Budget By Paycheck: Everything You Need To Know To Get Started
Two-thirds of Americans don’t have a budget.
That means that 218 million people are spending their money will-nilly with no game plan.
Two hundred and eighteen million people who are not financially successful.
Because, let’s face it:
Are you one of these people?
It’s ok if you are. I was too.
And it gets better:
Creating a budget (or a plan) for your money is hella easy.
What isn’t always easy is sticking to your budget.
However, when you use a budgeting method, such as the budget by paycheck method, you can significantly increase your chances of sticking to a budget.
And, when you stick to a budget, you’ll be able to:
- afford your lifestyle
- pay down debt (and stay out of debt)
- save more money
- free up money for personal use
That sounds pretty sweet, right?
I know. It totally does.
So, let’s get started.
- How To Start Budgeting (When You Don’t Know Where To Start)
- The 5 Best Budgeting Methods To Get Your Financial Sh!t Together
- How To Automate Your Budget So You Never Have To Budget Again
- The Zero-Based Budget: Take Control Of Your Finances Today
- 50/30/20 Budget: Everything You Need To Get Started
- The Cash Envelope System: How To Stop Poor Spending Habits
- The Ultimate Guide To Frugal Living: 101 Ways To Save Money
- How To Cut Expenses When You’re Broke AF
>> WHY YOU DEFINITELY NEED A BUDGET
But, budgeting can be the worst, so people tend to avoid it. (Two-thirds of Americans to be exact!)
Here’s the deal, though:
Not budgeting is a huge, huge mistake.
So, why do so many people avoid budgeting their hard-earned cash?
- budgeting is can be time-consuming
- budgeting is can be stressful
See, money is often the cause of stress, tension, and arguments between partners. And, money controls most aspects of our lives, leaving us feeling like we often do not have enough.
So, why even bother with it all, right?
You 100% need a budget, regardless of how ‘little’ or ‘big’ your income is.
Because, here’s the deal:
Without a proper budget (and understanding of your finances), you will never, and I mean never, feel satisfied with your income and standard of living.
A budget is necessary if you want to:
- afford your lifestyle
- stop fighting about money
- pay off debt (and stay out of debt)
- save money
So, let’s dive into the easiest budgeting method around: the Budget By Paycheck budgeting method.
>> HOW TO BUDGET-BY-PAYCHECK (step by step)
>> Who is a budget-by-paycheck method good for?
In my opinion, this is the easiest and most straightforward way to budget.
Budgeting by paycheck will:
- show you how much money you have to spend
- if you can afford your bills
- how much money you have left over
Therefore, by using this budgeting method, you can stop living paycheck to paycheck (or do so efficiently), pay down debt, and save more money.
It really is as simple as it sounds:
Create a plan for your money every time you get paid.
This works because:
- you are forced to evaluate your money frequently
- you rarely will run out of money at the end of the month (because you’ve created a plan for your money)
- making changes to your budget when unexpected costs come up is easy when you’re frequently evaluating your income and expenses
- you can see exactly where your money is going and if you need to stop bad spending habits
Ok, so, let’s jump in!
1. determine your why factor
Every single person needs a budget if they want to be financially successful.
This will be different for everybody, and you can determine your why factor by asking yourself these questions:
- What will budgeting help me do?
- How will budgeting make my life simpler?
Because let’s be honest:
If you do not have a plan for your money, how are you going to afford your dream life?
Here’s a hint:
So, once you establish the reason you want to start budgeting, I urge you to write it down!
Because writing it down makes it real and it reminds you of why you started in the first place (if/when budgeting gets tough).
2. collect your financial information
It’s hella simple and shouldn’t take you much time at all.
You’re simply going to gather up your financial information. (i.e., pay stubs and bills)
- a months worth of pay stubs (and your partners, if applicable)
- all of the bills that you currently pay & when they’re due
- an average of your monthly variable spending
This is crazy but:
And, when you don’t know this information, it is impossible to budget.
So, to avoid playing guessing games, take the time to gather your financial information before you try to create a budget.
3. Calculate your income & expenses
If you’re never budgeted before, you probably don’t have a firm understanding of your finances.
Therefore, you might be spending more than you can afford.
To determine if you need to cut back on expenses before you start budgeting (for better budgeting success) calculate your income and expenses now.
Once you know exactly how much money you earn each month, you can determine if you are living within or beyond your means.
For the purposes of this post, let’s pretend your total monthly income is $4,500.
