Your latest paycheck is in the bank and life is good. Until the end of the month. Suddenly, you need to pay the credit card bill, and you don’t have enough money. What happened? You should have had enough money, but somehow, it’s just not adding up. If this feels familiar, today’s short post will give you the relief you’ve been searching for.
Keep it simple
We make things too complicated in life, when it’s usually the simplest solutions that work the best.
I’ve been working on new ways to stay organized, and there’s a simple approach that works so well: choose 1 thing and do that first.
Sure, I have to do 20 things today, but what’s the 1 most important? The 1 most likely to be procrastinated? The 1 that must be done so I can do others? Today it’s writing the first draft of this post. That way later on I can edit it, add a photo, and so on. So the key is to do this first instead of leaving it for later and getting stressed out if I run out of time and can’t get it done. By doing this first, I will feel relieved and relaxed. And then I can do the rest of the items on my list and feel good about my productivity.
Why not do the same thing with your money?
The absolutely unavoidable must-pay items
Make a quick list of the bills you pay every month and circle the ones that must be paid no matter what. You know the ones. Probably your rent, the electric bill, last month’s credit card bill, any other debt payments, and a certain amount of groceries.*
When you get your paycheck, pay those immediately. No matter what. If you can’t pay them that day (maybe you won’t do a month’s worth of grocery shopping on payday) then put that money into a separate account. Right now. Or take it out in cash and put that cash into envelopes clearly marked for each purpose. That way you won’t accidentally spend that money on something else.
If you get multiple paychecks per month, you can divide these expenses between the paychecks. However, your goal should be to eventually pay these bills with your first paycheck of the month and to use any other paychecks for discretionary expenses, which we’ll get to in just a minute.
By taking this one step, you just assured that you will not run out of money this month for your most important expenses. Whew! That’s a relief, right? So let’s take it one step further.
Pay yourself second
Now that the most important bills have been taken care of, it’s time to pay yourself. Put some money into your nest egg. This could be a retirement account, emergency fund, or savings for travel. It could be $5 or $5000 – do what works for you at this moment and plan to increase it later.
You just got paid today and you’ve already taken care of your most important bills and you’ve put money into savings. Way to go!
Spend without worry
Now that your non-negotiable expenses and savings are taken care of, you can’t possibly run out of money before the end of the month. Whatever you have left can be spent, and it’s up to you to choose how you’d rather do that. You can go out to dinner, buy a new sweater, or buy a plane ticket for your upcoming trip without worry or guilt.
Be sure to do this spending using a debit card or a prepaid credit card, because if you often run out of money before the end of the month, you don’t want a credit card to give you a false sense of increased funds.
What about X?
Right now you might be wondering about all of the items I didn’t include. Well, those are up to you. Gas for your car might be a non-necessity, a luxury, in which case if you can’t afford it at the end of the month, you’ll be riding a bike and walking a lot. Or it might be a necessity so you can get to work every day, in which case you’ll put money aside for it in step #1.
In the end, everything will fall into one of these 3 categories:
- necessary expense/debt payment
- everything else.
It’s up to you how you prioritize each one.
After your first paycheck, you should start to notice a decrease in stress. This isn’t the only technique you’ll use to manage your spending, but it’s an excellent way to get things under control so you have the emotional space to address the details of your finances. Give it a try, and then let me know in the comments how it works out for you!