Savings categories or send money into next month?
I have a strange question and I hope I can say it in a way that makes sense. First the set up for the question:
We are currently budgeting about 70% of each month with last month’s income. We need to use the first of my husband’s paychecks each month to finish out that month’s budget. Our AOM is 23 days.
We have $82,000 of debt that we are paying off using the snowball method ($2000 left on debt #1 and paying $425 towards the principal each month!!). We only have $500 in savings designated for income replacement. We are working on raising this and have been balancing making this a priority while still prioritizing retirement and some debt repayment.
Here is the question. Next month, my husband’s second paycheck will likely be around $600 more then we need to finish budgeting for the month. Would you send that into the next month or put it towards our income replacement category and/or debt repayment?
Depends on the type of debt. If it's a credit card, send it to the credit card. If it's a loan, I'd use it to improve the budget. If you do keep it in the budget, it's really up to you whether you want to use it toward getting the full month ahead or padding your income replacement.
How many months of expenses is that $500, as far as a normal month and also a belt-tightened month? I'm guessing it wouldn't get you very far.
However, being a month ahead in your budget is somewhat like having one month of income replacement.