Most budgeting advice assumes your money arrives on the first of the month. For many people it does not. You might be paid on the 25th, every other Friday, or weekly, while rent leaves on the 1st and a phone bill on the 14th. A calendar-month budget fights against that. A pay day budget works with it.
The problem with the calendar month
If you are paid on the 25th and your budget resets on the 1st, the last week of every budget period is guesswork. You are spending money that arrived last month while planning with money that has not arrived yet. Bills land in the wrong period, and the numbers never quite match how you feel about your money.
The pay day method
Treat the stretch from one pay day to the next as one budget period. Then:
- Write down what you will be paid this period.
- List every bill and commitment due before your next pay day, with the date each one leaves your account.
- Subtract the bills from your pay. What is left is what you have to live on until you are paid again.
- Divide what is left by the number of days until your next pay day. That is your daily safe-to-spend figure.
A worked example
These numbers are made up, purely to show the method. Say you are paid £1,800 and there are 30 days until your next pay day. Bills due in that time total £1,020 (rent, energy, broadband, phone and a subscription). That leaves £780. Divided by 30 days, you can spend about £26 a day on everything else: food, travel and fun. If you spend £18 on Monday, you have £8 of slack to carry forward. If you spend £40, you know tomorrow needs to be lighter.
The point is not the exact figure. It is that you have one number you can trust today, already allowing for the bills that are still to come.
If your pay changes or is irregular
- Weekly or fortnightly pay: use the same method over the shorter period, and keep bills assigned to the pay day before they are due.
- Irregular income: budget from the amount you are sure of, and treat anything above it as a bonus you allocate when it arrives.
- More than one income: add the pay due this period from each source, using the dates they actually arrive.
Sharing a budget
Couples, families and housemates add a second problem: bills are shared, but not everything is. A good shared budget lets everyone see that the shared bills are paid, without exposing every private purchase. Agree who pays what, tick bills off as they go, and keep personal spending personal.
A tool built around this idea
This is the thinking behind Wangu, our pay day budget planner. It works out what is left until you are next paid, shows the daily figure, and lets a household share bills while keeping private items private.
This article is general information about budgeting, not financial advice. ZimbaTech does not provide regulated financial advice.