For the purposes of most budgets, break your expenses down into two categories:
1. Fixed Expenses
2. Variable Expenses
Fixed expenses are bills that you are required to pay monthly, such as rent/mortgage, utilities, cell phone, credit cards, insurance, etc.
If you aren’t sure what your monthly variable expenses are, begin tracking your spending in a financial planner to calculate an average at the end of the month.
For the purposes of this post, let’s pretend your total monthly expenses are $3,700.
4. Cut costs
Once you’ve calculated your monthly income and expenses, you can quickly decipher if you’re living within or above your means.
To do this, simply subtract your total expenses from your total income.
If the number is a positive number:
You’re in the green and should be able to afford your lifestyle with ease each month and can easily move onto setting up your budget by paycheck system.
If the number you calculated is a negative number:
You’re in the red and cannot afford your current lifestyle, meaning you will have to decrease your expenses if you want to stop living paycheck to paycheck.
If you are in the red and need to cut costs, these are the best resources:
This is a fantastic resource that will help you lower your monthly expenses. BillBargain has successfully negotiated over 85% of the bills they receive for cell phone bills, Wi-Fi, cable, and more. The best part? BillBargain is 100% risk-free. If they don’t successfully negotiate a lower price for your bills, you don’t owe them a dime.
2. Pay Off Your Debt
Credit card debt will suck you dry every month if you don’t work hard now to pay off what you owe. I highly recommend consolidating your credit card debt into a low-interest personal loan to save tons of money and pay off your debt in half the time. (Doing this helped me pay off $15,000 in debt in only 12 months!)
Referred to as a financial health service, Trim securely connects to your bank account(s) to analyze spending, subscriptions, and recurring bill pay. Then, Trim will help you cancel unused subscriptions, negotiate lower bill prices, and more. In the last month alone, they’ve helped their users save over $1,000,000!!
Furthermore, who knew you were missing tons of opportunities to save money while buying the things you already do?
5. Set Up Your Budget-By-Paycheck
- Grab a blank calendar (or download a budget by paycheck calendar, here.)
- Have handy your payday dates for the next month (and the average amount of each paycheck)
- Grab your list of bills with totals due and due dates
Next, here is an example of a budget by paycheck calendar:
For a family with two incomes, you can see that paychecks come in on the 3rd and the 4th (in blue) totalling $1,600.
First, we’ll subtract our fixed expenses for the upcoming week:
- SF Credit Card: $25
- Daycare: $140
- Credit One Credit Card: $25
- Tmobile: $110
- Citi Credit Card: $75
Remaining money = $1225
Next, we can subtract variable expenses:
- Food: $125
- Transportation (gas): $20
- Misc.: $35
Remaining money = $1,045
Needed from previous week = $385
When you’ve completed your budget by paycheck for the month, you can now place reamining money into savings or use it for debt repayment.
- You can clearly see what bills need to be paid and for how much
- You can easily determine how much money you’ll need from a previous week to afford your bills for the upcoming weeks (if any)
- Finding extra money for savings and debt repayment is clear and simple
- Surprise expenses can easily be worked into your budget by paycheck
6. Track Your Budget
If you have a budget, then you need to track it.
Because, here’s the deal:
If you do not track your budget, you cannot make sure that you are sticking to your budget. And, if you aren’t making sure that you’re sticking to your budget, your budget will fail.
You might be wondering:
How do you track your budget?
Ah! I’m glad you asked! These are the best budget tracking resources:
A printable and digital budgeting planner designed to help you create & stick to a budget, pay off debt, save money, and more. The Budget Boss Binder is un-dated so you only have to purchase once to use this planner forever.
SAVE $18 RIGHT NOW
When you act fast, you can download our best-selling Budget Boss Binder for only $9! But, quick! This deal ends tonight at midnight!
An online resource to track your budget. Honey Money is the internet’s version of a printable financial planner. Within your dashboard, you can create your budget, track your budget, create debt repayment and savings goals, and more. If you aren’t a pen and paper kinda person, I highly recommend this budget tracking resource.
Don’t let the time you spent creating a budget go to waste by avoiding this simple step!
>> Wrapping Up
It was the first way I budgeted my money and therefore was no longer living paycheck to paycheck, able to pay off thousands of dollars in debt and save more money than ever before.
I know. These are high claims for a simple budgeting method.
But, it’s true.
And, I want the same things for you.
>> Take Action!
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