How do I budget if I’m paid fortnightly?

Screen Shot 2014-01-27 at 10.39.28 AM“Hi Mark -

I’m just starting out, I can’t get the budget to work as we are paid fortnightly. I can’t seem to find any work around for this!”

Lynda sent me that message this morning, wondering if she needed personal coaching to establish her budgeting rhythm. Maybe coaching is the solution, but maybe a subtle shift in perspective is all Lynda needs.

By the way, Lynda, you’re not alone: the perceived conflict between a month-based budget layout and other-than-monthly pay schedules has confused many of us.

Lynda’s specific confusion is (I think), “How can I plan with a monthly budget when I get paid every two weeks?”

As a first step, let’s re-frame the word “budget” as a verb.

This makes budgeting something I do, not just something I have.

I budget whenever money enters my life, asking “What do I need and want my money to do before I get paid again?”

Personally, I maintain awareness of the jobs I need my dollars to do by naming my categories like this:

Screen Shot 2014-03-11 at 10.55.19 AM

You see the category name, the expected amount, and the date the money leaves my budget.

Let’s imagine I get a paycheck on March 21st. My job pays me every other week, so I’ll receive another check on April 4th.

My money needs to handle all my wants and needs between March 21 and April 4th. It doesn’t matter that the calendar happens to turn over between paychecks. It only matters that I know which bills come due before I’m paid again.

I scan my Monthly Bills and see I’ll be making payments in the following order:

March 24th – City Utilities
March 31st – The payment on my 2nd mortgage goes out (two mortgages, two separate lenders, two different due dates)
April 1st – Car Insurance
April 3rd – The payment on the first mortgage.

I’ll fund those categories first with my March 24th paycheck because they’re all due before I’ll receive the April 4th paycheck.

I’ll also need to fund other categories in my budget (food, fuel, fun), giving each enough dollars to carry me through to my next check. In the best case scenario I’ll also give some of the March 24th paycheck to my Buffer category, allowing me to eventually graduate from the need to time my bills and budget.

I’ll know I’m finished when I’ve budgeted the entire paycheck from March 24th.

Which means we’re back to YNAB’s most basic – most important – three steps:

1. Enter income.
2. Budget income.
3. Follow budget.

It doesn’t matter whether you’re paid daily, weekly, bi-weekly, fortnightly, or monthly – just budget whenever money enters your life.

65 Responses to “How do I budget if I’m paid fortnightly?”

  1. Emily

    Hey, Mark. Can you do an article covering the completely blood-pressure-increasing statement that I often hear that goes something like this: “You can only budget if you have money to put into it.” or “I don’t make enough to budget.” or so on and so on. I try to talk reason to these people, but they are so ignorant in their thinking about finances and it irks me so much that I get mad. I now avoid the topic all-together with certain people, but would love to have a well-reasoned, third party article on the subject, specifically budgeting with YNAB (the greatest budgeting software known to mankind). If possible. Thanks for your consideration!!

    • mark

      Hey Emily –

      Thanks for the post idea. I’d love to write that up, because I used to use a very similar excuse: “When I try to budget, the numbers just don’t work.” Tragic.

      • Jeremy

        This would be a hugely helpful article! Anytime I get resistance in promoting YNAB this is the line I hear. “I don’t have enough money to budget.” Eesh–it is tragic!

      • Brian

        Based on my own personal experience, my response to that would be something like, “Are you kidding? I don’t have enough money to NOT budget!” Budgeting doesn’t cost money, it allows you to spend it wisely and can (will usually) help you actually end up saving it!

      • Bert

        I would try this with the budget-phobic: don’t budget, just track. Based on my own experience, simply tracking and categorizing your expenditures in a tool and seeing the monthly totals at the end of the month can be an eye-opener, which itself may already be a significant increase in financial awareness. After a month or two, hopefully (1) you can see how the outflows compare to the inflows, (2) seeing the monthly totals on discretionary spending categories may be higher than expected and may help encourage pursuing alternatives, and (3) *tada* the budget is right there – its the average expenses from last couple of months. It may not be a balanced budget, but it certainly reflects reality. Ideally at this point, simply tracking will be a “gateway drug” to really creating and using a (balanced) budget.

  2. tommaxwell2013

    Yes. I had this same struggle when I first started. I had always budgeted prior to YNAB, but I was a forecaster. The one thing that helped me move on from the confusion of how to handle fortnightly paychecks, was when I was watching one of the tutorial videos. The line was “only budget the money, that you have right now” (or something to that effect). As soon as I heard that, I understood (and got off the forecasting bandwagon).

    For me, I get paid at the end of the month, and the 15th. Just like you, I budget the amounts that I need to cover the bills from 1-14. And then on the 15th, I sit down again, and plan the budget for 15-28/30/31. This means I am only ever working with the money that I have. I do plan on getting my buffer in place, but I have a way to go with that! In the mean time, this works well for me.

  3. Elizabeth

    Thank you so much for this article! It’s a great reminder to work with what you have. I’ve struggled with this exact topic for months. I also love the idea of putting due dates next to category names. I’ve been keeping a separate sheet for this and will be so glad to see it gone.

  4. Lauren

    For the bills and categories getting dollars for April before you are paid again. Do you budget those dollars in the April budget or March and just let it roll over?

    • mark

      Hi Lauren – In this example I would personally budget them in March (right when I receive the March 24th paycheck) and let them roll over.*

      *By “let them roll over” we mean let the money sit in the budget category until I get around to using it.

