Wednesday, June 20, 2007

Every Paycheck Counts for Something

I hate to budget, but I know it is necessary to keep me on track. My wife could, most likely, stay on course without a written budget, but I could not.

We are trying a system this month for the first time, and it is working beautifully. We have our budget, but we have added another side to the plan that my wife especially loves.

Each paycheck serves a specific purpose. While we already know we are going to have to tweak the system a little, here is what we have each check earmarked for:

  • Week 1: Giving to the Lord, saving for estimated taxes, envelope money for the entire month, our loan at the bank for our adoption (has to be paid by the 10th of each month)

  • Week 2: Giving to the Lord, saving for estimated taxes, car payment (due by the 16th), electric bill, water bill, pest control bill, DirecTV bill

  • Week 3: Giving to the Lord, saving for estimated taxes, debt reduction

  • Week 4: Giving to the Lord, saving for estimated taxes, house payment for the next month (due on the 1st)

Notice a couple of things.

First, notice that "giving" is the first thing from each paycheck. Wes is writing articles with that theme on this blog and will have more in the future, but we, as Christians, understand that God and His work come first!

Next, notice that our envelope money all comes out at the very beginning. I am planning on writing another article specifying what we use our envelopes for by the end of the week. But, just here, notice that we have all our money for the month right from the start.

Finally, notice that nearly an entire paycheck is spent to get out of debt. Instead of paying what's left over at the end of each week, we have a huge amount earmarked for that purpose.

Now, a couple of points as we close:

  • What if I don't get paid weekly? To be honest, that is an advantage with this system. However, many get paid every other week, or can choose to do so. If you do, you can still follow this system, you will just have to be a little more disciplined and make each check do more.

  • What about savings for things other than taxes? We are still reducing debt. We have some savings for emergencies, but we are not worried about building up a huge retirement account yet. You'll learn more about the reasons why when I begin to review Dave Ramsey's The Total Money Makeover in the next couple of days.

  • What if there is another paycheck? I get paid every Wednesday (making today "payday," yeah!!!), and some months have 5 Wednesdays (August will be the next month where this happens). In those months, weeks 3 AND 4 are both used for giving, saving and debt reduction, and week 5 becomes our house payment for the following month.

As I mentioned, the plan still needs some tweaking, and our "order" would not work for everyone, but we both love this plan and it makes budgeting much easier.