For most people, this is once every two weeks. Sometimes it's weekly, sometimes it's monthly. Either way, it's a regular interval, and it's the best time to decide how you're going to spend your money. Make it a rule that you don't spend any of your paycheck money until you've worked out your budget.
2. Make a list of all the things you'll need to pay for until the next paycheck, such as:
- Rent/mortgage
- Utilities
- Vehicle payments, insurance, maintenance (e.g. oil changes, tire rotations)
- Debt (credit card payments, student loans, doctor's bills)
- Gas
- Tuition, school supplies
- Food/groceries
- Health insurance
You can also opt to pay for a fraction of something that isn't going to be due until after the next paycheck. For example, if your rent is $800 due on June 1, you just got paid $700 on May 12, and your next paycheck will be $700 on May 26, it may be wise to set aside $400 from this paycheck for rent so that you only need to take $400 out of your next paycheck to pay for rent.
4. Add up all of the amounts (we will call this your regular expenses) and subtract it from your paycheck amount. Do you get a negative number? Then you are living way beyond your means. If you have money leftover, split that money up into a few groups:
- Flex money. This should be about 10-20% of your regular expenses. It's for if something you need to pay for turns out to be slightly more expensive than you anticipated. This can happen with utilities, or if gas prices suddenly go up, or you get a flat tire.
- Savings. Ideally, this should be about 30% of your paycheck, although even 10% (if you do it consistently) is pretty good. Build up enough savings for an emergency fund (about 4-6 times your regular expenses), then start saving money to invest.
- Spending money. This is whatever is leftover after you subtract flex money and savings money. It's what you'd spend on things like clothes, eating out, movies, gifts, and anything fun, basically. If you start to cry when you realize how little fun money you have, then you need learn How to Reduce Your Expenses.
5. Put everything but your spending money out of reach. The easiest way to do this is by leaving everything (except your spending money) in the bank. Withdraw all of your fun money in cash, and leave your debit card (and credit card[s]) at home. Use the cash for anything you want, just make sure you make it last until your next paycheck. You might not want to carry it on you all at once, but having physical cash will help you keep better track of your fun money than using a card.