      • Maiya

        Shouldn’t you split the income transaction as ‘Income for March’ and ‘Income for April’? Since your example had 2 bills in March and 2 bills due in April, and that paycheck needed to cover them all, I would think you’d want to split the income. There are always other expenses to budget for and you’d want to save the money you need for the 2 bills due at the beginning of April, right?

      • mark

        Hi Maiya – Yes, that would work! For me, it kind of all comes out in the wash. Not a huge deal either way.

      • Melissa

        It could also mean “Income (that was received) in March”… even though it will be spent in April. Is that right?

      • Aaron

        You CAN split it to income for March and April, but you don’t NEED to. As long as you look at your account balances as what you have until you are paid again then there’s no issue. If you’re going to interpret them as what you have for the month, then you should split the income.

      • JulieinNZ

        THIS is exactly what I was struggling with for the last two months, and it just clicked for me this week.
        Say you get paid late in march and it has to cover part of march and part of april. I thought I had to spilt my paycheck into “income for March” and “income for april”, and i stressed about trying to figure out the EXACT amount to split into each month. Since the budget covers “part of march and part of april”, i thought i had to split my paycheck accordingly and also split the money in each budget category proportionally. (ex groceries= $80 for March + $20 for April, Lunch = $30 for March + $10 for April, etc). Then, come the last day of the month, I thought I had to go back, zero out my budget for march, adjust my budget for april, and then readjust the split so that march was budgetted to zero. say I only spent $70 on groceries by the end of the month instead of $80, I’d readjust so that I had $70 for March and $30 for april, and repeat for all my categories. It was stressful trying to get the numbers to balance just right..

        But i just realized, IT DOESN’T MATTER that the end of the month falls in the budget category. You’re NOT budgeting for “part of march, part of april”, you’re budgetting for “the next two weeks until I get paid again”.
        When you get your paycheck, you can just put it all as “income for March”. Then in your budget for march, budget for two weeks of spending. IT DOESN’T MATTER that the month changes partway through your two week pay cycle. Because at midnight on march 31st, everything you didn’t spend will just magically carry over into April. If you use the mobile App, on April 1, you’ll magically see how much you have left till your next paycheck, even though you had entered it into the March budget. Because when you get that paycheck in March, you’re not budgetting “For the remaining days in March”, you’re budgetting “for the next two weeks until you get paid again.” If you do it this way, the “end of the month” becomes completely insignificant.

        That was what my stumbling block was, thinking that if a paycycle covered parts of 2 calendar months, that I’d have to split my income accordingly. Actually, even having the OPTION to split my income probably helped lead me astray. when you’re in the pre-buffered state, there’s no reason to split your income across months. Just ignore the calendar, budget for the next two weeks, and let YNAB magically carry the budget into the new month.

      • Jeff Ivany

        Someone else mentioned this and maybe it’s something YNAB can consider – get rid of the “month” as the unit of budget. :) Or maybe allow people to change their unit of budget.

        Or even the whole concept of applying income to this month or next month. It shouldn’t matter. You can’t apply income to next month if this month is still negative so why even offer that option?

        One other thing that has been driving me nuts is that I can’t quickly add a far off bill and have YNAB automatically tell me how much I need to budget in the current month. Wouldn’t it be better to be able to tell YANB “Hey, I’ve got an insurance bill of $500 due in 5 months, how much do I need to budget for that this month?”. No extra calculations to potentially screw up.

      • Seposm

        Hi Jeff,
        Again the concept of monthly budget really does help get you out of the paycheck to paycheck mentality. as far as applying income to next month, it is one of the main focuses of YNAB, to get you to rule #4 When I first started, I was not buffered, but it was one of my main goals. (the peace of mind that comes with it is amazing).

        To get to the point where you are buffered requires one of a few different things to occur.
        1. a windfall. that you just put in the bank and don’t spend.
        2. A reduction in spending that allows you to put money towards a buffer.
        3. Using the Month/week mismatch to move ahead. This is the same as #2 financially, but is a different mindset.

        Getting to the buffer using #2 can be done in a couple of ways,
        1. have a budget category called Buffer, contribute to it each month until it equals your monthly expenses, then zero it one month, and use that money to cover a months expenses. And then mark any income as available for next month..
        2. Start transitioning some money to next month as it comes in. Meaning lets say your income for the month is $4000 and you can live on $3800, you budget the $3800, And adjust the last income for the month so that it has $200 allocated to next month. next month, you will allocate $400, then $600 etc… Eventually, Your entire paycheck will be for next month, Then you move to the next earlier paycheck. eventually, you will be a month ahead.

        Using the week month mismatch is a little different mindset, although the same principle. basically, you budget for a month based upon your income for 4 weeks. and you just stretch the extra 2-3 days each month into that budget. As you get an extra paycheck, you allocate it to next month. Over the course of a year, you will naturally move ahead 4 weeks, giving you a months buffer

        As far as the auto calculation, I kind of agree with you, I still handle my yearly transactions like I did prior to YNAB since that worked well for me. Basically, I have an escrow savings account that I have money direct deposited into from my paycheck, I treat it as an off budget account and when I do pay the bills, they go in a category called escrow, then I transfer from that savings account and apply that to the escrow category. so it is always 0. This reduces my temptation to steal from that account. I think however, it would kind of go against the YNAB philosophy of being very hands on with your budget. Fully automating steps is kind of discouraged since it lends to a hands off rather than a hands on approach.

