Budgeting for the month or one check at a time.
Hello I am new here and I get paid every other Friday. Is it easier or "better"to budget each paycheck or just do it for the whole month? Thank you for the help. I need it
When you first start out, you have no choice, usually unless you have savings you can repurpose. YNAB is an envelope budget, it works only with the money you have. It’s not where you make a plan for the money you’ll get later.
If you have only one paycheck’s worth of money, then you’ll need to budget each time you get paid, because once your money is gone, you have to stop budgeting. Over time, best practice is to save money so that each month, you can afford to stick your paychecks into a holding category and then use them to budget the whole month at once.
That is a great question actually that it seems the experts don't proscribe one way or the other. Whichever helps you better. Consider your options:
You deal with the money right away, no holding bucket. You make a plan for it, and you can always roll with the punches and repurpose the money later if you need to. You are doing it more frequently, which some may experience as taking more time.
At every paycheck, you put the money in a category that reserves it for your end-of-month budgeting for next month. You then budget all of that money whenever you receive your final paycheck in a given month, into the next month's budget. This allows you to deal with the budgeting decisions once/month, which some may experience as taking less time.
In saying "some may experience" in both of these options, others actually experience the opposite. Budgeting once/month is literally less times than once/paycheck, but if you have to spend more time that one time, and possibly more stress that one time, than the multiple times combined the other way, then who is to say it is better?
I have been using YNAB on and off for about five years now. The concept worked but I didn't use the YNAB4 version as intended. Last year, we made a plan to pay off debt and have been using it religiously for the past year. Once, it clicks, it is amazing.
I am paid biweekly and since my husband is self-employed we changed his paycheque timing to coincide with mine. It made a huge difference in figuring out what to do. We now have a budget meeting the day after payday to go through the budget and discuss. It works well for us. Since we are concentrating on debt repayment, as it is more important to us, we have slowly been working towards getting one month ahead as described by Bruce in his response above.
Things that help:
1. Use the paycheck 1 and paycheck 2 categories to help with knowing what needs to be budgeted when. I didn't use them but can see now in hindsight how they can help. For the month with 3 paycheques, use the third paycheque to either fill up some of those true expenses OR move it to the Income for Next Month category (or both)
2. I used dates in the category name to help with due dates (Utilities 20th or Cell Phone 1st). It helps to also put them in order of payment so when you go down the line, you can see which one is up next.
3. Don't be afraid to rearrange the groupings if you find your first one is not working for you. It is easy to rearrange.
4. Stuff I didn't Budget For - I finally understood that this category was really meant to hold a buffer of budget money. If things came up, you categorize to the proper category (subscriptions for example) and then move any extra money you might have in that category to subscriptions. It is a good holder category for when you are not sure and are still trying to sort out what all of your expenses might be.
5. Reach out to the forum. There is a TON of great advice out there.
When splitting your check between this and next month, using groups to guide the order of allocation is very common. Instead of Paycheck 1 & 2, I suggest "Budget 1st" and "Budget 2nd" as that's really what's going on and you won't be thrown by the occasional 3-check month.
The choice to use a holding category or budget directly in next month's area is a completely separate consideration from your groups. I personally favor the holding category as it makes it obvious when you're "getting ahead". Specific workflows I recommend when using the holding category are described here. Once all income can be budgeted to the holding category, feel free to drop the Budget 1st/2nd groups.
Incidentally, the 3rd check works seamlessly with the holding category, as it naturally goes into the holding in its entirety. It's a convenient jumpstart if nothing else, and is often enough to put you "over the top" with an entire month's worth of income in the category.
In all my years of helping people with various issues, I don't know of anyone who has been ahead enough to budget in month-sized chunks that intentionally decided, "Nah, I'd rather budget each check separately."
There was one person. I just can't remember who it was. I still think it's.... odd.
keep everything together and budget 1/2 the first paycheck and the rest on my second paycheck
Very astute of you. This is simply applying the True Expense concept on a paycheck basis. Since all (per-check) budget increments must fit in a single paycheck amount, it's trivial to see how far your money goes down the list of priorities (categories). This simplifies a LOT, especially when priorities or amounts change.
In fact, it has almost all the same advantages as being ahead enough to budget month-sized chunks. In that case, you're still applying True Expenses on a paycheck basis -- you merely have a month-sized "effective paycheck" when you release funds from the holding category.