When you are constantly in the cycle of never having enough for payments and pulling from different categories to make up for that shortcoming, it becomes very difficult to save with success. Proper money allocation is not only efficient, but also less stressful.
Imagine receiving a bill for a recurring payment and knowing that the money is already set aside. The payment can then be made immediately and you can then move on with the rest of your life. On the flip side, if the payment is not set aside, you may have to scramble for money.
Sometimes you have to borrow money. Hopefully we are referring to simply borrowing from another category, not another person. Sometimes the payment must wait until the next paycheck arrives, which then leaves another thing for you to think about. Or worse, it increases the risk of missing a payment if you happen to be the forgetful type.
So if you’d prefer the former lifestyle, then consider this organization strategy.
When creating categories such as rent, mortgage, auto payment, cell phone, utilities, and insurance, it may be useful to include the recurring payment date on the title. And instead of grouping categories based on NEEDS, WANTS, and FINANCIAL GOALS, it may be better to group them in ascending order of due dates.
Budgeting then involves setting aside money depending on the urgency, and it is visually easy to do as long as one goes down the ordered list.
Take a look at the example below. (Notice how the day which the recurring monthly payment is due is tagged at the end of the title.)
Towards the end of the list lies the categories that do not require a monthly payment on a specific day.
With each incoming paycheck, you place the necessary money for the first category aside before setting aside money for other categories. If your spending is higher than your earnings, it will quickly become apparent when the bills are due. There is no hiding this fact with this method, and it is at this point that you need to take a serious look at your spending and find areas in which to cut.
For those only beginning their budgeting journey, and are having trouble making scheduled payments, it may be that the payments are too bunched together.
Try calling each bill and asking to change the due day for the month in order to space the payments out.
For example, if your car payment, health insurance payment, utility bill, internet bill, and student loan are all due in the same week, then it’s hard to practice budgeting. Making lump sum payments do not train our brains to set aside money over time. It is better to dedicate yourself to a car payment and insurance payment this week, focus on the utilities and the internet next week, and then spend the next two weeks saving to pay down student debt.
Off course this is not the only method.
I only suggest it as an alternative for people who are having trouble getting a jump start. And hey, maybe once you’ve got some savings in stock, you can switch back to prioritizing based on needs and wants again.
All I’m saying is, don’t be afraid to change it up. Creativity is key.