      • Jeff Ivany

        But this is where YNAB seems to be confusing a whole lot of people (and the original reason for this post we’re commenting on). If you follow the Rules, to get Buffered, you MUST start budgeting paycheque to paycheque. If you aren’t Buffered then this means the whole concept of a Monthly budget makes absolutely no sense.

        If you aren’t Buffered then assigning income to anything other than your current “month” makes no sense at first. Eventually it might make sense if you are more than half-Buffered and paid on a bi-weekly basis but for many people commenting here and on other YNAB posts, that might take many months or even years.

        It would almost be better to ignore the whole idea of assigning income to the next month and instead focus on creating a Buffer category. This is where YNAB could even nag you to get Buffered by suggesting an amount that you can put aside and not budget/spend this budget period (month).

        To get Buffered, realistically, no one can expect a windfall. Reducing your spending (by budgeting and planning for future expenses) is the only solid way to get Buffered. Attempting to fool yourself by doing some funny stuff with months vs weeks is basically the same as reducing spending and honestly, I think that is anit-YNAB philosophy since it disconnects you from being hands on with the budget.

        Basically, YNAB has the Rules but the app itself doesn’t seem to help you follow them since I’ve read a whole lot of ways people are working around confusion associated with what the app shows you.

        YNAB touts this initial budget based on income you received except then it talks about forecasting for the “big bills” a few months down the road. But it provides no easy way to do that since you aren’t supposed to be forecasting.

        Anyways. I do actually like YNAB from an application point of view but I’m probably not going to end up using it. Maybe I’m an anomaly but I know what my regular bills are, when they are due and how much I need to have in my account to cover them. What I was looking for was a way to help plan for other expenses (vacation, remodeling, etc) and YNAB seems too limited (since you aren’t supposed to be forecasting) for this.

      • Seposm

        Remember YNAB has a budgeting method and a software. They can be used independently of each other.

        It is your software, you can use it how you like., I absolutely forecast, the vast majority of my income is salary and I can tell you how much it will be within pennies until September, So I already have my income which will come in tomorrow and the 28th entered in my transaction register, along with all my scheduled monthly bills. I have next months budget already in place. I have been forecasting the month since day 1 on YNAB. Even when I wasn’t buffered.

        I think it depends on where you came from before, I was like you I had my own system, I was making it, but not getting ahead like I wanted.to. For someone who is literally living paycheck to paycheck meaning that if a paycheck was late a few days, they would be in trouble, then I agree that they need to follow the “only budget what you have” mentality. For someone who had their finance managed before and want a better way to do it, then forecast the month at a time.

        For me the idea of the zero based was more important to me than anything else, the idea of give every dollar a job. So for me, I would forecast the month, plan where every dollar that was going, if I overspent in some category, then I had to figure out where it was coming from. Sometimes I would take from the same category next month, Sometimes, I would take it from another category, sometimes from a credit card. The accountability came in that I had to account for every dollar in and out. Zero based budgeting only works if you have an absolute starting and stopping point, monthly works well for that. And obviously, since that is how the software functions, it makes the most sense if you are going to be using the software.

        I disagree with the weekly/monthly thing being against YNAB philosophy, I think it is perfect, for the philosophy. For me, I have a low point each month, this month it is today. I get paid tomorrow, and about 70% of my monthly bills are already paid.Because I budget based on a 2 paychecks per month, next month, the same thing will occur, except my low point will be on the 10th. in May it will be on the 8th and so on. My mortgage comes out on the 12th every month, so I am really gaining ground each month. When August rolls around, I will have 3 paychecks again, my September bills will be funded from the 1st and 15th of August. that gives me an extra paycheck to use at my discretion(the last 2 of these my discretion was to use it as buffer). My only expenses that are not monthly or sporadic are our personal spending money which we pay weekly and tithing which I give when I get paid. the rest of my bills are based monthly and so they don’t really follow my pay schedule anyways. I know you mentioned that you had changed many of your bills to be bi-weekly, so your situation may differ. I simply stated it though because for many people it really could be a very viable way to build a buffer. Fooling myself would be saying that I make so much a year and dividing it by 12 and using that amount to budget

        As far as those big bills, I agree, there is nothing in the app that does remind you that you need to be saving. I know a lot of people use the category names as a way to add a note like that “Insurance $500 due 8/21″. I agree, that that is a potential room for improvement.

        One of the things that I love about YNAB is the flexibility. I tried the envelope method, and while i totally understood the concept, the reality is that it sometimes just didn’t work, and when it didn’t, it made me feel like I was a failure and blew the budget. not to mention that sometimes dealing with all cash isn’t always practical especially when you are married and are not always in the same physical location as the cash. YNAB allows you that flexibility of taking from one “envelope/Category” to give to another, or borrowing from next month’s “envelope” which may not be filled yet. I think the most important aspect of it though in my opinion is honesty, yes, I forecasted, but I forecasted honestly. I know what tomorrows paycheck is going to be and the one in 2 weeks I planned for my income and my expenses for the month, i just had to pay the expenses when the money was actually there. There is in my opinion nothing wrong with the forecasting. I read the articles on monopoly money and the argument that you would have to watch your bank account balance constantly to make sure you don’t go under. The truth is that you still need to do that until you have a nice buffer in place. Because, just because it says it is available, doesn’t mean that it is in your checking account, some of that may be cash, or in another on budget account. The mentality of What do I need to do with this money before I get paid again may be a good place to start, but it should be a very temporary state.

