Strategies for Budgeting: Zero-Based and Paycheck to Paycheck
Having money in the bank is always a great feeling. Perhaps that’s why every other Friday is my favorite day of the month (I get paid biweekly). I’ve found that the easiest way for me to manage my money–and not risk it disappearing without doing what I need it to do–is to break up my bills and saving goals by pay period. I created a money routine that works for me, but this isn’t any old money routine. This payday money routine helps me maintain productive money habits as soon I get paid.
What is a payday money routine?
While I encourage you to have regular money check-ins every month (especially with the great account aggregation tools inside the nav.it money app), I’ve found that I manage my money better when I create short sprints. Since I get paid every two weeks, I consider each paycheck a two-week sprint. The day I get paid (or a few days before), I figure out where my money is going for the next two weeks, and decide how much I use to pay bills, save, invest or pay off debt.If you get paid weekly, consider managing your money in weekly sprints. If monthly, plan for the entire month. Make a plan that works specifically for you.
Yes, you could say that you’re living paycheck-to-paycheck, but I don’t see it as a bad thing. I live paycheck-to-paycheck because I assign tasks to every paycheck. That means that every dollar I earn has a job: spend, save, invest or pay off debt. And I always plan to have zero dollars left over at the end of a two-week sprint.
Move extra funds into savings.
The night before I get paid, I check my bank account balance. If I didn’t spend everything in my budget, I move any extra funds into my savings account. This goes back to the concept of zero-based budgeting. Zero-based budgeting is when you have $0 left over in your budget when you subtract your expenses from your income.
Pro-Tip: Accomplish financial goals faster with Auto-Saves inside the nav.it money app.
Pay as many bills as possible.
Since I get paid twice a month, I split my two paychecks. One paycheck covers bills and saving goals from the 1st to the 15th of the month. The second paycheck covers expenses from the 16th to the end of the month.
The day I get paid, I pay as many bills that I can for the next two weeks. I do this because the day you get paid, you have an influx of cash but that’s not necessarily all yours to spend because a lot of the money is already earmarked.
I like to pay my bills the day I get paid because my bank account more accurately reflects my account balance the next day. Now that all of my bills are out of the way for the next two weeks, I can clearly see how much money remains.
Doing this gives me a much clearer picture of what’s going on in my finances and as a result, I can make more informed financial decisions, which ultimately prevents overspending. It also helps me avoid overdraft fees, interest fees, and late fees.
Create a to-do list.
When you’re digging into your finances and making payments, you may realize that you have to follow-up on certain things. This may mean disputing a charge, transferring funds from one account to another, or opening a new bank account.During my payday money routine, I always have a pen and paper handy so I can write down next steps. I might even take it a step further by creating a calendar invite just to make sure that I don’t miss any important dates.Learn more about how to create money routines in Danielle Desir’s Back to Budgeting Basics course. She teaches you step-by-step how to create and maintain a budget, save money every money and crush your financial goals.
We’re changing the narrative around money but change can’t happen with a one-sided conversation. Send us an email and let us know what you think. And remember the nav.it money app offers you free tools for checking in and managing your money moves.