Why You Need to Stay a Month Ahead of Your Expenses
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Budgets? I’ve got ’em. I’ve got spreadsheets and figures galore. You want statistics? I’ve got twenty! But who cares? No big deal! I want moooore!
You’re welcome. 🙂
The problem with most of the money management methods and budgets out there? You’re budgeting imaginary money. Money you think you’ll have when your bills come due. Sure, you could write up a budget for the next month, next two months, six months or even a year. But if you’re counting on money you don’t yet have, how are you supposed to accurately stay on top of that budget?
Budgeting with money that you actually have in the bank is so much easier. This is one of the most secure ways to escape living paycheck to paycheck, and it is done by simply getting one month ahead of your expenses.
When Paul and I paid off all of our credit car debts and car loans, we got to a position where we could get ahead. Since implementing this system, we are able to throw more money into our savings because we are able to budget better.
How budgeting one month ahead works
Don’t spend money until you have said money. At the end of every month, I add up all that we brought in last month, and I am able to allocate those funds for the coming month. Sounds too easy? It is!
My “real job” is always consistent, I know (within a few dollars) how much I will bring in every single month. Blog income, however, that can fluctuate greatly.
By adding up and portioning out mortgage, utilities, groceries, entertainment, gas for the cars etc, I am able to see just how much we should be able to throw into savings. I am able to tweak our budget on a month – to – month basis. (Which you should do with any budget.)
Why this changes your life
You’re not sitting every month, looking at your checking account wondering how you’re going to pay the light bill, or which bill can be a little bit late. You’re not paying late fees or interest or missing payments. This means your credit score will start to love you too!
See: Boosting Your Credit Score – Understanding Credit
You’re secure in the knowledge that when you sit down at the beginning of the month you can pay ALL of your bills at once. Can we take a minute to think about how much time that saves?
Say my electric and gas bills are due on different days of the month, then there’s the water bill and the mortgage, maybe a car payment. I could forget one or two (they sneak up on you!) and the fact that I’m sitting down to pay bills multiples times per month is just a time waster.
By staying one month ahead of your expenses and having last month’s paychecks saved in the bank for this month’s use, I am able to pay ALL of my monthly bills at the same time. This saves me not only time, but potentially money (no late fees or penalties for forgetting) and most importantly: my sanity and peace of mind.
Since blogging income can fluctuate so greatly from month to month, we have one (sometimes two months depending) month of advanced notice if a lean month is coming. We have a good 4-6 weeks to prepare for a short month, and to budget accordingly.
We eat out less (which is really saying something), we use more at home, we tighten the strings on our grocery budgets and we stay home instead of going to a movie or date night.
What you need to do to get started
To get started, you’ll need to have one month’s worth of income in your bank account. Sound impossible? Make that your next goal! It may take you a couple of months or longer, but keep plugging along. Have a great month at your commission job, or if you get a bonus, a tax return etc? Throw those funds into your one-month-ahead budget plan.
Even if you are in debt now, saving up the money to get ahead of your expenses makes all the difference. Getting one month ahead helps you know how much you can apply to each debt the next month. In short – you’re focused. You feel peace and you’re in the mind set to take your finances to a whole new level.