        On a side note, I also have a separate budget file for our summer vacation, I have categories like food, lodging transportation, entertainment. Obviously forecasted since it will happen in June. But it gives me a target goal to put on my vacation savings line on my real budget. I do the same thing for Christmas. Use the software in the way that makes sense for you.

  5. Mom

    We are fully buffered, so any paychecks coming in this month are budgeted for in April. When we get a month with a 3rd paycheck, the following month is flush and we top off any categories that need it (right now, that’s paying off debt)

  6. jivany

    OK, I’m new to YNAB but not that new to budgeting. In the last 5 days since starting my trial, I think I’ve started a new budget about 30 times now.

    I get paid bi-weekly and have a mix of bi-weekly and monthly bills. No problem. The bi-weekly bills get budgeted in monthly amounts (amount * 26 / 12), I can do the same for my paycheque.

    But what has me utterly confused in YNAB’s method is that even though I’ve set these as recurring bills/income on a biweekly schedule, YNAB won’t show them in the monthly budget view. So right now, I’m one full paycheque negative in my “available” for this month (since I have been paid once and get paid again next week) . That makes no sense to me. Sure, if you have irregular income then adjusting your budget on every pay day might make sense but I’ve got the most boring, structured money in/out flow there is when it comes to the “regular” stuff.

    YNAB touts the Buffer and not living paycheque to paycheque except that this model forces you to live paycheque to paycheque since you can only budget one pay period at a time.

    Or have I really missed something when setting this up? Maybe attempt number 31 will make it all come together for me? Any pointers?

      • jivany

        OK, I’ve quickly read through those posts and while I better understand the concept, I’m still scratching my head about how this is different than living paycheque to paycheque.

        Until you are Buffered, you are forced to only take into account bills that are going to happen before your next pay. That makes no sense for recurring amounts that are always the same (paycheque and mortgage/rent for example).

        Or is that the goal? Get Buffered so you don’t have to think about silly stuff like this?

      • mark

        You’re not being silly – these are legitimate questions. And yes, you are living paycheck to paycheck until you’re fully buffered. When I was still living paycheck to paycheck, the category naming structure you see in the screenshot above was the tool I used to keep track of what was due, when, and how much. In that way I didn’t need to fill out budgeted amounts to fixed bills ahead of time.

      • Victoria

        This is exactly how I see it, once buffered you can budget all your bills for the month but until then the goal is absolutely to live paycheque to paycheque whilst building up your buffer.

        This has been one of my hardest mindsets to break but once I did I realised that trying to spend the next paycheque before it was in the bank was the root of all my problems.

        Trying to get my husband on board with this is a whole different matter and why our credit card sometimes ends up carrying the difference into the next pay period where I pay it off but I’m slowly getting him there.

      • Jeff Ivany

        I think I get it now. What was causing the most confusion was that I am actually starting with one month of cash on hand (in addition to some other savings) so I guess I already have a buffer.

        When I was following all of the “setup” posts/etc, it kept referring to putting your “savings” in as income for the first month and then adding a budget amount to “take it out” and categorize it as some Rainy Day item. I mistakenly was looking at my cash on hand as “savings” when in reality it’s my buffer.

      • Joseph Clark

        It sounds like you understand, but just to clarify for you a bit more, all of your bills for this month should be paid for by that 1 month of cash on hand. Any income for this month should be assigned the income category for next month.

        Once you get paid, you can now start budgeting for next month, and it won’t affect your available to budget amount for this month at all.

      • Seposm

        Jivany, I was exactly where you are a year ago. And I may go against YNAB conventional wisdom, but let me tell you how I did it. First, I entered both of my paychecks for the current month. I know you aren’t supposed to budget money you don’t have, but i also felt that within the confines of a monthly budget, my options were limited. I had been paying my bills so I knew when certain bills were due and I never ran short of money doing it this way, I just made sure not to schedule some of the bills before the second paycheck came in. I know this is considered forecasting rather than budgeting. But my income is predictable.

        The second thing I did, was immediately start budgeting based on 2 paychecks not 2-1/6. as that first paycheck for the month moved before the month, I allocated the money for the following month. by doing this, I was able to use the 2 extra paychecks to become fully buffered. Once you are there, things change a lot. Then i would suggest you keep budgeting based upon 2 paychecks per month. Then, when you get the extra paycheck, I use it to really beef up some of the seasonal categories (Christmas, Birthdays, Vacation) or rainy day funds, or debt, whatever your needs are, having extra money is really nice.

        Incidentally, I still do some forecasting, I currently have my April Budget pretty much ready, and May in the works. I like this, because I know I have a large expense coming up in April and I have already planned for it. And what is budgeting, but a plan. If I make a mistake, I don’t let it get me down, I roll with the punches and figure out how to handle it, Besides, it is my budget, I am accountable for it. If I screw it up or fudge the numbers, I am the one who pays for it.

      • Jeff Ivany

        Interestingly, I don’t subscribe to the “extra two paycheques” idea for my bi-weekly pay. Instead I’ve tried to make everything bi-weekly to coincide with my pay period. Mortgage, loan payments, etc. This way I get extra debt repayments and thus reduce overall interest cost.

