If you get paid biweekly, I bet you’ve been budgeting wrong.
Most people create a monthly budget by estimating their total income less their total expenses expected for the next 30 days. When the month is over, they give their finances a quick review and realize they were hit with surprises along the way. Turns out they weren’t able to make those estimated budget numbers work for them after all.
Newsflash: forecasting is not your friend.
If you’re determined to make your money work for you and you get paid every two weeks, forget your old way of budgeting and follow these three simple steps instead.
1. Map Out Your Month
Grab a blank calendar or print out a copy of my free “bi-weekly budget plan template” inside of the resource library.
On this calendar I want you to write down three things.
- Monthly income: write down when you expect to receive your paychecks in the month
- Pay schedule: write down the due dates of your monthly bills
- Monthly expenses: write down when you plan to buy living expenses (like groceries or gas).
Be sure to include the estimated dollar amount next to it on the calendar so that you can visualize your financial responsibilities at a glance for the month.
Through this exercise, you may find that you have to pay bills all at one time and it makes you feel tight financially for a few weeks. If that’s the case, there are a few things you can do:
Age your money
Aging your money means you can save up a month’s worth of income and your cover March expenses with the money you just saved in February. Then the income you make in March would go into savings and you’d budget and spend those dollars in April.
Acquiring a month’s worth of income can take time though, so for a more immediate solution try the next option.
Share the burden
Try splitting each paycheck up, and set your money aside to cover the larger expenses. For instance, if rent is $600, you can set aside $300 from check #1 and the other $300 from check #2 to share the burden of the bill across your bi-weekly paychecks.
Lastly, you can give this third option a shot.
Call your creditors or utility companies and asking to move your bill payment date to a date that makes more sense with your income schedule. Most companies will work with you, you just have to call and ask!
Seeing the flow of your income and expenses visually on a calendar can be an eye-opening exercise that will prepare you to create a proper bi-weekly paycheck budget.
2. Create a Zero-based Budget
With a zero-based budget, you’re not going to look back at the previous month and wonder where your money went. Instead, you’ll be in the driver’s seat, giving every penny a job to work towards your financial goals.
When your paycheck comes in, assign 100% of your income to a budget category until you have zero dollars left over.
NOTE: Just because your budget shows $0 at the end doesn’t mean you’ve spent all of your money. Rather, you’ve given every dollar a job to help you give, save and spend.
The trick to making a zero-based budget work on a bi-weekly schedule is to budget for the dollars you have in your bank account now!
For example, let’s say you get a $1,000 paycheck on the 1st of the month, here’s how you could assign those dollars to have $0 left over on your budget.
-$100.00 (10% Tithing/ Giving)
-$200.00 (20% Debt Paymentt, Savings Account or Emergency Fund)
-$50.00 (Car Payment)
-$100.00 (Credit Card)
Then when your next paycheck comes in, you’d budget 100% of that check towards your giving, saving, and spending goals.
I personally love this type of budget because I’m not playing with theoretical numbers. I’m dealing with reality. I have $1,000. I need to give all one thousand dollars a job.
Just because you set a budget to hit zero by the end of the month doesn’t always mean it will go as planned…
3. Track Diligently & Be Flexible
If you go over by $21.84 in groceries, you’ll need to move money out of from another category to cover the expense. Or say you budgeted $40 in toll expenses but only spent $20. You need to reassign the extra $20 somewhere else.
Your budget is fluid with a lot of transactions going in and out. If you don’t diligently track your cash flow and expenditures, this budget isn’t going to work.
Personally, I’ve tried cash envelope systems, paper budgets, Mint.com, and even fancy excel spreadsheets but none of those worked for me and my husband.
The only budgeting tool that has worked for us is YNAB (short for You Need A Budget).
My husband and I both work full-time and are apart often. Since we use our debit cards for daily expenses, we needed a way to track our expenses against our budget in real time.
If he goes out to lunch at work, his $6.25 charge will sync up and show on my app too. So if I want to grab lunch while I’m out-and-about, I can see how much is left in our dining out category before deciding the restaurant or choosing to go home for a PB&J instead.
YNAB has singlehandedly helped us master our money and create a realistic budget with bi-weekly paychecks. If you’d like to give YNAB a try, you can sign up here and get a free 34-day trial.
In the free resource library, you can also download my budget categories printable to see how I categorize our budget in YNAB.