Budgeting Basics (Part 4): Why You Should Get a Month Ahead

Budgeting Basics (Part 4): Why You Should Get a Month Ahead

Of the many things I learned from Dave Ramsey, this is not one of them. This is something my mother-in-law suggested we do early in our marriage. She had been the single-parent of 3 children for over a decade at that point, and was (and still is!) an amazing budgeter. Since this is the only piece of financial advice she felt was important to impart to us before we started our life together, I knew to take heed and try to implement this as soon as possible. I would not hesitate to say that this has been the single most impactful decision we have ever made in terms of managing our money. Here’s why:

We have not fought about money in 3+ years of marriage

Yes, we have disagreed about where our money should go in many different situations, but we have never had an actual stressed-out, knock ‘em down, drag ‘em out fight about paying bills on time, or fought about if we have enough money to make it through the next two weeks. I have counseled a handful of people, and the biggest roadblock to getting on a budget and having some financial stability in their lives seems to be that their paychecks and their bills don’t seem to line up. I’m not saying it’s not possible to have financial stability when living on the paycheck you’re bringing in during the current month, but I am saying it adds complexity, and increases the likelihood of overdraft and/or bouncing a check when doing something as simple and paying the electric bill.

It gave us a holistic view of our monthly finances

When you have a full month’s pay in your bank on the 1st of the month, it allows you to look at your finances in a whole new way. I remember laying out my first budget, and I was immediately frustrated by the fact that I could not budget the same every month. I had a “first half” and “second half” column for the month, and had to figure out when my paychecks came in to make sure I didn’t run out of money. Most of my bills were due during the one half of the month, so I always seemed to come close to running out of money before my next paycheck came in, depending on the month (I got paid every 2 weeks). Once we got a month ahead, I knew exactly how much money I needed for the month, transferred it into my main checking account, and could pay bills as they came in. No more calculating and re-calculating whether or not I had to pay a bill now or later, I just paid it and forgot about it. Simple as that!

It gave us an extra cushion in case of emergency

We have always had some money in a savings account in case of emergency. By being a month ahead, it gave us an extra cushion in case something unexpected came up. I recommend having at least $1,000 in a liquid savings account in case of emergencies, but being a month ahead also gives you an extra couple-thousand dollar cushion (depending on expenses), allowing you to breathe a little easier when all your other cash is aggressively paying down your debt.

So, how did we get a month ahead?

Now that you’ve seen that being a month ahead can have great potential impact on your financial life and even your marriage, how do you get there, and when should you start? Most financial experts will tell you to pay off consumer debt before focusing on saving up any money outside of you emergency fund. I found out quickly that it’s hard to even consider paying off my debt when just paying the bills on time is stressful enough! I recommend that once you have an emergency fund in place of $1000, you should start saving money to get one month ahead.

  1. Get on a written budget. Follow the steps laid out in Budgeting Basics Part 1, Part 2 and Part 3. This will allow you to see where you money is going so you can cut out unnecessary spending and direct your money toward your priorities.
  2. Pay yourself first. This mantra has been repeated more times than Justin Bieber has been asked to stop making music, but it’s true. Once you know roughly how much money you can save each paycheck, make it a priority to pull that money out of your account and put it into savings. We created an account and named it “Month Ahead”, so we knew what we were saving for.
  3. Save enough to match one month of income. For most people, this is the equivalent of two net paychecks. Don’t count the 3 paycheck months, as that usually only happens twice a year. Once you squirrel away one month of income, you are ready to plan your upcoming month using that income.
  4. Change your direct deposit to your “Month Ahead” savings account. This may not seem important, but it will help automate your process, and help you STAY A MONTH AHEAD! This will allow you to keep next month’s budgeted money out of your hands and allow it some R&R while it waits for it’s turn. Remember, next month’s money is not this month’s clothing budget.

Give these 4 steps a try. I guarantee (which I don’t do often) that you will experience more financial peace by being a month ahead than you have ever had.

In the final part of the Busgeting Basics Series, we’ll talk about Your Savings Bucket and how it will help you plan for infrequent expenses.

Comments: Have any of you gotten a month ahead? Do you enjoy the freedom? Who thinks I’m crazy for suggesting you do this BEFORE paying down debt? Let me know if you have found a better way of managing your monthly finances!

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Comments

  1. I haven’t gotten to the point where I can budget a month ahead but I’m wanting to get there. I think I will eventually though. I’ve certainly thought about it.
    Right now I have my budget set out to December though so I don’t generally have to scramble. I like to see if I can tweak it and I do budget for bi-weekly. I also love to see those 3 paycheck months–that helps out with everything!

