Budget By Paycheck: Everything You Need To Know To Get Started
Here’s a crazy stat:
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:
Without a budget, you are highly unlikely to be able to afford your lifestyle, pay down debt, or save money.
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
Learning how to budget is super crucial if you want to stop living paycheck to paycheck and reach your financial goals.
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.
Because, if there is one thing that you should keep organized in your life, it is your money.
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?
Wrong, wrong, wrong.
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?
Every single person, regardless of income, can use a budget by paycheck budgeting method.
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.
As I said, budgeting by paycheck is the easiet way to budget your money because you don’t need fancy tools or resources to do so.
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
We’ve already established this:
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?
You might want to start budgeting to stop living paycheck to paycheck, to pay off debt, or to save more money.
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:
You won’t be able to.
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).
Need a spot to write down your motivation for budgeting? Then, I highly recommend investing in a budgeting planner, like the Budget Boss Binder. You see, keeping all your financial information in one tidy spot makes budgeting a whooole lot easier!
2. collect your financial information
Want to know the best part about this step:
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:
Most people don’t actually know how much money they make or how much money they spend.
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
Even though you will be budgeting your income as you get paid, it is important to calculate your total monthly income and total monthly expenses before you start budgeting.
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.
Using the information you gathered during step two, calculate your total monthly income (after taxes) from all sources.
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.
Next, you’ll want to calculate your total monthly expenses.
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.
Variable expenses are those that vary in cost each month and could be decreased or eliminated if needed. These expenses include things like groceries, transportation, entertainment, and more.
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:
1. Use BillBargain
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!)
3. Sign Up For Trim
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!!
Who knew saving tons of money could be so simple?
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
To get started:
- Grab a blank calendar (or download a budget by paycheck calendar, here.)
- Have handy your payday dates for the next month (and 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:
Let’s break it down:
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
Now, looking ahead to the next week, you can clearly see that you will need some money from the previous week to afford the bills due in week two (purple).
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.
As you can see, outlining your income and expenses on a budget by paycheck calendar is good for many things:
- 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
Most people forget this crucial part of budgeting and end up wondering why their budget failed a month after implementing it.
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?
These are the best budget tracking resources:
1. The Budget Boss Binder – $9 ($27 value)
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!
2. Honey Money ($50 value)
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.
Again, when you track your budget, you ensure that the system you put into place is working correctly.
Don’t let the time you spent creating a budget go to waste by avoiding this simple step!
>> Wrapping Up
Budgeting by paycheck is a super simple and straightforward way to budget your money.
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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Budget Boss Binder (40+ Pages)
Budget By Paycheck Calendar Template
Popular Budgeting Methods + Templates Bundle
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