Biweekly pay, how to make it fit monthly goals
I survived the first month of YNAB and I've faced up to the fact that I'm using the CC float to get from month to month. I have a plan for that.
I have set up my spending plan based on my pay, following the principle that you only spend money you have. So I transfer money to retirement savings and budget for my sinking funds and cash (groceries, spending cash) the day after payday.
The monkey in the plan comes about with the 26 pays in 12 months and trying to set monthly goals.
For example, I withdraw $40 every 2 weeks for spending cash. For 10 months of the year, it will be $80, but twice a year it will be $120. So do I set my monthly goal as $80 and manually adjust it during the months with 3 pays, or do I set it as $86.67 a month?
As I write this, I think the best way to go is to keep the budget set to the 2 pay amounts, and manually adjust during the 3 pay months. This keeps the budget accurate, and it's not going to be telling me I've under budgeted 10 months a year. Because the funds come out as the pay goes in, I don't need to be saving up, and I won't feel like I'm always behind.
I think just having this space to write down and explore my concerns helped a lot, but if there is a flaw in my thinking, please let me know.
There are a couple ways you can manage this.
1) Try to live off 2 paychecks each month. In months with the third paycheck, push it forward to the next month. Do this twice and you'll be budgeting a month ahead, which allows you to budget one month at a time, which makes for better decision making. Later on, those third paycheck months will be like having a min-windfall.
2) When you have a month with a third paycheck, use 1/6 of it, and put the rest in a Deferred Income category. Then for the next 5 months use another 1/6 each month in your budget.