    • We got a month ahead when our expenses were low and have kept it over the last 3 years. We made things work bi-weekly, but it was a bit frustrating to have to do so much planning just to make sure we didn’t miss any bills. I LOVE that you have your budget planned through December, same here :)

      • Is it sad that I’m working on next year’s already? I love tweaking my budget and figuring out goals based on it!

        • Haha! Absolutely not!! I have a picture of myself on the morning of my birthday; Two computers open, budget planning/forecasting our next years’ finances. It’s great to set goals and then reverse engineer them so you can actually get there!

          • This is true! We have a picture of him in a robe, budgeting next to his gift of a crystal decanter and a nice bottle of scotch…pretty sure he’s never had a better day! (well, hopefully the wedding day and the day our son was born were better? ;D)

    • Start with a smaller goal. I added up my utility bills and made that my first Goal. Then once I reached that I did my automatic withdrawals for my second Goal. Then I did my mortgage payment as a third Goal. My last goal and the one I am working on now is the full month of pay. Even just getting utilities saved is a big stress reliever.

  2. Pasadena says:

    Hi -first-time commenter here ;-)

    I do. I think that’s the very first financial step I’ve taken when I moved to the US. In my country, we get paid once at the end of each month. So I’m used to living with last month’s income. I didn’t even really think about it. It’s just that instead of getting next month’s money in one lump sum every month, I get half of it two weeks sooner.

    The other step I’ve taken is your fourth. I divided my direct deposit into my EF, my sinking fund, a few saving accounts, and whatever’s left goes into by “Buffer” account. Every last day of the month, a fixed amount is automatically transferred from the buffer into my checking account. And that’s what I have to spend for the coming month.

    I actually save three paychecks in the buffer, not two. Since I automated the buffer-to-checking transfer, I needed to account for transfer delays, which could be a problem if the second payday is too close to the end of the month.

    (Sorry for any English mistakes !)

    • Pasadena, nice work! It sounds like you’ve had this down from the beginning. Isn’t it great spending money from last month’s income? It’s been our biggest financial stress reliever.

      I agree that being 3 paychecks ahead is definitely better, especially since some months’ paychecks arrive right at the end, and you want to make sure you have all the money in there at the beginning. I am in the process of automating all of our payments and trying to put everything at the beginning of the month, so I may look at getting 3 paychecks in our “Month Ahead” account.

      And your English is great! Thanks for dropping by :)

      • Pasadena says:

        Thanks ! Automating everything is really the greatest thing you can do for your finances. Then separating my “buffer” (YNAB terminology, I like it) from my checking account was the icing on the cake. Doesn’t prevent me from micro-managing it all, though. *sigh*. Now I just micro-manage passively, if that makes any sense.

        If you have all your money ready at the beginning of the month, you don’t care when your payments are due (as long as they’re automated, of course).

        • I have heard great things about YNAB. I may ned to check it out soon :). I love excel and how I can tailor it to all my budget needs, so I don’t know how I feel about paying for another piece of software, but it may be worth it.

          I totally micro-manage all of my accounts. It’s fun for me, though, like a game. I try to find ways to save money each week and love tracking all my spending to see where we can make adjustments. Again, for me it’s all about aligning my spending with my priorities and if I see that we’re blowing money on things we don’t really care about while neglecting other areas that we do care about, we can make adjustments.

          The only downside to automated payments is that if there is a mistake, you may get used to not double-checking your bills and end up over-paying for a few months before you catch it. But I will be writing more on that later :)

  3. Definitely like getting ahead a month or two. We got lazy the last few months, but still project a month in advance. I separately go at least a quarter ahead to do general guestimates and then work with my wife once the month comes to prepare that month in advance but with a form that’s been developed by me well in advance.

    • I love setting up the budget! I actually built each month into tabs in excel and have the year projected at the end of December of the prior year. We then touch base before every month to see if there’s anything we missed and look at areas that we went over/under budget from the previous month. This helps us keep on top of any excess spending and to transfer out any savings we have at the end of the month toward debt payoff or savings.

  4. Hi! First time here :) Enjoyed this post a lot because this is how I manage my finances. I always do everything one month ahead so I feel safe and secure, and I know I have enough to cover the next month and maybe even more. My BF and I don’t fight about money either but we are both on the same page with money.

    • Hey! Thanks for stopping by :) I wish everyone budgeted this way. I think there would be less road rage, less stress and a lot more hugs! And having your significant other on the same page is such a blessing. My wife and I have been on the same page since we got married and it’s made a WORLD of difference. We seriously never fight about money and I LOVE IT!

