Paycheck Workflow

[dsstao]

Hi all,

I want to find out what systems (if any) you use to manage your personal finances when payday comes. Do you:

1. Deposit the entire check and then spend according to a budget?

2. Allocate certain amounts of the check to various destinations and deposit/keep the rest?

3. Cash/deposit the check and just pay bills/expenses as they arrive with no budget.

Please be Honest.

I get "paid" monthly and divy out the proceeds according to the following scenario. (I am also self-employed which is why #1 is here):

1. Calculate YTD tax liability and deposit enough into a tax savings account to match my liability.

2. Send a deposit of $400+ to my Roth IRA (to max it out)

3. Pay everything in A/P (accounts payable)

4. Deposit 10% of the post-tax, IRA and A/P into my savings account.

5. Deposit 10% of the post-tax, IRA and A/P into my investment account.

6. Add my credit card debits, interest (if any) and debt reduction amount(s) (if any) and send payment to my credit card (this assures that I'm paying for what I spent during the billing period plus contribute towards paying down the balance at the same time).

7. The balance is mine to spend on everything from groceries to entertainment to fuel to whatever (I don't have a car payment).

What do you guys think? Do you have a structure like this in place? How successful have you been?

The reason I have this structure is to ensure I pay taxes, IRA, Savings and Investments first... A/P is next, current purchases and debt reduction is last. Then, whatever is left is what I can spend. Note that the Credit Card would only be used for monthly automatic expenses like cell phone, health insurance, subscriptions, etc. This is my way of not buying things on credit cards that I can't afford as well.

What do you think?

DS

[readytorock]

Last month was my first being self-employed. I have two steady gigs and various other one-off jobs. So, money is coming in and out all the time. I made sure I built up two months worth of expenses in my checking account before dropping down from full-time to part-time at my "day job".

Then I just pay things as they're due (I've set up almost everything to be due on the 15th of the month, including all automatic recurring bills), then, at the end of the month, I move any "extra" money from the month over to my savings and extra debt payments, while maintaining the two months of expenses minimum in the checking account.

This works for me, though might be confusing to others. But in the first two months I've worked for myself I've tripled what I was bringing home from my day job. The trick now is just sustaining it. =)

If your system works for you, that's the most important thing.

[JimInOK]

I deposit the whole thing and live on a budget. I use Quicken as a history-builder (so I can look back and run reports on how much I spent during whatever past time period). I keep my actual budget on an excel spreadsheet. Basically, I start with my bank account total, add to that paychecks still coming for this month, deduct bills and known expenses (including the amount of current month's salary to go into savings), deduct the total in my bank account that represents savings (I have these savings dollars detailed on a separate tab), the rest is my available cash for the month. I put whatever expenses I can on a rewards cc and deduct those charges from my available cash as they are made.

My spreadsheet has grown as time goes by. My first sheet is as described above, the second sheet details my savings (where incoming cash came from, what I've used savings to pay, how much savings is allocated to different goals), the third sheet shows the things I've put on the cc card and will be paying off on the last day of the month. There's also a sheet that I use during the Christmas season to make sure we stay within budget.

Has it become obvious that I'm an accountant yet?

[Diolla]

My paycheck is direct deposited in 3 accounts,
1-ST Savings account attached to checking for periodic bills
2-Tithe Account- for giving and charity
3- Checking Acct- for bill paying/expenses

I withdraw cash for day to day expenses like groceries & spending money
I make sure the bills due this period are scheduled (I use online billpay)
I transfer the rest to LT savings

Retirement & Health Insurance comes out of my check before it is deposited.

Repeat every 2 weeks

BTW- If you are carrying a balance you may want to consider not using the CC for monthly bills. Most CC's charge interest on new charges immediately if there is a balance which means you are paying interest on the bills you charge. Perhaps you could use a different card for those that gets paid off every month?

[disneysteve]

I get paid every 2 weeks. I deposit the check in my checking account. Pretty much everything is on auto-pay from there. All household bills except the mortgage and credit card get paid automatically. DD's 529 deposit is auto. A taxable mutual fund deposit is auto. I manually make our Roth contributions online. I also manually transfer funds to prepay our home equity loan online (the regular monthly payment is auto).

My wife gets paid every 2 weeks. Her check is direct-deposited into the same account but is for a minimal amount since 50% goes into her 401k. There is nothing particular budgeted for her income beyond the 401k money.

[MonkeyMama]

I guess we go with #1.

I actually use Quicken and sit down on the first of the month to pay all the bills for that month. I also set up all the transfers for our savings (retirement, and other savings categories).

If there are bills that are paid from savings I transfer that money in to cover it. Stuff like property taxes (We set aside 1/12 monthly).

With the budget we usually run pretty breakeven in the checkbook then.

We certainly pay our savings accounts first. (Pay ourselves first).

I try to give myself a 15-day time frame to deposit my paychecks. I don't like running to the bank on pay day. I don't like counting down the days to payday. So we stay 2 weeks ahead to keep it easy on us.

Sticking to the budget eliminates most financial worries.

We don't use cash, so I know on the first day of the month what all my bills will be and know I generally have $1300 on the credit card to spend on regular monthly purchases. This is pretty good motivation to keep the credit card on budget (no extra money in the checking account). We never have carried a balance.

[Caoineag]

I have direct deposit and just have a budget in excel that I work from. All savings and investments are auto deducted just like any other bill, use a cc for all monthly expenses that I can and pay in full and any extra that I have (income is not strictly salary so you can't count on some of it) goes to savings at the moment.

[skydivingchic]

My paycheck, after 401(k) and insurances are already taken out, is deposited into 3 seperate accounts. Some to continue building my EF account, some to short and mid term savings (my new to me car fund and travel), and the bulk to my checking account.

I use Mvelopes as my budgeting system and made it a point to build up one month's expenses in my checking account. So, when my paychecks come in for the month of June, they simply get set aside until July 1, when I fund all my envelopes in full for the month.

Over the last year and a half I've developed a workable, realistic budget using the envelopes. Money gets set aside each month for periodic, variable expenses like gifts, cat care/vet bills, vehicle maintenance, medical, etc. Also, I have envelopes for day to day expenses like groceries, gas, spending money, Roth IRA etc and escrow envelopes for periodic expenses like vehicle registration, subscriptions, etc. And of course envelopes for all the bills. Anything that is left over at the end of the month in the gas, groceries, spending money, and monthly bill envelopes gets transfered to savings.

[dsstao]

Thanks for all the responses guys... I can see there are a lot of diverse systems out there but that all of you really put thought into managing your finances and coming out ahead at the end of the month. I appreciate the thoughts.

[jIM_Ohio]

We deposit money into accounts, and use budgeting to control spending.

Some of what you describe might be a problem because you are using credit. If you can use "cash in the bank" to cover current expenses, you might like that business model better.

We deposit money into 5 accounts at 2 banks.

Bank 1 checking account 1 gets mortgage and IRA payments. This account usually has 2 months worth of mortgages and IRAs (paycheck on 1st and 15th of month pays bills for first of following month and IRA of following month).
Bank 1 checking account 2 covers utilities and any electronic payment we make.
Bank 1 savings account 3 gets $20 per check to accumulate money.
Bank 2 checking account 1 gets enough money to cover groceries and cash based bills. This is only account we withdraw cash from.
Bank 2 savings account 1 gets enough money to cover cell phones and two car payments. When cars are paid off we will probably close all accounts at this bank.