Budgeting each paycheck...

**cschin4** · 12-14-2009, 03:43 AM

Um... sort of!

I really never budgeted to that extent though I am sure it is a good plan. I just really look more at the monthly costs and make sure I am covered. As for savings, some months were better than others and sometimes i save more or less depending on what my expenses are.

**minnie1928** · 12-14-2009, 03:57 AM

I don't think it really matters when you put the money back (1/2 per pay vs. all at the 1st of the month). I think the issue that you need to look into is why you are only putting $100-200 per pay instead of the $250 you intended. To me, it sounds more like you have missed something in your regular budget that causes you to, in effect, take it out of your savings. Perhaps the $500 goal is too high and you are setting yourself up to "fail" each month. Why not lower it to $400 and surprise yourself by hitting $500 on occasion.

**ScrimpAndSave** · 12-14-2009, 04:13 AM

Well it is because I am overspending while furnishing my house. I know I CAN meet my $500 a goal...it's just that by the end of the month, when the money is still in my checking account, I sometimes end up spending it on a piece of furniture rather than sending it to my emergency fund.

If I put the $500 in the emergency fund with my first paycheck, then there are no excuses and I am already fully funded for that month rather than breaking it up between two pays. I think I am going to try it and see how it goes.

Thanks!

**cschin4** · 12-14-2009, 04:29 AM

Well it is because I am overspending while furnishing my house.

Ha! I have been there! A word of caution, don't go overboard or break the bank to furnish your home. However, you should buy nice pieces you enjoy and can afford, nothing wrong with that. But, I was recently looking at furniture and one of the furniture salespeople came over talking about their great financing. Sorry, if you have to finance furniture, you can't afford it. Go to a yard sale. I have never and will never finance a piece of furniture. I have financed my car and my home and that's it. And, now my home is paid off.

**ScrimpAndSave** · 12-14-2009, 05:00 AM

Well, I am pretty much all set with my house and I am happy to say that I have only been over budget by a few hundred dollars. I just want to make sure that it doesn't happen again. I've always budgeted things per paycheck (as per Dave Ramsey)...but I am beginning to think that a monthly budget may be better.

**Ima saver** · 12-14-2009, 05:51 AM

Well, I have always budgeted per pay check and it has worked for me for 44 years. I just put away 1/4 (paid weekly) of each bill in an envelope each week.

**MonkeyMama** · 12-14-2009, 05:57 AM

I don't think it really matters - what you really need to do is "pay yourself first." You can do this by putting away $500 with your first paycheck, or $250 with each paycheck, or however you decide. If you always transfer that to savings, first thing, it shouldn't be an issue. Though I see why it's may be easier just to do it with your first check.

I personally budget by month, not paycheck, simply because I find it easier. I don't have to divide everything, I just pay everything when it is due. Though I tend to send equal amounts to savings, twice a month. I kind of just pretend that money is not even there - pay myself first.

**LivingAlmostLarge** · 12-14-2009, 06:05 AM

I do annual budgets and let it work out monthly. Example car repairs, I budget 200/month. Well I spent $900 last month. Unexpected but not unpredicted. I wasn't going to wait and put aside money for a need.

Depends on what works best for you.

**jIM_Ohio** · 12-14-2009, 08:53 AM

Budgets are best done monthly and annually.

Meaning if you get paid 26X per year, 2 of checks will not even be factored into budget. Meaning you have to build a budget based on annual costs and monthly costs, and budget check to check based on monthly projections.

First, track income separate from expenses and savings separate from other 2.

For all expenses, list the amount and the annual frequency
mortgage is paid 12X and is a recurring expense every month, so budget each month based on actual cost
utilities are paid 12X per year, vary in cost within a range, budget high and project annual expense.
the tricky part is groceries and gasoline. For example I fill up my tank about every 10-18 days. In the budget I fill up 26X per yer, cost of $60 per up. I multiply 26*60 then divide by 12 for a monthly projection- this is my gas budget.
groceries might be every third week spending $200 or something like that. So that would be 17*$200/12 as the monthly budget for groceries.

