One of the best things we’ve ever done for our finances is get a month ahead of our budget.
Basically, all of the paychecks we get during the month of November are saved to pay for all for our bills and expenses for December. At the beginning of each month we already have all of the money we will need for our budget that month.
I’ll explain why exactly this is so awesome and how you can make it happen for yourself.
How to Get a Month Ahead of Your Budget
There are a few reasons why it’s so helpful to get a month ahead of your budget.
- It gives you an extra buffer / mini emergency fund. When you’re always one month ahead, if you were to have an emergency or job loss, you will know that you already have enough money to cover the next month. I don’t necessarily consider being a month ahead as an emergency fund, but it definitely could be used that way!
- You don’t have to time your bills. It can get complicated when you’re trying to pay certain bills throughout the month based on when they’re due and when you get paid. It’s not uncommon for this to cause late payments or over drafted accounts. By being a month ahead, you will already have all of the money you need for the month on the first day of the month. You’ll be able to pay all of the bills that come in immediately without worrying about due dates and if you have the money yet.
- It’ll help you stick to your budget. By the first day of each month, I transfer all of the money we need for that month from our savings account to our checking account (I’ll get into more details coming up). This helps me stick to my budget because I know that money needs to last us the entire month. We’ll mess up the system if we go over budget and have to transfer money in from somewhere else. We have a plan for the month and the money to pay for that plan, so we’d better stick to it.
- Less stress! The whole underlying reason that I work hard on our finances is because I don’t want to stress about money! The end result of the three reasons listed about is that we stress less. We know we’ve got an extra buffer if something were to happen. We can pay all of our bills as they come in. Plus, we are better able to stick to our budget.
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Here’s How it Works:
Create Your Monthly Budget
To get started with this plan, you’ll need to have a written budget so that you know how much money you need before the month begins. If you’re new to budgeting, check out this post about the fastest way to create your first budget.
I know that budgets can vary from month to month but try to come up with an average amount that you spend each month, factoring bills and all expenses.
If you’re currently living paycheck to paycheck, this amount is going to be how much extra you’re going to save to get this system working for you. Don’t worry if it seems unattainable. When we first started doing this, it took me a long time to save up a whole month’s worth of money. It’ll be worth it!
You can see what our current budget looks like here if you need an example: Our $2500/Month Budget
Sidenote: One of the very best things you can do to start getting a handle on your finances is track your spending! You can download and print my free spending tracker printable and take action today!
Deposit All Extra Money into Savings
Start looking for ways to save money and deposit all extra money into a savings account before you have a chance to spend it. Your savings account is going to be your “holding tank” for next month’s money. To really move the needle, try some of these methods of earning extra money…
How to get extra money:
- Tax Return
- Bonus Check
- Sell Clutter
- Sell Homemade Items
- Get an Extra Part-Time Job
- Baby Sit
- Dog Sit
- Ask for Overtime
- Donate Plasma
Keep working on this savings goal until you have an extra month’s worth of money saved up.
Deposit All Income into Savings
Once you have your extra month of money saved up, it’s time to start working the system.
Most people have their paychecks automatically deposited into a checking account. You’ll want to talk to your payroll department at work and switch to depositing checks into savings. Whenever you deposit a check yourself, put it in your savings account.
Everything you make in one month is going to be used to pay for your budget in the next month.
Do not touch that money in savings. It’s not extra money. It’s next month’s money and you’ll be stealing from yourself and causing yourself problems if you spend it. If you’re not used to having extra money saved, this can be a difficult mentality to get used to.
It can be helpful to have your bank disable any overdraft protection between your checking and savings accounts to help keep you accountable to only spending what’s in your checking account for the month.
Transfer Budget Money for the Month
Now before the start of each month, you’ll transfer the amount you budgeted for that month from savings into checking. Once you save up the extra money, it’s really that simple.
Getting a month ahead of our budget has been incredibly helpful. It takes a lot of stress off of us because we know that we have everything we need for the month before it even starts. We don’t have to worry about timing our bills with our paychecks throughout the month. Plus, it helps us stick to our budget because we can clearly see how much of the month’s money we’ve spent.
It did take a while to get to this point because we had to save up a whole month’s worth of extra money, but after years of using this trick, I can tell you that it’s absolutely worth it!