GET YOUR FREE SET OF FINANCIAL PLANNING TEMPLATES
This set includes the goal sheet, debt and savings tracker, weekly spending worksheet, annual expenses planning sheet, as well as a budget summary sheet.
Overdraft fees piling up? Surprised by big bills? Struggling your way through the maze of bill pay each month? If you're falling victim to these budget pitfalls, here's my message:
You're not irresponsible. You're not terrible with money. You're not horrible at saving.
You just need a plan that gives you a timing advantage so you never have to pay overdraft fees or get surprised by big expenses ever again.
There are three main ways you can use scheduling to avoid budget pitfalls. Each technique uses scheduling to ensure you're paying things on time, paying the RIGHT bills at the right time, and thinking ahead to plan for expenses that derail you any given month.
And I'll even talk about a big-time technique that is super complicated BUT once it's set up you have automated your finances and set for life.
If you're following a Down-to-Zero budget system, you are already thinking about this. The key is all in the planning.
Each month, you get paid and you have bills to pay. And those things are not set up to automatically talk to each other well.
For instance, you are paid weekly or bi-weekly, but your bills are due monthly.
Here's how most people handle it:
• When payday hits, you quickly pay the bills that are overdue. You make a guess about how much money you need to live on before the next payday, and pledge to send more to your bills next time. NOOOOOOO!
• You have a loose plan of when your largest bills need to be paid (like your rent or mortgage) but after that, it's a free for all. FORGET IT if you have to hold back money from one paycheck to pay a bill several weeks down the road.
There are better solutions out there!
I'm going to walk you through how to make sure you never miss a bill payment, and how a deliberate plan with a schedule can get you free from the monthly chaos of paying bills and avoid those budget pitfalls.
Why give the banks $15 billion dollars when a little calendaring can help you keep your money.
List all your monthly bills on this sheet.
This includes any bill that you pay on a monthly basis, but shouldn't include things like groceries or your yoga class (unless you're paying for yoga monthly. In that case, include it.)
Make sure you list the typical due date and the amount that the bill never goes over.
If you're being paid at predictable times during the month (like on the 15th and 30th) you should be able to assign each bill to its very own pay period.
Go through all the bills that occur BEFORE the first pay period of the month. Those need to be paid the prior month, so assign them to the pay period that happens mid-way through the month.
Make sure that which ever pay period you assign each bill to, it is occurring BEFORE the bill is due by at least 5 days.
So if your water bill is due on the 16th of every month and you get paid on the 1st and 15th, you should put the water bill in pay period 1.
After you've assigned every bill, check to make sure you can actually afford the bills on the schedule you've created.
You might want to use this handy sheet.
Here you can include up to four pay periods a month and indicate how much revenue (pay) you get, list your bills that will come out of that pay period, how much you want to dedicate to debt and savings, and how much you should have leftover for spending.
One thing that can happen is that you realize you don't have enough money to live on with the expenses you have right now, In that case, you will have to re-evaluate your living situation, your job, or your spending.
Most likely, you need to fiddle around with the timing of your bill pay, savings, and debt repayment to match your pay periods. You might even discover you have MORE money than you thought, and that you can dedicate even more than you have been to savings and debt repayment.
I believe that this system can help you get honest about your finances, which should be the first thing you do in any kind of budget overhaul.
Another one of those budget pitfalls is being surprised by those bills that are collected quarterly or yearly. Because they're not collected monthly, we forget about them. When they come due, we scramble to pay for them and then we have no money left for the important things like debt repayment or just regular everyday life.
Go take a scroll through your bank accounts and see if you can locate all of the big bills you paid last year. This is your child's tuition payments, the alarm system, and your property taxes.
Use another one of my handy sheets to list these big bills, their amount, and their typical due date.
I typically don't include things under $100 on this sheet since a bill that came up for $100 on any given month would not derail my spending and saving plan. You get to determine your own threshold here.
While you're at it, think about ALL the things you like to do every year that you don't pay for monthly.
Summer camp, yearly vacation, expensive travel during the holidays, birthday parties, and Christmas gifts. If you are spending big amounts of money on these things, consider adding them to your sheet.
One major budget pitfall is getting into the habit of putting celebrations and holiday expenses on the credit card. They seem necessary, and we have big expectations around this kind of spending. However, Christmas gifts and birthday celebrations put on the credit card mask the extravagance, allowing us to spend beyond our means without thinking about it. And then we pay interest on this spending for years to come.
Consider including your celebrations and vacations on this sheet too so you can truly calculate your yearly spending.
The blue sheet will give you the simple calculation to add up your expenses and divide them either by 12 (if you're paid monthly) or 24 (if you're paid bi-monthly).
That number is how much you should be saving every month to afford these big expenses every year.
Write those into your (color coded) Monthly Financial Report to see how that added expense affects your spending. Do you still have enough to live within your means?
Your goal isn't just to afford your lifestyle but to create a personal financial plan that allows you to meet all your financial obligations AND build for your future. That means paying down debt and saving for retirement, college, and emergencies.
I think the best way to do that, no matter your income level, is to make a Down-to-Zero budget, and I walk you though all the steps here. (Bonus: if you're using the sheets in this post, you're halfway to a Down-to-Zero budget already!)
A Down-to-Zero budget tricks you into spending less money because it designates all of your money to be used BEFORE it hits your account, and leaves you with just the money you need for daily spending.
The idea behind this kind of budget is that you trick yourself into spending less because you leave yourself less money to spend. You make decisions up front about how the money will get spent that month instead of leaving it to chance that you'll have some left over.
My planning sheets (get 'em all below!) help you map out how soon you'll get out of debt or have that emergency fund depending on how much you plan to save starting today.
No matter what budget type you choose, these sheets give you a good foundation for planning for your financial success.
If your bank account or your budget SAY you should be able to contribute to savings and retirement, but you just can't seem to build those accounts, then this plan is for you!
If you've downloaded the sheets and done the work to create a schedule that prevents you from missing payments or letting big bills derail you, there's a final step that can take your budget to the next level: automation.
When you automate your finances, you can ensure that your bills are paid and your goals are met...on autopilot.
If you're like me and you have big goals, and you want to spend every dollar towards those goals, you need a system like this. Instead of paying for needless overdraft and late charges, put that money to good use!
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