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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.
- 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.
- 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.
- 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.
- 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!