How to budget when you get paid once a month
Divide the month up on the day the money lands, because with 12 paydays a year the danger is never the total — it is the last ten days. One deposit has to survive 28 to 31 days, and the bills that leave in the first week make the balance look like spending money when most of it is already promised.
The total is fine. The end of the month is not
Monthly pay is the only schedule where you can see the entire month's money at once, which is exactly why it goes wrong. A balance that must last 31 days looks identical on day two to a balance that only has to last a week.
Almost nobody on this schedule runs out because the salary was too small. They run out because week one and week two were funded at a rate the month could not sustain.
Take the bills out on day one
Fixed obligations leave first and they leave on known dates. Rent, the loan, insurance, subscriptions — subtract every one of them from the deposit before deciding anything else, whether or not they have been collected yet.
What remains after that subtraction is the only number worth looking at. Everything above it is somebody else's money that has not been moved yet.
Then cut the remainder into weeks
Take what is left and divide it by the number of days until the next payday. That daily figure is the real answer to "can I afford this", and it is a number that changes as you spend, which is the point.
A remainder of $920 across 31 days is $29.68 a day. Spending $60 on day three does not remove $60 from a large balance; it removes two days from the end of the month.
Annual bills are worse on this schedule
A once-a-year charge landing in a month you did not plan for takes a bite out of a single deposit with no second one behind it. On a weekly or biweekly schedule the same charge is absorbed across several cheques.
The fix is to hold a twelfth of every annual bill out of each deposit, so the month it lands in is no different from any other month.
Written by Larder, makers of an envelope budgeting app for iPhone. Last reviewed .