"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:
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:
- Enter income.
- Budget income.
- Follow budget.
It doesn't matter whether you're paid daily, weekly, bi-weekly, fortnightly, or monthly - just budget whenever money enters your life.