how to budget by paycheck

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If you’ve been struggling with sticking to a monthly budget, the budget by paycheck method could be the solution you’re looking for.

If you get paid more than once a month, it might make more sense for you to budget every time you get paid.

I’ve been using this budgeting method for years- it’s how I stuck to a budget and was able to pay off over $15,000 in debt!

What is the budget by paycheck method?

The budget by paycheck method is simple: you make a budget every time you get paid.

With each paycheck, you budget all of your money (until the next paycheck, when you budget again). This is an alternative to monthly budgeting, where you only budget once a month (regardless of when you get paid).

Why should you budget by paycheck?

There are many reasons why the budget by paycheck method works so well. 

Many people are doing this instead of monthly budgeting- most of the questions I get are actually about the budget by paycheck method. Here’s a few reasons you should try it:

1. It keeps you thinking about your budget more often.

With a monthly budget, you set your budget at the beginning of the month- but then it’s easy to forget about it for 30 days. With the budget by paycheck method, you’re making a plan for every dollar of your pay, and you check in again every time new money comes in. 

2. It helps to break the cycle of living to paycheck to paycheck.

Since you’re budgeting for every dollar of your pay, you’re planning all of your spending- and you can plan it so that it lasts until the next payday. Plus, you also get to budget for savings every payday, so there will be some money set aside for a rainy day. 

3. It’s easier to predict your spending for the next week or two, than for the next month.

One major problem with a monthly budget is that it’s hard to guess how much you’ll spend in the next four weeks.

For example, it’s hard to say if you’ll need to spend $500 or $700 on groceries this month, as you might run out of something pricey or forget about a major bill that’s cutting into your food budget.

With the budget by paycheck method, you can easily think about the bills you need to pay in the next two weeks, and what food you need to buy in that time frame. If you’re about to run out of something more expensive, you can plan for that, too.

How do you budget if you are paid bi-weekly?

If you get paid bi-weekly, the budget by paycheck method is perfect for you! This also applies if you get paid on a weekly basis. If you want to budget every time you get paid, you will reap the benefits of this method.

What do you need to budget by paycheck?

To get started, here are the tools you’ll need:

  1. A monthly calendar. You will need a place to write down when your bills are due, so you know what paychecks to pay them with. I recommend color-coding your bills for each pay. For example, you can highlight bills you pay with the first pay of the month in pink, and bills you’ll pay with the second pay of the month in green. 
  2. Optional: A bill reminder sheet. If you want to make sure you never miss a bill (there’s been a time or two I forget putting one in my calendar!), use a bill reminder sheet like this one to stay on track.
  3. A budget by paycheck template that works for you. There are printable templates you can print off at home, spreadsheets, or you can download a budgeting app like Mint to keep track of spending.

How the budget by paycheck method works

1. Start by entering all of your monthly bills on a calendar (on the days they are due)

You can highlight them in different colors to correspond with the paycheck you will pay them with. You’ll also want to enter your pay dates! This calendar printable in our shop is perfect for this.

If you’re not sure what bills you have to pay, use your bank and credit card statements to see all of the bills you paid last month. 

2. Optional: track your bills with a bill reminder sheet

This is an easy way to make sure you never miss a bill on your calendar. Plus, if you ever remove a bill or add new ones, you can stay organized and on top of it all. Every time you pay a monthly bill, simply check it off on your tracker. At the end of the month, check it again to make sure you haven’t missed any. 

3. Write down your paycheck amount and date

You can do this on our budget by paycheck printable templates and spreadsheets. A pen and paper also works just fine!

4. List the bills that are due between now and your next payday

Use your calendar to see what bills are due between today and the next time you get paid. Write in the name of each bill and the amount that is due. Note: this is only your fixed monthly bills, or the ones that stay the same every month. Examples of bills are rent/mortgage, insurance, phone bill, internet bill, credit card minimum payments, and your car payment.

5. List your variable expenses

This is where you can enter the expenses that change from month to month. Examples of this are groceries, dining out, transportation, utilities, shopping, and health/medical expenses. 

You can use your debit card for these expenses, or you can use cash envelopes, too. Cash envelopes can be helpful when you’re trying to watch your spending. Simply write an expense category (like shopping) on a blank envelope, and put your budgeted amount in cash in this envelope.

This can help to curb over spending because you can see exactly how much money is left to spend.

Calculate how much you have left over after your bills are paid, as this will give you an idea of how much you have left to spend (simply subtract your bills from your paycheck amount). We will look at savings and debt repayments next, so if you can, leave a little room for these, too. 

