If you’ve ever tried to sit down and make a budget, you know it’s not easy. Because unless you have a boatload of cash sitting in your bank account then you’re probably like the rest of us…living paycheck to paycheck.
Before I became a stay at home mom, we never had a budget. We were spending more than we made eating fast food every night and used our credit cards in between paydays.
But when we did become a one income family, I had to learn how to manage money effectively to even make my dream of being a stay at home mom possible.
Because my husband doesn’t make six figures. He only makes $35,000 a year.
So I know what it’s like to struggle with making and maintaining a budget when you live paycheck to paycheck or have irregular income.
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The easiest budgeting method for beginners
When you’re living or paycheck to paycheck or on one income (like me!), it takes a LOT more discipline to avoid making the kind of mistakes that will land your budget in hot water.
I recommend you budget by paycheck instead of by month.
This is the exact budgeting method we use and it works great for us — especially with my husband’s irregular income! There have been times he got paid weekly, then bi-weekly, or twice monthly.
Then there were other times he wasn’t getting full-time hours every week or suddenly got crazy overtime, and I’ve had to maintain our budget through it ALL!
Today, I’m gonna show you how to budget your paycheck step by step on paper first. You can also grab my free budget printables by clicking here. They pair perfectly with this paycheck budgeting method!
So let’s get ready to get to work.
Step 1: Determine how much you earn per pay period.
This may be hard to estimate if you have irregular income. I recommend you go online to take a look at your last 6 paychecks on your bank statements to help you find your average minimum pay.
For example, my husband’s bi-weekly paychecks range from $1,500-$1,700 each time, so I know to expect at least $1,500 bi-weekly or $3,000/month.
If you’re paid weekly, you can still do this!
Simply take your average minimum pay for two consecutive weeks and add them together to get your “bi-weekly” number. Trust me, you’ll want to have it when you move on to Step #2.
Once you know your income amount write it down.
Step 2: Create a monthly paycheck budget outline.
In order to do this, you’ll need to brain dump all of your bills, amount due, and their due dates on a separate sheet of paper. Some of the most common monthly expenses include:
- Utilities: heat/gas, water, electric, trash & sewer
- Car insurance
- Health insurance
- Auto loans
- Student loans
- Credit card payments
- Cell phone
Next, you’re going to divide and conquer your bills! What I mean is, you’re going to assign each of your monthly bills to a paycheck. For example, your rent/mortgage due on the 1st may be assigned to Paycheck #1 because this is the pay period that’s closest to the first of the month…so on, and so forth.
Continue until all of your bills have been assigned, but making sure that you can pay them on time.
Now, if you’re paid weekly, I suggest you wait for your second paycheck (the following week) to arrive so that you can combine your earnings and pay your bills.
It’s going to take a lot more discipline, I know because this is exactly what I had to do for some years when my husband was paid weekly and it worked out well for us.
Step 3: Set a grocery budget for each paycheck.
You’ll need to know how much you can realistically afford to spend on groceries — or how much you plan to spend.
Because I can tell you, it’s much easier to shave off $100 off your grocery bill if you’re used to spending $500/month than it is to shave off $500 when you’re used to spending over $1,000/month on food.
If you have no idea how much money you should budget for groceries, you can go through the last 30 days of spending in your online bank account and add up all food-related purchases you made.
If it’s over $1,000 take 20% off and divide it in half. Write that number down to use as your grocery budget for your next paycheck.
For example, our grocery budget for a family of 6 is $400/month. So because my husband is paid twice monthly, I can divide this number in half, then budget to spend $200 on groceries per paycheck (or $100/week when he was paid weekly).
Getting our grocery bill so low definitely didn’t happen overnight. I had to find ways to save money on groceries (with and without coupons) and create a meal plan that feeds all of us for under $100/week.
But if this change is too drastic for you because you spend a lot on groceries and eat out a lot too, then you should gradually reduce your food spending each month until you find a grocery budget that works for your family.