        Utilities are the only thing I pay monthly other than regular consumables (food, gas). I’ve even managed to get it so my home/car insurance is paid in advance on a yearly basis (with cash on hand).

        I’m realizing that I might not be the target market for YNAB.

      • Seposm

        I love YNAB, it has really made a difference in my life. I used to budget bi-weekly, based upon pay cycles. There is nothing wrong with having your bill coincide with your pay cycles, I have many monthly bills, some bi-weekly, some weekly and some randomly throughout throughout the month like fuel. While YNAB is based on a monthly cycle, you can still used it getting paid bi-weekly or any other frequency. They biggest key for me was to get to rule number 4. Once you have a month’s buffer, things change a lot. If you you have bills that come in every 2 weeks, I would budget them with the paychecks. Meaning that normally, you would have to pay it twice in a month, but twice a year would have to pay it 3 times, you can either split the yearly amount by 12 and budget it every month or budget what you will actually owe during the month you will get the money to pay it (meaning that if you get paid 3 times in January, you budget that from that money, not when it is actually paid)

        The biggest reason I would think you would want to use YNAB though is the to break the cycle of living paycheck to paycheck. When I was budgeting bi-weekly, it was because I had to calculate when I would have enough money to be able to pay the bills. Using YNAB, it disassociates the money in your bank account with what you spend. you spend what you budget if you are budgeting monthly and getting paid bi-weekly, it helps to disassociate the two. Save towards your buffer, and after a while, due dates become much irrelevant. If I wrote checks to pay my bills, I could write them on the first of the month and not worry about it, that is a wonderful feeling :)

        Good Luck, Stick with YNAB, it may not fit your current budgeting paradigm, it didn’t fit mine exactly, But if my existing system worked fabulously, I never would have been looking to change it.

  7. Alissa W

    This question “What does my money need to do before I get paid again?” was REVOLUTIONARY to me and the reason I jumped on the YNAB train. I always struggled with the monthly budget idea and now realize I was just a forecaster/spending tracker. Finally for the first time in YEARS I feel like I have control over my money and I’m making better decisions and saving more.

  8. Tom Shelton

    Until we are fully buffered I have broken down our budget using categories. I am paid twice monthly so I created master categories called 1st Paycheck and 2nd Paycheck (I know, very creative). I created subcategories for items that will be paid from each check. I also have a master category called Everyday expenses for things like groceries, fuel, auto repairs, clothing, etc. So, when I get paid we budget that check to the appropriate major and subcategory. There may be better ways to budget but this seems to work for us.

    • mark

      Hey Tom – that’s a great way to approach it!

  9. Tom Bushaw

    Mark, As “Mom” mentions above, once “fully buffered” (Rule 4, Live on Last Month’s Income), do you agree it shouldn’t matter when the paychecks roll in — you can budget on or near the first of the month (to match YNAB’s monthly budgeting framework) using the dollars you have (either from a recent paycheck and/or from the buffer). Of course, getting to “fully buffered” is a prerequisite and this can take time, discipline, some hard decisions, and all that good stuff…

    • mark

      Hi Tom – Yes. Once a person is fully buffered the monthly paradigm works perfectly. As each paycheck comes in you categorize it as “Income for next month” and handle it all in one session near the first of next month.

  10. Brian Franklin

    I currently get paid fortnightly. I believe it was thanks to some of your previous posts, Mark, that I started using the [Name] [Amount] [Date] naming convention as well. It looks like you have your categories sorted by Amount descending. I ended up sorting mine by date ascending, so 1st at top, end of month at bottom.

    In that way, I turned my budget into a champagne fountain (is that the most glamorous comparison a budget has ever gotten?), where you pour the money in at the top and it fills up each bucket/category as it goes down, and then spills over into the next, in priority order.

    Because my paychecks were variable (depending on hours worked), I took a different approach than the 1st paycheck and 2nd paycheck master categories.

    I ended up with master categories in an order that fit the pour-down arrangement as well:
    Monthly Scheduled — bills that have a certain date;
    Monthly Unscheduled — things that get replenished monthly like groceries and gas but don’t have a certain date;
    Buildup Scheduled — rule 4 things that have a deadline like car registration, yearly renewals;
    Buildup Unscheduled — rule 4 things that have no target date.

    It may not work for everyone, but it helped me speed up my budgeting process instead of having to jump up and down through the various rows trying to find out what the priorities were.

  11. chosenbyjesus

    About three days into YNAB I got the “only budget the money you have” concept. It literally changed my life. I am not kidding! About 4 months in I realized I had actually paid off debt (without even trying!) rather than staying the same or getting deeper in debt. This after 10 years of digging in and thinking I was moving forward.

    And yes, I’m paid biweekly! It works!

  12. Wyndee

    I like the idea of adding payment dates to the category title. I would think category notes would be good for that too. The way I always managed budget outlay for biweekly or weekly income is to go ahead and pre-enter all bill transactions that are due to be paid before my next check. So, when my income entry is automatically entered, I manually enter all scheduled bills up to my next scheduled income entry. Then, I go to my budget, balance those bill categories, then review and allocate what I have left. I have always wanted to equally allocate throughout all my bills each pay period, but it never seemed to work out right for me. I may have to use your idea to help me with that.

