Upon contemplating how to implement our first budget, I ran into an inevitable problem: how to cash flow monthly expenditures. Having worked in retail for large corporations, I understood that other people had a similar problem. When it came time to pay their bill, some would say, “Well, I don't get paid until Friday. Can I make partial payments?” I had to find a way to avoid this problem and stay current with all of our bills.
Perhaps you have the same issue. You can't quite figure out how to easily pay all of your bills on time. Or maybe you're dealing with stress from barely making enough money to pay your bills in the first place. Things can get twice as complicated when you have a variable income. What do you do at that point?
There are three steps you can implement so that you can easily pay all your bills on time:
- Use this month's income to pay next month's bills. This is the most reliable way to make sure you have the cash to pay all your bills on time. To get to the point where this becomes feasible, you must drop your expenses and raise your income to have this “1-month cash buffer.” You know that you have enough money to get this system in place once you can pay all of this month's bills on the 1st of this month. Allow me to explain. During the month of May, we wrote down all of our paychecks in a list and at the end of the month we totaled that list. Whatever the total was, we budgeted it for the month of June. That way, we spent only the money we had ACTUALLY HAD in our checking account. As June progresses, we will only be spending the amount of income we had in the month of May. Meanwhile, June's income will be filling our checking account which will prepare us for July. This method assumes that you have at least one paycheck a month. If you're commission-based, you may want to budget according to averaged timeframes. To understand other ways this helps you pay your bills on time click here!
- Prioritize your expenditures. When you have variable income this is especially important. Start by writing your list as expenses pop into your mind. When you've maxed out your list, put check marks next to the items that are essentials (things you need for survival). For example: Food, Shelter, Utilities, Transportation, Reasonable Clothing, etc. Put these items on the top of a second list and order them according to your specific situation. Then add all the non-essentials (things that help you live a productive life and enjoy life). Prioritize these things as well. In the end, you should have a master list. Cash flow your income to pay for these expenses in this prioritized order.
- Create 7-day advance reminders for all non-auto-pay bills. Of course, you want to make sure you set up auto-pay for all bills you can. For those bills you can't, use a reminder system such as Things to keep you on track. I use 7 days as a rule of thumb, but you can adjust as needed. Once your reminder pops up, stop everything you're doing and pay that bill!
There you have it. Follow these three steps and you're on your way to paying bills with ease.
How do you currently pay your bills on time? What are some tips and tricks you use to effectively manage your budget?