Systems to Maximize Your Paycheck
Let’s face it, your paycheck, no matter what the size, isn’t going as far as it used to at the pump or the grocery store. While you can’t stop the tide of ever-rising prices, you can take control of your spending. Here are some tips to help you better manage where it goes!
On payday, do you focus on where you will spend your money or maybe just hope that it’s going to be enough? If so, you may want to re-examine how you think about your paycheck.
Instead, of thinking of it as a way of keeping the bill collectors at bay, think of your paycheck as a tool to get you closer to achieving your financial goals. Create a spending plan and take control. You are the one who decides where your money goes!
Here are a few game plans you can incorporate come your next paycheck.
If you’re like most people, you get paid biweekly, but your bills come monthly. Your bills all have different due dates, and they don’t necessarily line up with your paydays. Some times of the month your account balance is high, but other times you’re scraping the bottom of the barrel to pay your bills.
To combat this problem, open a calendar and record all your bills’ due dates for next month. Use the timing of the bills to determine which bills will be paid with which paycheck.
It is best to try to even out the total amount due for the bills from each paycheck. If it seems like too many bills are due at one time of the month, contact your billing companies and request a change in your due dates. Having a more balanced bill pay schedule will help you to manage your money and keep your bank account balance even and in the black.
With the envelope approach, the goal is to control your spending by setting aside budgeted amounts for each category of bills in separate envelopes.
“Envelopes” don’t have to be physical— a more secure option is to have multiple checking accounts with your credit union, and to treat each of those accounts as an envelope with money for different expenses. You can even have your paycheck direct deposited into the separate accounts, so that your “envelopes” fill automatically.
However you decide to set up the accounts, the key is to have one account set up specifically for bill payment money. Separating the funds for these expenses will help you to track and manage them— and ideally to limit them!
The Cushion Method
This is the easiest technique to manage once you get it going, but it can also be the toughest to start.
The concept is to have at least half your total monthly living expenses as a floating balance in the account you use to pay bills. This floating balance is your cushion.
With this cushion in place, your first paycheck should be enough to cover all of your monthly bills. Your second one serves to replenish your cushion— helping you to be prepared in the case of emergency expenses.
Having a cushion is great, creating it is more difficult— especially if your finances are tight. It’s hard, but don’t give up hope! Start building your cushion slowly. Examine your spending and make a list of items you could cut back on for 1-2 months. When you cut a little here and there, you’ll be amazed at how quickly your cushion will grow!
Pick a plan that works for you.
No matter how you do it, the important thing is to work towards your financial goals. So, next payday, consider taking one of the approaches we discussed to maximize that your paycheck. Spending some time getting organized now could save you financial stress for years to come.