  13. gpamerritt

    After reading this excellent blog post and comments, it occurs to me that YNAB can scare the heck out of a “casually interested in budgeting” person. You have to really WANT it to take the time to learn YNAB, put it into practice, record everything, follow 4 rules, give every dollar a job, roll with the punches etc. etc. This is probably why there are is a high percentage of people on board that are familiar with Dave Ramsey – things have gotten so out of hand that they DO REALLY WANT TO BUDGET. Although that narrows down your prospective sales clients considerably, fear not – the number is still in the tens of millions – you just have to find a way to reach them all.

  14. Liz McD (@lizbianism)

    I started YNAB with a large buffer, so I didn’t really have the envelope budgeting learning curve that lots of folks seem to go through. But I can sympathize. By nature, I like to forecast and over-plan for the future. But I realized it was useless to do this, and it gave me no information that I needed.

    That said, though, you can certainly forecast with YNAB if it’s helpful. “Budget” with your imaginary money to your heart’s content, and use that negative number as a guideline for how much money you will need in the next week or month or whatever. For people picking up odd jobs for quick payment to get the bills covered, this kind of thing definitely makes sense. But in a fixed expense/income scenario, which is how most people live, you gain nothing by simply plugging in the same numbers over and over and over. That’s what I found, anyway.

    “No forecasting” certainly doesn’t mean “I have no idea what bills are due when, or whether I’ll be able to pay them.” I think that’s where some people get nervous. But there’s a YNAB method for that. I receive monthly income, but for expenses that occur at six or twelve month intervals, I divide the total cost by the number of months until it’s due, and then make sure that category is funded every month with that amount. It’s not necessary for me to forecast and go back and make sure I’ll have enough to pay it when it comes; I’ve already taken care of that, and just need to ensure I always fill that category and don’t steal from it. The money will be there when I need it. It’s an incredible “set it and forget it” peace of mind. For monthly expenses being funded bi-weekly (or whatever), as others have said, it’s just a matter of adding a little note to yourself that ensures you don’t forget what the full amount should be. But the principle is basically the same.

  15. Paula Brensinger

    I’m lucky – My husband and I are paid every two weeks, but at our current jobs, they are on opposite weeks. So there’s a check coming in ever week. We’re still living paycheck to paycheck, and haven’t been able to get buffered, but I am working on getting to the point that I’m funding all the categories every week.

  16. Dave

    “My money needs to handle all my wants and needs between March 21 and April 4th. It doesn’t matter that the calendar happens to turn over between paychecks. It only matters that I know which bills come due before I’m paid again.”

    If the calendar is not important, why does YNAB force people to use a month as the standard budgeting unit? If what matters is what my money needs to do between now and when I next get paid, then wouldn’t my pay cycle be a much more obvious and logical period for viewing my budget than a month? A pay cycle view would help reinforce the mindset rather than confusing people, as the enforced monthly view appears to do.

    • Melissa

      Agreed, I like to see the monthly reports but to switch the budgeting part of it to pay cycle view would be great.

  17. Melissa

    I’m paid fortnightly as we’ll and I’m still working YNAB out. A couple of thing I figured out…NAND correct me if I’m wrong: “Every other week” means fortnightly, this comes up when I schedule payments. I pay absolutely all of my bills – mortgage, rates, water, electricity, insurances, vehicle registration, pets, body corp – (all automated) the day after being paid fortnightly. Also another thing I worked out was that if you don’t have a one-month buffer, there will be a lot of numbers in red in the top section of the budget until the second payment of the month, then suddenly there’s a surplus. So either I have to get the buffer in place or ignore the red numbers. I’m prioritising my Baby Step 3 right now ie. get a 3-6 month emergency expenses fund, so the buffer will be my Baby Step 3b of the Dave Ramsey financial peace uni teachings.

    • Lynda

      Melissa, this is approximately where I am at. A lot of red numbers ( in the thousands) in the overbudgeted category at the top, as ive only entered in a fortnights pay but YNAB pushes you to enter monthly bill payments, this is where i come completely unstuck. Another thing you bring up is have emergency expenses fund before the buffer, oh hell, ill never have a buffer! :-/

      • Melissa

        Hey Lynda, I’m currently happy to just let the numbers be in red. I put it in my head that the figure in red will be the approximate amount that I will make on my next pay check. Therefore the figure in red is not bad, it’s good. I know I’m not living pay check to pay check because I’ve done Baby Step 1 and 2 so a lack of a buffer, in my circumstance, doesn’t mean I’m out of control. A fully funded emergency fund has a real world application (hello dental surprises, vet, death in the family, car parts, $20,000 in body corporate fees yes this happened to me) but a buffer is just to make a number in YNAB software be a different colour. That’s why the buffer is BS3b.

      • Aaron

        Don’t budget money you don’t have to expenses. Budget what you currently have to expenses that you will need to pay before you are paid again. When you are paid again, do the same thing. Then you have no red and no monopoly money in your budget.

        If there’s an over-budgeted number at the top of your budget you can’t trust your category balances.

  18. Lynda

    Thank you Mark for bringing my dilema to the forefront of the YNAB blog today! I feel a little like a super star and a super twit all rolled into one. Im still getting my pea brain around this fortnightly stuff and only allocating money to jobs for that fortnight. Ive been using YNAB to collate all my yearly bills and put them in the spotlight so I dont forget that I have to save for them, not just the monthly bills. Ive worked out all the annual amounts i need to put aside, and then ive worked backwards to half yearly bills, quarterly etc. It seems that I have this all wrong? I dont do this? I just put down my immediate bills to pay in a 2 week block and leave the rest until I have a buffer? Or am I completely on the wrong track? Also, our next pay falls on the 20th of March which means there is 11 days this pay covers in March and then 3 days for April. Another brain bender! Alas i could not do any live online beginner classes as the booking system is flawed and even though I change the time zones to where I live in the booking system I get confirmation emails telling me Im booked into 2am sessions and such with each booking, so it reverts back to US times! Argghhhh. My thoughts are I need face to face mentoring, im sure id get this within 10 minutes if someone could give me a visual demonstration.

