monthly calendar is
It’s super helpful for me to see a month at a glace for these reasons.
I’ll show you how it works.
Here, you can see that paycheck #1 is on the 4th. For that paycheck, you will pay the cell phone, car insurance, water, life insurance, and internet.
This paycheck is a net paycheck where medical/dental/vision insurance and retirement funds are already taken out.
First, subtract your fixed expenses.
Only subtract the expenses that occur from the time you get paid until the next time you get paid. (Blue)
- Cell phone= $140
- Car insurance= $110
- Water bill= $50
- Life insurance= $25Internet= $90
= $885 left after all fixed bills are paid
Next, subtract your discretionary spending.
Again, only subtract your spending that you plan on doing from the day you get paid until the next payday. In this example, this is what will be charged in a 2 week period.
- Groceries = $200
- Fuel (gas for car) = $40
- Clothing = $20
= $625 is left after the fixed and variable expenses are accounted for.
Next, fund your savings/cash envelopes/sinking funds
- Christmas fund = $30
- Travel = $50
- Fun = $30
Even if it’s just $25 for the yearly Christmas savings account, it helps when you break up big payments into smaller ones.
I created a super-realistic money savings challenge designed for moms with small or tight budgets. You’ll end up with $1,000 after 1 year. Plus, it’s based off each paycheck. It perfectly complements the budget by paycheck method.
= $515 is left after bills, necessities, savings, and fun
Don’t forget about your budget buffer!
Budget buffer= $100
This will be the money that you will leave in your checking account at the end of each paycheck. It’s what I like to call the “oopsie” fund”.
When you use the zero-based budget, this makes sure your bank account will actually never get to zero.
= $415 left over
Now before you throw all of your extra money into savings or debt, make sure that the next paycheck will cover the expenses until the next time you get paid.
For paycheck #2 (orange), there is $202 left after fixed bills, variable expenses, sinking funds/savings, and a buffer is accounted for.
Since the next paycheck covers all of the expenses and you still have leftover money, we can safely use the leftover money from paycheck #1 toward our debt or extra savings.
Use the extra money towards debt repayment, extra savings, or investments
I used the debt snowball method to pay off my debt. The debt snowball allowed me to see progress much faster which helped keep me going.
- Cell phone (extra payment to pay off the phone) = $190
- Extra payment towards the car = $225
= $0 (you have now budgeted to zero using the budget by paycheck method)
You see, it’s pretty simple. As a budget by paycheck budgeter, I can easily make adjustments as life throws me curveballs. Because life does throw curveballs.
Give this method a try and see if you have more success this month. Don’t give up after one month though.
I’ll say it time and again, it can take up to three months to get your budget right. So give yourself grace and let the process work.