How to Stay Ahead
Now if you have read my previous posts then you have seen the goals set, understand the overall concept of the saving accounts, and you have worked through the math of estimating your savings. This next section is what I found to be the most important advice I got… how to put these goals and expectations into action.
I am going to continue to use the numbers from the example in my last post. In this example, $2,100 was the total amount earned per month (after taxes).
The goal, like I said in my first budgeting post, was to have the money set aside for all monthly expenses ahead of time. To do this we need to work with individual pay checks.
If we are working that 35 hour week at $20 an hour (from estimated spending example) after taxes we earned $2,100 in a month. This means we are earning $525 a week (after taxes).
This is where personal preference comes in. Based on your pay period (weekly, bi-monthly or monthly) and how much you’re making you want to decide how long is this saving goal going to last. Do you want to have the $1,100 saved in a month or two months? I would not suggest taking any longer than that, unless you absolutely have to.
I was surprised I was able to have my monthly expenses account established within a month. I will show you how continuing with the example we have been using…
Again, our goal is to save $1,100 within a month.
$1,100/4 = $275
If we put $275 aside per weekly paycheck we will have our $1,100 after a month (4 weekly paychecks). Bi-monthly we would need to put aside $550 from the two paychecks. Each paycheck would be $1,050 after taxes.
$1,100/2 = $550
$525(2) = $1,050
Now let’s see on a weekly and bi-monthly plan how much money we will have to get us through to the next paycheck.
Weekly: $525 – $275 = $250
Bi-Weekly: $1,050 – $550 = $500
This is not a lot, but it should be enough to get you to that next pay check. The first month you start this personal finance method will be the hardest, I won’t lie to you. You will need to be dedicated and most importantly disciplined. You won’t have that cushion set up yet so you will only have the $250 to get you to the next week or that $500 to get you through possibly 2-3 weeks.
When I first started I made sure I was in a good place before I started saving. A “good place” to me meant that my big expenses for the month were already paid before I started saving. I paid my rent and bought a monthly subway pass. From there I just had to promise myself I would not splurge on groceries or outings. I thought this was a “good place” because I felt like I was in control of what expenses would come up in my month.
I hope you have been following my math. Let me know if anything is confusing or *GASP* wrong! I checked my math about a billion times so I hope everything is correct.
I really hope this works for a lot of people and would love to hear any success stories. Even if you have a success story with personal finance/budgeting that is not due to my posts, please share your own!
I will try and have a post tomorrow with an overall big picture that hopefully summarizes and brings everything together.