How to Budget Your Paycheck & Break Down Your Income

1. Monthly goals

I start out each month by listing specific goals for that month and checking the family calendar. It’s essential that I make sure I don’t have any extra events or expenses I need to consider before allocating the money coming in for that month. I make sure to keep track of everything so I don’t get sidelined by any surprise expenses.

If you take on this method of budgeting you will know what to pay or save with every check as it comes in. Even if you forgot to write out your monthly budget you will have a good starting point for what to do with the money you have at hand.

This way you won’t fiddle away your money with mindless spending as you place ‘write the budget’ on your to-do list.

2. Listing your income

The first thing you’re going to want to do is to list all of your income and the weeks that it’s supposed to come in. I find assigning a specific color to each week of the monthly budget makes it easier to read. It also makes it less likely that I will look at an incorrect number when I work through the budget later in the month.

Before attempting to separate expenses, go ahead and list everything in a monthly column. Listing your due dates can be helpful when it comes time to split your expenses. Don’t forget to check your calendar to make sure you don’t forget any extra or upcoming expenses for the month.

There are three things to consider when assigning each paychecks job for the month. Firstly, the amount of each paycheck is important. The second thing to take note of is the date it comes in. The third thing that most people forget about is the reliability of the exact pay date each month.

For example, my husband Scott’s drill check comes in from the National Guard every month a couple of weeks after his drill weekend. Since it’s always changing I can never depend on its arrival date. I always try to assign pay like that to expenses that are only due every few months, sinking funds, tithing, savings, or anything else that is not date dependent.

3. Savings

Don’t forget to pay yourself first and put any amount you can into savings for that month. Even if it’s just one or two dollars it will help you get into the habit. Saving is completely addictive, just like spending. You just have to choose your addiction.

In our home, we work off of a month-ahead fund. Since we adopted the practice of using a month-ahead fund, we have a lot more flexibility in our monthly budget. Once we started paying this month’s expenses with last month’s money we have more financial freedom in our month than we ever had before. It has taken the stress out of making sure that we have enough money during each week of the month, especially if it’s a week that is heavy on bills.

Scott and I have decided to pay ourselves first and meet our savings goals with our very first check of the month. It is by far the largest check that comes in, so it makes larger lump sums easier to pay. We have tried using a percentage budget and saving a certain percentage of each paycheck, but I have found that for us it is easier to focus on set dollar amounts rather than a moving target like a percentage budget.

It’s easier to share the responsibilities of household finances with my husband when he doesn’t have to ask me every week what amount he can transfer into our long-term savings. Everyone is different in their budgeting methods. I find I can even change mine throughout the year as I try new and different things to methods that work best for our family.

Currently, I like to pull as much of our cash budget out of the bank at the beginning of the month as possible. This would include cash envelopes and sinking funds. We live a very long way from the bank and I find it’s much more likely that I will get all of my cash envelopes stuffed for the month if I do them all at one time.

4. Assign jobs to every dollar

For this month’s assigned jobs, the VA disability money and the first of Scott’s monthly paychecks will cover all of our savings, cash envelopes, and sinking funds. For Scott’s second paycheck this month, I’m assigning all of the household bills and our family vacation fund. We are able to have such a large vacation fund in our month because we chose to live tiny, so we have very low housing expenses.

The last and lowest paycheck of the month is Scott’s National Guard pay. As mentioned above, the date fluctuates greatly depending on which weekend he drills that month. There can also be large swings in the amount of the check depending on whether he picks up extra duty or has his annual training that month.

How to budget your paycheck

That is how you give your paychecks a job. Until this season of life that we are currently in, a single paycheck never covered any one category of expenses.

This is how I would manage each of our months. That way I didn’t have to think so much when it came to every paycheck coming in. Let me know in the comments if you have any questions.