How to Develop a Payday Budget Routine

Creating a monthly budget is an important way to keep track of the money you earn and spend. A budget can also help keep your monthly spending in check, so you can still achieve your savings goals.

In a previous article, we introduced a simple plan —50/30/20— that offers a good rule of thumb for crafting a budget. You may also want to consider another technique: a payday budget routine. Think of a payday budget routine like a road map. By allocating a destination for every dollar you earn, you reduce the chances of getting off track with your budget each month.

A payday budget routine can be especially helpful if you find yourself stretched for money between paychecks. Having a plan in place can also help you avoid making impulse purchases at the expense of your financial goals, such as paying your bills in full (and on time) or setting aside some money for savings each month.

The following three-step plan can help you get started:

  1. Divvy up your paycheck. Next, divide your monthly take-home pay (after taxes) into different allowances such as groceries, gas and credit cards—either by percentage or dollar amount. If you’ve noticed that the expenses portion of your budget is difficult to manage, it may be helpful to use a spending tracker tool. Consider starting to execute this plan as soon as your next paycheck arrives.
  2. Stick with your plan. By knowing that each and every cent of your paycheck has a destination, this routine may also help you look at your paycheck in a new way—as less of a lifeline and more of a way for you to get one step closer to some of your big life goals.
  3. Gather your pay stubs. To begin, you’ll need a copy of your latest pay stubs for the month. If you receive your paycheck through direct deposit, contact your HR department if you need help accessing your pay stubs electronically. If your pay varies from paycheck to paycheck or you work multiple jobs, the Consumer Financial Protection Bureau has an income and benefits tracker that can be helpful for tracking your monthly income.

    1 April 18 is the tax filing deadline in 2023.

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The articles and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. Consult your attorney, accountant or financial or tax adviser with regard to your individual situation.