The whole point of setting a grocery budget is to make sure it’s realistic enough so that you can actually stick to it through weekly meal planning and cooking quick meals at home so you won’t get discouraged, give up, and go back to overspending.
Step 4: Add in the necessities.
Now that you’ve set a weekly grocery budget based on how much you can afford to spend, you can include other necessities. If you drive a car then you’ll need fuel. You’ll also need to determine how much it’ll cost to run your household.
Do you need toilet paper, trash bags, toothpaste, shampoo, or laundry detergent? To make it easier, you could absolutely include your household necessities in with your grocery budget — especially if you have a tendency to buy these items together when you’re shopping at Walmart, Costco, or Target.
You can review your previous month’s spending to find out how much money was used to purchase your home supplies so you can know how much to budget for next month. Then, label this on your paper as “Home & Grocery” instead of keeping it separate.
For instance, if my grocery budget is $400/month and I know we spend $50/month on home supplies, then my new Home & Grocery budget is $450, which would be $225 for each paycheck. Easy as pie! 🙂
Step 5: Create Funds
When you’re living paycheck to paycheck or on a tight budget it’s crucial that you create funds for purchases like vacations, holidays, and other expenses that come up throughout the year.
Because if you’re not prepared for it in advance, then you may find yourself pulling out your credit card to pay for these things. Not good. (Been there, done that.)
The good news is you can create funds for nearly EVERYTHING you need including:
- Kids clothes
- Emergency savings
- Medical bills
- Dining out
- Car repairs & maintenance
- Fun money (date nights, entertainment, etc!)
The easiest way to save for funds like these is to open as many savings accounts as you need! That way you can allocate your money right and never be caught off guard again.
Step 6: Set money goals.
Think about your family’s future goals that cost money. Do you want to pay off your student loan debt? Save for a family vacation to Disney? Build a $1,000 emergency fund in 90 days?
Together, figure out your Top 3 goals and list them in order of importance — 1 being the most important and 3 being the least. Then write your goals out in order of which they can be achieved.
For instance, if your goal is to pay off your student loans, then you may want to build your emergency fund first because it will take less time.
Now you can work your goal into your budget — and you can totally work on a few goals at a time! Give your goal(s) an initial (like D for Disney), then add the leftover amount that’s in your bank account at the end of the month for that goal.
What if I don’t have any money left over after bills and necessities are paid?
If you don’t have any income left after your bills and necessities are paid, then you should look for things that you can swap out to save. In other words, you’ll need to find cheaper substitutions to your higher bills that will help you save money and lower your budget.
We cut things like cable but still watch tv. And we got rid of our high cell phone bill, but still have great phone service. It was making substitutions like these that helped our budget TREMENDOUSLY!
Here are some cheaper substitutions you can make to help lower your budget:
- Cut your cable and use Sling TV instead — it’s only $25/month for 50 top channels. And you can try it out for 7 days free. You can find out how we (legally!) watch tv for free without paying for cable here.
- Switch to a low-cost cell phone carrier — we switched from Sprint to Metro by TMobile (formally MetroPCS) and saved almost $500/year for the same service! Now we only pay $90/month for two unlimited phone lines which also includes an Amazon Prime Membership for free! (YAY!)
- Bring your lunch to work instead of buying it every day.
- Don’t have time for clipping coupons? You can get free refunds on your groceries with the Ibotta App.
You can also read about how we made $22,000 worth of cheaper alternatives here.
Choose one or two bills you can reduce and do it! Then go back and check your new amount. If you still don’t have any money left after bills and necessities (because you’ve cut your expenses down to the bone), there you’ll need to find a way to make up that money.
So What’s Next?
Congratulations on making a paycheck budget! Going forward you will just rinse and repeat these steps as needed.
It’s imperative that you are monitoring your budget and repeat these steps on paper with each pay period too since you’re just getting started.
Get these FREE Paycheck Budgeting Worksheets to make it easier to organize your income and expenses every time you get paid.
As you get better and better at this, then you can graduate to tracking your budget monthly and electronically using free budget apps like Mint.com and EveryDollar (my favs!).
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