Planning Your Paycheck: Take Control Of Your Finances Before The Check Hits
I remember sitting in the back seat of my Sister’s car and she was playing “Just Got Paid”. I was dancing, not a care in the world, and didn’t get paid. Little did I know that dancing on a random PayDay Friday would not be instantly connected to going out on a Friday night. Why? Well, I did sometimes – but the budget was in danger when out dancing. We’ve come a long way from singing that song to now watching payday short-form content from strangers on the internet. Talk about a shift.
Over time, I had to personally work on my payday routine. And if you’re reading this, you more than likely need to build a routine or need to change what you’ve been doing. As I’ve been saying over time, sometimes the math doesn’t math and then sometimes you need to understand your formula to match the answer. The reason why planning your paycheck is important is due to the fact you’re able to know what's coming in and where it could be going out this check or this month. Let’s start with some pre-work before that paycheck!
Pre-Paycheck To-Do List:
Before you check that check stub, you need to understand where you currently are financially when the check deposited. Let’s look at your mini-audit of your wallet:
Gather Your Bills And Expenses: List all your upcoming expenses (rent, utilities, debt, etc.) Also look at the month/weeks ahead to see if you have any upcoming expenses like Birthdays, Holidays, Trips, or Annual bills. As you know, I recommend you look back at your bills over the previous months to see what type of routine/cycle your bills are on.
Review Your Current Budget And Previous Month’s Budget: The reason for this is that you need to understand where you are currently and if your management in the past needs to be fine-tuned. Also, you might want to see if the budgeting style you’re using matches the reality of your finances, and your financial goals. You might even catch some fees that you could free yourself from, and negotiate them.
Review Bank/Credit Card Statements: Track your spending from the previous month. Going back to what I was saying about reviewing your bills/budget - you might catch some fees/charges that don’t belong. You could also check to see if the product (checking account, saving account) you’re using makes sense. Are you overpaying for a checking account that doesn’t help you grow your money? Also, looking to see if you’re matching the requirements to keep you from getting monthly fees. Plus, where is your check going and how are you funneling your money to pay bills, live life, save, etc?
Check Your Financial Goals: The key to your financial growth is your goals. Say, for instance, you want to start saving for a downpayment or another goal. Do you know where you are with that goal each month? Your paycheck can help be the pathway towards accomplishing that. Look at your paycheck and your budget to see how you can curve that goal into reality. Your financial goals shouldn’t just show up at the beginning of the year or on your vision board – when you get paid, pay attention to where you are with your goals.
Before I get into the routine, I want to go back to what I’ve said before: I don’t just check my accounts when a check is coming in or when I’m checking out. I set a milestone date for the month when it comes to planning your paycheck and operating your budget. My milestone or middle point of the month is the 15th. So on the 15th, I check to see how your money is flowing and if I’m hitting all of the marks. Do I need to shift my spending or did I overdo it with my grocery shopping? Keep this in mind. You do you to help learn your mannerisms to handle where your money is going. Because right now, you more than likely don’t know where it’s going. You can have a pretty budget, but how are you planning it all?
Ok, back to the paycheck planning.
Here’s The Zones In Which I Want You Gone Into:
Pay Yourself First: This is simply where you stash a bit of cash within your savings (you know I love HYSAs). But I want you to either consider a savings towards a sinking fund of a smaller goal, your emergency fund, something fun, or even a longer focus goal.
Allocate a portion of your paycheck to savings/investment accounts.
Start small (5-10%) and gradually increase over time. Even if you have to start with 2% - just start.
Don’t forget to focus on stashing some of your cash for retirement! The small still compounds!
You could also set an amount to pay towards charity or if you’re a person of faith, your tithes.
Conquer Bills: Look at your bills and determine which paycheck will be assigned to that particular bill. Also, looking back at the last payment to see if there have been any changes - this would help you budget more realistically.
Pay all essential bills (rent, utilities, minimum loan payments) on time.
Consider setting up automatic payments to avoid late fees. Even if you can’t autopay all your bills, you can start with one. Be mindful of when the draft happens for the payment and if your paycheck is accounted for at the same time.
Budget For Groceries & Necessities: This is a part of your budget and you should track your CPI/ Personal Consumer Price Index to know if there were any changes the month before. I talked about that here.
Create a realistic grocery list and stick to it. This newsletter post talks about how you could start doing this.
Explore cost-saving options like store brands and meal planning.
Allocate For Fun: We aren’t just here to pay bills and die. Don't forget to include some enjoyment. I talked about how to allocate your fun towards your funds here.
Set aside a specific amount for entertainment and leisure activities; look at what you’ve done in the past and plan for it again. You might have to save but expense your fun.
Find free or low-cost ways to unwind (parks, libraries, game nights).
Track & Review: No matter if you’re using a budgeting app, pen/pad or even spreadsheets - you need to track your stacks (money). Find what works for you!
Keep track of your expenses throughout the month.
Compare your spending with your budget and adjust as needed.
This includes debt! If you’re paying down debt aggressively, you need to check your process while you’re paying it down.
Making It Last: Tips to Stay On Track Throughout the Month
You can set the mood for your Paycheck Planning with Money Meetings, which I talked about this a while ago. I recommend that you do this based on your pay schedule, so if you get paid twice a month - check out your accounts twice a month. If you get paid monthly, pull it for the month. Do this at least a week or a couple of days before you get paid, because when that check hits – you’re in “go” mode. You need to plan your check for your check to split, the right way. Check to see where the empty spending happens with your money. This helps you avoid impulse purchases and where your money is going. Also, like I say often - start to have multiple bank accounts to help manage your money throughout the month. We’ll touch on that in another blog post.
Drop any questions you may have below about budgeting, paycheck planning, or anything connected.
If you’ve done all you can and still need help, check out my budget analysis service to help you learn and leverage your money.