I would then do the following for savings. PAY YOURSELF FIRST.
Meaning take the $250 out of every check, and pretend that money does not exist. If you deal with any other bill before moving $250 to savings, you are paying yourself second.

Then make the rest of the math work on the budget. For example if you bump groceries up to $250 per shopping excursion, and only do it 12 times (once per month) or spend only $100 and do it twice per month, is there a savings?

When I was single, I got by on grocery shopping once per month except for milk and bread because I traveled and ate lots of spaghetti. I know little of your day to day habits, so could not guess as to what works.

My best guess is your 2 extra paychecks per year make up for the savings shortfall. This usually comes down to knowing annual expenses, but not knowing monthly expenses as well.

**ScrimpAndSave** · 12-14-2009, 09:16 AM

You know, I never looked at things annually...this is a really good idea!

Thank you

**minnie1928** · 12-14-2009, 09:21 AM

Originally posted by LivingAlmostLarge View Post

I do annual budgets and let it work out monthly. Example car repairs, I budget 200/month. Well I spent $900 last month. Unexpected but not unpredicted. I wasn't going to wait and put aside money for a need.

Depends on what works best for you.

I do the same thing...in fact, I think mine is $200/month too!!

**MonkeyMama** · 12-14-2009, 09:29 AM

Agreed with the last few posts. Some of my "pay myself savings" is for annual items (property taxes, insurance, car repairs, vacation, etc.). IT just makes it all very simple. A lump sum is set aside every month for everything that is not a regular monthly bill. There is never any scrambling to pay one-time bills. IT's all well planned for.

**ScrimpAndSave** · 12-14-2009, 09:34 AM

MonkeyMama,

I like this idea. I was splitting up every single thing that I save for and making all of these sub accounts...even though I am never struggling to pay bills - I think I was making it a bit over complicated. I just want to be saving as much as possible.

Thanks for all your help!

**jIM_Ohio** · 12-14-2009, 10:07 AM

Originally posted by ScrimpAndSave View Post

MonkeyMama,

I like this idea. I was splitting up every single thing that I save for and making all of these sub accounts...even though I am never struggling to pay bills - I think I was making it a bit over complicated. I just want to be saving as much as possible.

Thanks for all your help!

SnS-

its a good idea to set the money aside for car and house repairs, and have this money saved in addition to 6 months emergency expenses. It is also important to know about asset allocation and risk.

You have heard me mention seeing a forest and seeing trees before. Think of each expense, budget item or sub account as a single tree in a forest. No one tree is more important than the forest. Your goal is to make sure even if one tree in forest falls, the other trees are 100% intact.

There is more than one way to solve the problem, here is an alternative opinion.

The most important thing is to know your budget. Know what you make (before and after taxes) and know how much you spend each year on most typical items. Mortgage, car payments, groceries, gasoline and similar. Also know annual expenses for car repairs, house repairs and most other rare and less frequent expenses. Thinks like heater repairs, new HVAC, garage door repairs and a new roof.

If you know your budget, then the rest of this will be easy...

Sum up all your less frequent expenses. For example add car maintenance into same budget with house repairs and house improvements. Note that house repairs (something less predictable) is different than house improvements (like room decorations).

I say this because in my less frequent expenses, I include 2-3 things you might not think. Car payments. Second mortgage payments. College savings for kids.

If you add all those up, you might see a good chunk of money. In my case its close to $2000 per month. What I do is shift money from one item to other, knowing that if a house repair (new roof, new garage door) is needed I can either
a) take the entire $2000 monthly expense and pay for the bill with cash
b) tap into emergency fund to pay the bill
c) finance the expense, knowing that in X months, the money to pay it will be freed up.

So in a perfect month
my 2nd mortgage is paid off
no car payments exist
I can set aside $2000/month into an account for house repairs, car repairs and kids college.

If emergency fund has 6 months expenses in it, more than likely that $2000/month is being invested some way, some how. Might be a 529 for college, might be moderate mutual fund (like RPSIX or PRPFX).

The mutual fund investments are in addition to retirement accounts and are designed to give a decent return, but still preserve the value of the money I invested with some incremental risk.

Budgeting each paycheck...