I recommend checking your bank or credit card statements for the last week or two to get an idea of how much you typically spend. 

If you want to spend less, focus on the necessities like groceries, transportation, utilities, and health/medical expenses. Then budget much less for the non-necessities, like shopping. Keep in mind this budget is only for the next two weeks- so you can always change these amounts again on the next pay!

6. List the savings contributions you want to make

Once you have paid your bills and ensured you have money for variable expenses like food and transportation, it’s time to focus on savings! 

Here is a simple savings plan (in order) that covers the essentials:

  1. An emergency fund (more on that here!) for unexpected expenses, like losing your job
  2. Sinking funds for each of your expected, planned purchases (like a car, a down payment on a house, or a vacation)
  3. Retirement savings

You should have money saved for unexpected events in life, so that you’re not worrying about your car breaking down or being laid off from your job. 

You should be saving up strategically for the expected things that you want, whether that’s buying your first house or getting your first car. 

And of course, if you plan to retire someday, you should be putting money aside for retirement (it’s NEVER too early to start- in fact, the earlier the better). 

7. List any extra payments you want to make on your debt.

If you have debt to pay off, and if there is money remaining to budget, you can make extra payments to ensure you’re paying it off quickly. 

Should you pay off your debt before saving money? 

This is a question that comes up often, so I thought this would be a great chance to address it! If you are in debt, it is beneficial to pay it off as quickly as possible. When your money is tied up in debt repayments, you can’t save that money or use it for any other goals. 

That being said, you should have an emergency fund in place before aggressively paying down your debt. Typically, an emergency fund is 3-6 months worth of living expenses- and it can take some time to save up this much money. It’s totally fine to start with a smaller amount, like $1000, until you are debt-free. 

The reason you should have an emergency fund before paying off your debt is simple- it keeps you on track to reach that goal. 

If you have $0 in savings and start to pay off your debt, what will you do if an emergency expenses pops up? You would likely need to use a credit card and go into even more debt. 

If you have an emergency fund, you could cover the expense in cash- and continue to watch your debt balance decline!

8.  Keep track of your money until your next paycheck, and enter your actual amounts spent.

Now that you have a budget made, keep track of how much money you actually spend until your next paycheck. You will want to do this for each category- bills, variable expenses, savings, and debt.

This is how you will see how closely you follow your budget, and make adjustments to it the next time!

Budget by Paycheck tools you can use to make budgeting easier

1. Budgeting apps

There are a variety of great budgeting apps out there that make budgeting from your phone a breeze. 

I’ve been using Mint for years and I love it- it’s free to join and it tracks all of your spending for you!

2. Budget by Paycheck worksheet

Check out our budget by paycheck worksheet on our shop- it’s one of our best-sellers! It is a budget by paycheck PDF file that you can print off for each payday. 

It walks you through the steps and lets you enter the amount you have left to budget as you go. 

3. Paycheck to Paycheck Budget Spreadsheet

If you want an easier way to budget, you can use a spreadsheet. Spreadsheets are great because they do all of the calculations for you (no calculator required). 

We put together a budget by paycheck spreadsheet that is ready to go- it already has the formulas you’ll need, and a transaction tracker for your variable expenses! 

The transaction tracker is probably my favourite part- simply enter each transaction you make and the category is falls under (like food or shopping)- and your budget totals will be instantly updated. 

If you know how to use Google Sheets or Excel, you can also make your own budget template.

4. Monthly calendar

You can use a monthly calendar printable like this one to write down when your bills are due and when you get paid. 

When you get paid, you can look at your calendar to see what bills need to be paid in the next two weeks.

Want to master your budget? Here are some of my favourite budgeting tools:

Trim is an app that constantly works to help save you money! Here’s how it works: once you link your credit or debit card, Trim helps you to cancel old subscriptions, set spending alerts, and automatically fight fees. They can even negotiate your monthly bill costs for you! Sign up for Trim here!

Credit Karma allows you to check your credit score online- and it’s completely free! You can check in on your score as often as you like, too. I’ve been using Credit Karma for many years now to keep on top of my score. Sign up for Credit Karma here!

Acorns automatically invests your spare change for you, making it easy to reach your savings or investment goals. Here’s how it works: link your credit or debit card, and Acorns rounds up each transaction to the nearest dollar- then invests the change for you. You can even set up recurring investments (as little as $5) on a daily, weekly, or monthly basis. Get $5 when you sign up for Acorns today!