  5. Wait, I’m confused about what you’re contrasting being a month ahead with – are you talking about paying bills and such with money that hasn’t come in yet?? We get paid on the 25th of the month so we use that money to pay the following month’s bills. Is that what you mean? Or using the money you earned in August, for example, to pay October’s bills?

    I’m so glad we’re paid monthly instead of biweekly – that seems a lot more complicated and irregular!
    Emily @ evolvingPF recently posted..Needs Becoming Wants: My Weekend WithoutMy Profile

    • Hey Emily, just as you have stated. The money is all in the account before the month begins. I used to pay my bills as the money came in during that month, and it was super stressful. I would have to organize my whole budget in two halves, and since Friday’s landed on different days during the month, my budget would change dramatically from month to month. We then just decided to save up a few grand and make sure ALL the money was in our account before the month began, enabling us to relax a bit and pay our bills at the same time, every month.

      And yes, getting paid monthly would be amazing, unfortunately I do not have that option here (yet). :)

  6. Just to throw a wrench into things, using a credit card this month IS budgeting for next month, provided that you pay entire balance in full every time the bill is due. That way, you don’t need a budget and you’re already ahead!
    Kathleen @ Frugal Portland recently posted..State of my Debts: October Check inMy Profile

    • Hah! I would consider that being a month behind, not a month ahead :)

      Plus, I still can’t pay my mortgage or student loans with my credit card, which is over half my expenses!

  7. I am LOVING what I am reading here. You guys are much younger than I am, but you’ve all got the right idea! Yay for you! Something your parents/grandparents tried to teach you has sunk in. Or maybe you’ve just seen them be irresponsible and are doing way better than anyone expected you to. GOOD FOR YOU. YOU are restoring my faith in the younger generations. Thanks much and best of luck to ALL of you.

    • Thank you Jim! That means a whole lot! Honestly, didn’t have great examples of money management, but listened to Dave Ramsey and my mother-in-law, and those two influences brought me to where I am today. I’m glad I’ve restored some hope, we’re not ALL lame :)

    • I totally agree. I wish I had learned these lessons as early as you.

  8. I really think that getting a month ahead is great advice. I run a budget and I ended up doing somewhere in the past 4 years I think it just sort of happened for the same reason you stated bill all really happen at the beginning of the month. I never thought to streamline my direct deposit straight to my savings and then only transferring what I needed so in the middle of the month we’d end up with a fat account since it had last months money and was getting the current and it always made us think we can afford it look at all this cash in our account.
    This will be great now instead of balancing everything and saving only what’s left over I can transfer only what our expenses should be and then if we go over do the extra transfer. Cool great tip.

    • You will not regret implementing this strategy. Has been the single most helpful thing we’ve done as a couple. The stress goes away, and you can truly plan ahead and enjoy your finances!

Trackbacks

  1. […] do suggest moving to a model where they are one month ahead. Currently, they transfer money into their checking account every two weeks, as they are used to […]

  2. […] Part 4, we’ll talk about Why You Should Get a Month Ahead. This has been the BIGGEST financial stress reliever in our […]

  3. […] our spending and put it on paper. We decided we wanted to pay off our debt quickly after getting a month ahead on our bills. We were living on a bare minimum and only making $14 an hour while my wife was at […]

  4. […] able to save $300-$400 a month only making $14 an hour. The first thing we did was get ourselves a month ahead on our bills. Because I was paid twice a month, tracking when our bills were due and adjusting our […]

  5. […] budget to help iron out the expenses, but that they would feel much more at peace if they could get a month ahead on their […]

  6. […] in because that’s the schedule you are paid on. Ideally, you would save up a cushion and get a month ahead on your budget. That way it wouldn’t matter when you get paid. But don’t worry about that until your […]

  7. […] am super glad to hear you are now a month ahead on your budget. My wife and I have been on this plan for over 4 years now, and it has been the single most […]

  8. […] debt free if you are not already doing this. Take that money you were using toward your debt, and get a month ahead on your expenses. Trust me on this. It will suck any financial stress right out of your life, and allow you to […]

  9. […] The solution: Live on last month’s income. See more about this brilliant tip on Jacob’s blog (of I Heart Budgets). […]

  10. […] savings, I recommend that you restrain yourself from using credit.  It will be very difficult to keep from getting a month behind or carrying a balance if you put more than a couple hundred dollars on credit.  Keeping mind that […]

  11. […] savings, I recommend that you restrain yourself from using credit.  It will be very difficult to keep from getting a month behind or carrying a balance if you put more than a couple hundred dollars on credit.  Keeping mind that […]

  12. […] pulling out the cash you need for the month AT THE BEGINNING. And that can only happen if you are a MONTH AHEAD on your budget. Then you can avoid being short on cash and paying $450450450324 in fees at some big […]

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