January 21, 2020
Living paycheck-to-paycheck is stressful and frustrating. When the money hits your bank account on payday, it feels like Christmas morning. But as soon as all the bills are paid, you’re once again struggling to stretch those last few pounds for another two weeks. 
Always Strapped For Cash? The Paycheck Budget Could Be A Gamechanger
If you can relate, you’re not alone. But it doesn’t have to be that way forever. 
If budgeting has always been a struggle, you might need to ditch traditional monthly budgets and try budgeting by paycheck instead.  The Problem With Traditional Monthly BudgetsConventional budgets tend to follow a monthly format, where all your income and expenses are planned out for about 30 days at a time. There’s nothing inherently wrong with budgeting this way, but it’s important to recognise that it doesn’t work for everyone. If you live this way, you probably know what it’s like to run out of cash before the end of the month despite all your best intentions.
In other words, budgeting strictly by month might be the most common strategy, but it’s not necessarily the best one for you.
Kumiko Love (her pen name), an accredited finance counsellor, blogger and founder of The Budget Mom, wasn’t always a money maven. Her business was born out of years of struggling to pay off debt and make ends meet. And she realised that part of the problem was how she was budgeting her money.
“In the beginning, I couldn’t figure out why I was having such a hard time managing my income on a monthly schedule. I would pay my bills on time, but by the end of the month, I would always come up short,” Love said.
But one day, it clicked. “I was paying my bills every time I got paid, so why wasn’t I budgeting my income with every paycheck?”How The Budget-By-Paycheck Method WorksAs you might have guessed, following the paycheck budget means you create a budget that’s based on how often you get paid (for many workers, that’s every two weeks). “Instead of budgeting in larger time frames such as a month or year, this method breaks it down into smaller chunks,” explained Jovan Johnson, a certified financial planner and founder and CEO of Piece of Wealth Financial Planning in Atlanta. 
This allows you to manage and monitor your spending much better. “Every dollar has an assignment,” Johnson said, adding that he actually budgets his own finances this way. 
Love added that the paycheck budget allows you to check on your budget more frequently and have a plan in place before you receive any income.Budgeting strictly by month might be the most common strategy, but it’s not necessarily the best one for you.Another benefit of the budget-by-paycheck method is that it’s totally customisable to your lifestyle and preferences. For instance, Love is a visual learner, so she relies on calendars, workbooks and a highlighter system to manage her budget. She also incorporates the envelope method into her system.
Budgeting by paycheck can be as simple or elaborate as you want. The point is that it allows you to see exactly where your money is going and to be more hands-on with your finances.
Here’s the gist of how it works.
1. Determine how much money you take home every pay period. The first step is fairly simple ― take a look at your pay stubs and find out how much money you get paid every pay period once taxes, retirement contributions, etc. have been taken out.
2. Put your monthly bills on a calendar. Next, go through your bank and credit card statements to come up with a list of all your recurring bills, such as rent/mortgage, utilities, insurance, child care, subscription services, etc. Jot down the due date for each and organise chronologically. You might also prefer to write these down on an actual calendar, along with your other appointments and events, as Love does. View this post on InstagramA post shared by The Budget Mom by Kumiko Love (@thebudgetmom) on Nov 20, 2019 at 7:28am PST3. Split up variable expenses. Some of your expenses —such as groceries and gas for the car — won’t be the same amount each month and might not be due on a set day.
For these types of expenses, you’ll need to average how much you typically spend on them, and then split the total among your paycheck. For example, if you spend an average of £500 on groceries each month and get paid twice a month, you’ll need to allocate £250 from your first paycheck and £250 from the second paycheck to cover that expense.
4. Set aside extra cash for irregular expenses and savings. Also known as a sinking fund, you’ll need a cash reserve for expenses that don’t occur regularly. This is separate from your savings, which you don’t want to tap into for daily living costs. 
For instance, you might pay your car insurance premium every six months, or do your holiday shopping in the last couple of months of the year. Plus, there are birthdays, vacations, weddings, school trips and other random expenses that tend to pop up throughout the year.  View this post on InstagramA post shared by 𝕃𝕒𝕦𝕣𝕒 🤟🏼 (@laura_bruyn_) on Jan 12, 2020 at 9:38am PSTLook back at your spending from last year and estimate how much you spend in these categories on an annual basis, then divide that sum by the number of paycheck you’ll receive. For example, if your car insurance premiums total £1,200 for the year, divide that by 26 paycheck (assuming you’re paid every two weeks). You’ll need to set aside about £42 each payday for that expense. 
5. Assign expenses to each paycheck. Once you have all your expenses accounted for and calendared out, you’ll need to assign each one to a paycheck.
Bills that have strict due dates will need to be paid with the check you receive during that particular pay period. However, you can allocate funds for your variable expenses, sinking fund and savings between your checks however you see fit. Just be sure to strike a balance so that you never spend more than you get paid for that two weeks (or however long your pay periods are). View this post on InstagramA post shared by The Budget Mom by Kumiko Love (@thebudgetmom) on Dec 30, 2019 at 1:02pm PST6. Make a plan for the leftovers. Stick with the paycheck budget method for a few weeks so you can learn where you need to tweak the numbers and move dates around.
Are you consistently ending up in the red? You may need to cut back on your spending in certain categories or change the timing of payments. If you tend to end up with extra cash once all your obligations are paid (congratulations!), it’s important to put that money to work. This can be an opportunity to pay down your debt faster, build up an emergency fund or finally save for that family vacation.Could The Paycheck Budget Work For You?Johnson pointed out that some people might see the time required to follow this budget as a potential drawback. “This method will require more time upfront ... it may seem very restrictive to some,” he said.
However, the time spent working on your paycheck budget should be well worth it in the end. It’s a budget that works across all income levels, pay schedules and family sizes. “What I have learned on this journey is that without the work, without the effort and time, lasting change will never happen,” Love said. “You have to want this bad enough to do the heavy lifting.”Related... No, ‘Blue Monday’ Is Not The Most Depressing Day Of The Year 10 Things You Didn't Know You'd Need When You Became A Parent Coverless Duvets Promise Sweet Dreams. Do They Live Up To The Hype?
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