    • mark

      Hi Lynda –

      No problem! If this post (and the emails we’ve exchanged) don’t cover it – let’s get together for some coaching! And like I said, you’re far from the first person to feel this confusion. It’s just part of learning the YNAB way.

    • LeiraHoward

      In reply to your comment:

      ” Ive worked out all the annual amounts i need to put aside, and then ive worked backwards to half yearly bills, quarterly etc. It seems that I have this all wrong? I dont do this? ”

      I think you are correct, you do break things down so that you know how much you need to be putting in each category monthly in order to have the funds on hand when the future bill hits. That’s the budgeting part. Something like a life insurance policy that is due every 6 months would be in this category. If you pay $60 every 6 months, you’d want to save $10 a month to be sure you have the funds on hand when it is due. (More to start with if the bill is due sooner, but lets ignore that right now because it complicates things).

      But since you don’t actually have the money on hand (yet) at the beginning of the month to “fully fund” (pay) all of those categories, Mark is suggesting that you break it down even further to paycheck (or half-monthly) amounts. It might be simpler to think of it as two budgets per month. One budget for the first paycheck, and one for the second paycheck. The two budgets don’t have to have the same things in them, though.

      For instance, when paycheck #1 comes in, you might say that it pays for your mortgage/rent, your car payment, and half your grocery and gas for the month. (obviously, other stuff too, but this is an example, so lets make it simple).
      Then when paycheck #2 comes in, you say that it pays for your utilities, car insurance, and the other half of your grocery and gas for the month.

      For your categories that aren’t due for a while, you have some flexibility. You know that by the end of the month, you need to have $10 in the life insurance category, but you can do it however you want. Maybe that is as simple as saying that you put $5 in the life insurance category from paycheck 1, and another $5 from paycheck 2. Or $7.50 from paycheck 1 and $2.50 from paycheck 2. Or the full $10 from whichever paycheck.

      Whatever way works for you, the end result is that at the end of the month, after all your paychecks have arrived, your long-term categories should be filled with the amount you figured they would need per month. (Any surplus should go toward building your buffer.)

      The benefit of doing things this way is that your budget numbers will always show the actual amount of money that you currently have on hand to be able to spend right now (no worrying about bounced checks or insufficient funds to make an important payment). The downside is that you basically have to budget twice a month, and also have to think about what you can pay now vs. later while you’re doing it (though that is easier once you’ve figured out how to do everything, and goes away completely once you’ve got one month’s worth of income in hand (the “buffer”).

      That said… I’m not fully buffered yet (about 3/4 of the way there) and I use a completely different method which makes sense to me (and probably breaks several YNAB rules). :) But my husband is paid weekly, so that changes things for us. :)

  19. Lynda

    I wish there could be a tutorial for fortnightly pays versus monthly budget, how to set it up. It does still seem a flawed system, but im only new and perhaps the penny will drop one day…

    • Allison

      Hi Lynda,
      I’ve been a YNABer for 2 years now, and I’m paid bi-weekly. It really can work out great! I don’t know that I can frame it in a way that’s any different than what Mark or others have already said, but I’ll try.

      Before you have a full buffer, timing still matters a lot or else you might bounce a check. After your buffer is full, you are thinking about dollars you already have [in your buffer], so you know that you can spend them at any time.

      Imagine your budget like an archery range. Your dollars are your arrows. Fittingly, your targets are your financial needs/goals. Without a proper buffer, you are really concerned with when the arrow delivery boy will replenish your quiver because you do not have enough arrows to hit all your targets. However, if you manage to buildup a large enough pile of arrows, you don’t even notice the delivery boy anymore. If he’s late, you’ll be ok. You can fire away at your goals because you already saved up enough arrows to cover this round. If some new unexpected target appears on the field, you still know you’ll be alright. You already have enough arrows to shoot it down.

      Does that help? When you’re buffered, it just so happens that the “arrow delivery boy” shows up every other week.

  20. Beth Anne

    I never thought that getting paid biweekly (without a buffer) would be an issue. Maybe it’s different for me as this is the only way I have ever gotten paid…in any full time job. I had a part-time job in college that was paid monthly but it was worse in the fact that you got paid the 4th business day of the month so it varied from the 4th to the 8th of the month.

    I also have set up my categories like Marks. I put the type of bill the company the cost and the date. I have toyed with doing a master category “1st check” and “2nd check” but that got kind of complicated.

  21. Melissa

    I think with YNAB we are all affected by numbers that are in red and numbers that begin with “-” (negative sign). However if you’re getting your bills paid on time or early, with no debt except the mortgage then I think these numbers are just a suggestion of the minimum amount we need to get on the next pay check before the end of the month. If you haven’t got a Baby Step 1 Emergency Fund ($1000) then I think the buffer is a great place to start. I only discovered YNAB after starting Financial Peace University so I had my BS1 and BS2 done and dusted. If I was a financial mess with absolutely no structure I would probably get my buffer together first because it’s easier than putting away $1000. It could be as easy is just starting a Category named “Buffer”. Or I could just not purchase silly things one month.

