By Frank Conway
When you are paid once a month, it can make budgeting both much easier and much more difficult too!
The trick to navigating the new financial landscape is when you are paid once a month, you should set up all your bills to be taken out right after you get paid. That way, you won’t have to set aside money from pay-period to pay-period to cover your rent or mortgage, PCP or car loan payments, or other bills. In that way, it makes managing your bills a lot easier.
However, it can be more difficult because when you are paid once a month, it is easy to go through all of your money quickly and leave you falling short at the end of each month. In this way, you’ll need to be much more disciplined with how you spend your money.
Read our practical tips on how to budget successfully when you get paid once a month.
Pay all your bills in one go!
If you are paid once a month, one option is to set up your bills to all come out as soon as you get paid.
Most companies will allow you to set up direct debit to pay your bills. It is easier to do this just once a month, and it saves you time since you are doing everything all together.
If you are paid on the first of every month, you can set up your phone or cable bill to come out at the beginning of the month. If you have other bills automatically deducted from your current account, such as your mortgage payment, you can also set this to come out within a day or two after you get paid.
However, it may be a bit more complicated with bills that aren’t a set amount, such as utility bills like gas and electricity. Be sure to allow for fluctuations in these bills if you choose to set up a direct debit.
And if your bills are due at all different times of the month? Most companies are willing to work with you to change the due date, especially if you are setting up direct debit. Simply call and ask to get your monthly due date changed.
Keep in mind that after you pay all your bills, you should also be setting aside money each month into savings. This will help you switch from a weekly budgeting structure to a monthly one.
Switch to Cash-only for Some Spending
At the beginning of a pay period moving from weekly to monthly, switch the remaining categories in your budget to a cash-only basis. This means that you will not use your debit card at all, but will only use the cash for each category to make your purchases.
The reason for using this approach is psychological. It can help you focus on how you spend. Remember, there can be a lot more temptation to spend more as you might feel that your pay has increased significantly. This happens because in your mind, you might feel that you are still being paid weekly and in your mind, you might think the increased pay will arrive at the same frequency (weekly) and forget that it arrives a lot less frequently (monthly)!
So, for a few months, as you settle into your new situation, withdraw enough money from your bank account at the beginning of the month and then put the correct amount into each category that you spend money on; food, lunches etc. This will stop you from spending all of your money on eating out the first week since the categories are divided up already and you know it’s time to stop spending in one category when you run out of money in that category.
If you get paid once a month, switching to cash is a great option for tracking your spending. It simplifies the process and protects you against scenarios like money you need to spend on food shopping was spent on a night out with friends.
Divide Your Cash Up by Week
If you find that you spend most of the food bill at the beginning of the month or if you have a difficult time with other categories such as entertainment, you may want to split these up into smaller weekly amounts.
Set a limit for each week, and only take that amount with you when you go shopping. This is the best way to stop overspending and stay on track throughout the month.
Stick to Spending Limits
The key to making it to the end of each month is to stick to your weekly limits for each category and to not overspend in any category (use the MoneyWhizz Budget Planner).
As you switch to cash for your entertainment, food, and clothing money, you will soon learn to stop overspending. It is important to stop spending once you run out of money. If you don’t, that’s how you can run up credit card and other forms of expensive debt.
While a cash-only budget can help with this, setting weekly limits can help as well. It is important to make sure that you don’t forget common budget categories. You can also look for new and more relevant ways to save each month to help you stick to your spending limits.
Build Up an Emergency Fund
When you are paid once a month, the month can feel long, especially if you run into unexpected expenses like car repairs and other issues.
An emergency fund can help you handle those expenses without ruining your budget. When you only get paid once a month, it is even more important to have an emergency fund because an emergency can eat up all of your money at beginning of the month and leave you struggling for the rest of it. MoneyWhizz suggest having at least three to six months of living expenses in your emergency fund.
Setting aside €50 a week for an emergency fund will give you a good start. You can also apply bonuses or tax refunds to build one up.
Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz