You realized that your monthly budget has not been working out for you as you had hoped?
Or maybe you have never thought much about making a budget and need some guidance on how to start?
And, of course, like so many of us you get paid bi-weekly, which can add some stress, anxiety and confusion to making sense of your financial matters.
Do not worry, I am here for you with a step-by-step guide to get you started on taking control of your bill payments and budget concerns.
Before we get started, you should grab yourself a copy of our Printable $5 Budgeting Binder! This will help you organize your budget and your bills throughout this process.
1. Bills Bills Bills
Before you can start budgeting you need to list all your fixed expenses per month.
Any bill that is due every month needs to be accounted for, so that you know how much money out of your paycheck is already spoken for.
Take a piece of paper or start a spreadsheet in Excel and shed some light into the recurring nuisance called bills.
Print out or call up your last two or three bank statements and highlight all automated and non-automated payments that appear to be recurring.
Then go through your statements and make sure you list all payments that only happen once or twice a year.
Take note of those due dates to add them to your bill payment schedule, which I will explain in step number two.
After you have listed all bills that are due per month or just once a year, you are ready for the next step in making a bi-weekly budget that works for you.
2. Bill Payment Schedule
Take a page from a monthly calendar or open that function in your calendar app on your laptop and mark down every bill’s due date from the list you made in step number one.
You can colour code the bills you plan on paying with your first paycheck of the month and those you intend on paying with your second paycheck to make it visually easier to remember which bills are due when and to remind yourself that not all is due at once.
For this step you have to know how much you will generally get paid per paycheck in order for your scheduling to work and for you not to feel overwhelmed by the realization that the math did not add up.
Once you have done so, it feels like a weight has been lifted off your chest, because you can see how manageable paying your bills have become.
I know that most major bills, such as rent or car payments, are always due on the first or the last of the month.
Other bills, like your cell phone or internet bill, will have a due date based on when you started the service.
This spreads out your fixed expenses throughout the month and will make it feel less like an avalanche of uncomfortable due dates.
Also, it feels wonderful accomplishing when you put that little checkmark behind each bill you have paid, giving you a sense of control and ease that this is not some undefeatable task.
A little trick I want to mention here is putting a little star (or any other sign) next to the bills that are paid through automatic payments, just to make it easier for you to stay on track.
3. Bi-weekly Budget part one
Now it’s time to write your first bi-weekly budget.
Take your colour-coded bill payment schedule and add those extra expenses that occur each week, such as groceries, gas and household items.
While I was doing some research on this topic and drawing from my own experiences with budgeting (there was a lot of trial and error involved, which really is all part of the process), I noticed that any money left over from your first paycheck should be left untouched until after the second round of payments for the month have been paid.
This creates a little financial buffer (something I will discuss a little late in step number 5), because life sometimes happens.
Although it is wonderful to get a head start on paying off debt or putting money aside for that summer vacation, I do not want to see you scrambling once you realize an unexpected expense has come up and your left-over money is already tied up.
4. Bi-weekly Budget part two
This follows the mantra of rinse and repeat. With your second paycheck pay all bills that are due in the second half of the month and again out aside money for groceries, gas or household items that you may need.
After you have paid everything and the money allocated for the fluid expenses, like groceries etc. it is time to take a look at how much money you have left over.
Equipped with your knowledge of how much money you need in a month to pay your bills and how much money you are making and is left over at the end of each month, you can make an informed decision about how much of that leftover money can go towards saving for that vacation and paying off that pesky credit line.
5. Financial Buffer
I have mentioned the financial buffer before and want to take a few minutes to discuss it a little further.
A financial buffer is a good idea for at least two very important reasons: (1) unexpected things can always happen and it’s a good idea to have a little money available for emergencies; (2) when starting out a new budget it comes with a trial and error period until all the kinks have been smoothed out.
As I said before, it is an exhilarating feeling when you check your bank account after having paid off all your bills and there is money left.
What to do with it? Stick it to the ridiculous interest rate and pay down your debt? Bring your next vacation that much closer to reality? The options are endless.
But remember to be prepared and smart with your financial matters. Sometimes life loves to throw a wrench into your plans and watch you struggle.
For that purpose, have a few hundred dollars extra in your account, just in case your child’s glasses break or you happen to need a root canal.
It is not pleasant to think about, but even less pleasant to be caught off guard and have more stress added.
Also, when you start a new budget bill payments are due regardless of what your bank account tells you. There really is never a perfect time to start, so make sure you have a little financial buffer to get you started on your new budget.
A little side note about the occasional third paycheck that comes our way: use it as you see fit.
I love putting an extra couple of hundred dollars towards paying off my student loans, because who wants to have that hanging over their head for longer than absolutely necessary.
Or you can treat yourself to a movie date and put the rest aside, as you know that next few months might be difficult.
I assure you, with a little attention paid to the nuances of time management and your own finances and after a little trial and error period, I will be surprised how well a budget can work for you.
Making a budget can be difficult.
Facing your financial existence can be terrifying and nothing short of anxiety-inducing, but take a deep breath and follow these steps systematically and taking control of your financial matters will become easier than you could have ever imagined.
The key to any good management is to remain calm, stay informed and make smart decisions. You got this.
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