  22. stephen

    One word…buffer. When I started I was a “see what we spend and figure out how to pay for it when the credit card comes due” budgeter (yikes). When I started YNABI pared down my expenses by being aware of what I entered and made sure when I budgeted my money by fortnightly paycheck I had a category budgeted for “buffer”. It was hard to pair down, pay down old debts and leave buffer money. However, after about a year later I am budgeting for next month with this months paychecks….so it makes no difference when I am paid since because next month is filled before I need it. Plus, the money I used to put in “buffer” gets to go elewhere …like investing or saving for a new car. Like I said…hard at first but very freeing in the end. Love YNAB!

  23. LeiraHoward

    My approach (which breaks YNABs rules) is instead of “budget what I have,” I “budget what I earned last month.” This is the ultimate goal of YNAB, but can’t be really done right until you actually have saved up enough money to have one month’s pay on hand.

    *Note: All numbers below are fictional for the sake of this example. *

    Basically, when we started, I knew that the previous month, my husband had earned $4,000. But we only had $1,000 on hand (in various accounts). Our paychecks were regular, and weekly.
    So, I created an “imaginary money” category in YNAB and budgeted $-3,000 to that category. (Yes, a negative number). This basically represented the amount that we needed to earn in order to be fully buffered. And made it so that I magically had $4,000 to budget for the month.

    Now- of course, I didn’t REALLY have that money, so couldn’t pay all of the bills right away. However, I could use the number to determine what should be put in each budget category, and then use the amount budgeted in each category to know what we could spend for the month in that category. (And since I was using a credit card for these purchases and paying it off at the end of the month, I knew I wouldn’t cause problems with the checking account.) And by only spending the budgeted amount, I knew we’d spend less than we had earned last month.

    Any extra funds left over after budgeting “last month’s pay” went to decreasing the imaginary money (buffer) category. Right now, it’s getting close to being gone. When it is completely at zero, (projected date: August 2014) I will have one month’s pay saved up and can hide that category forever. :)

    I just had to be careful to look at my actual bank balance to avoid spending before the next paycheck came in. Since my husband is salaried, I entered in a transaction for each payday using the base pay for each week’s paycheck, and set those to “Income:available next month.” Obviously, we did not yet have the money, but I could use the forecasted balance to know when I could schedule future payments (for instance, I could schedule a credit card payment after a payday). I would go ahead and enter those into the register for the month, so I could see when they would draw from the account and be sure to not overdraft the account with other purchases.

    And yes, this breaks all kinds of YNAB rules, but it makes a lot of sense to me and since I didn’t take a YNAB class and was just moving to YNAB from Quicken without any real instruction, it is what I set up that felt intuitive and made those numbers on the budget screen work without us being buffered.

    The problems with this approach: obviously, it would be easy to look at the category balance and spend money that you do not yet have, so using a credit card (or cash) or looking at the actual register (including looking ahead to be sure you won’t deplete it too much before the next check) for budgeted purchases is probably needed for a while to prevent overdrawing your account. And if you did not receive a paycheck for some reason, you’d be in trouble. And also this won’t work for those whose paycheck amounts fluctuate greatly (getting MORE than you anticipate is fine, getting LESS… not so much.)

  24. Vicki

    I get paid every other week and I’ve found the simplest way to deal with it is to budget as if I only receive 2 checks every month. Then twice a year when I get an extra third paycheck I can use it to build my buffer or pay off debt. After getting a 2-week buffer, I now put it towards my debt.

  25. Pauli Colburn

    This was so helpful! Our main income is our Social Security checks; my husband’s comes on the 3rd each month, and mine comes on the 4th Wednesday of each month. So my dollars come on a different date each month! Add to this (thankfully) my husband picked up a part time job that pays him every 2 weeks. It seems I’m always shifting dollars around, especially since we had a major car repair this month and I was computer-less for about 10 days in Feb. Thanks to YNAB, a portion of those repair dollars were already set aside. I also liked your essential categories’ summary–that will help me to “think” like that. Thanks so much for not only creating YNAB but for continuing to improve it and educate us.

  26. Kelly

    I understand the shift in mindset, however, it would be much better to automate the allocation of a fortnightly payment across periods by scheduling in fortnightly income or payments from a particular date, and it auto calculates. I’m using the trial and the admin with payments/incomes (that are contractual/fixed) at different frequencies is a nightmare.

  27. frederick johnsen

    Totally lost. I get paid every two weeks but in trying to budget my monthly expenses it all becomes confusing because I have more bills than I have cache and then I have more cache then bills once I have paid everything out of my one paycheck, which I really don’t because some bills come after the second pay period but YNAB really doesn’t seem to show me what I need to know. Am i confusing you? Good, that is how I feel looking at YNAB and trying to figure out how to reflect what I actually have and what I need to pay during a given pay period.

    • Tom Shelton

      Hi Frederick,

      Here is how we dealt with our similar situation. Until we are fully buffered I have broken down our budget using categories. I am paid twice monthly so I created master categories called 1st Paycheck and 2nd Paycheck (I know, very creative). I created subcategories for items that will be paid from each check. I also have a master category called Everyday expenses for things like groceries, fuel, auto repairs, clothing, etc. So, when I get paid we budget that check to the appropriate major and subcategory. I hope this helps.

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