Magic Month Budgeting Tips (Feb 2013)
Employees who are paid every two weeks will receive three paychecks in March. This occurs two times per year and is sometimes thought of as magic months due to the extra income. The fact is that there is nothing magic about money and without making a plan, this extra income can disappear by the time April arrives.
This extra paycheck is an excellent time to start thinking about how our money is being spent. Do we have a spending plan to know where our money is going or do we always have too much month at the end of the money? Below is a list of simple steps to begin getting a better handle on how our money is spent:
- Track your spending – We don’t think about what running through the drive-thru, getting a snack from the vending machine, or buying a drink to treat ourselves really costs us over time. Start writing down on a piece of paper or in your phone every time you spend money. $4 a day on cappuccino or a soda and snack adds up to over $1000 a year. Know where your money is going.
- Create a spending plan – We all hate budgeting because we have to face reality and tell ourselves no. While this is painful at first, gaining control of our money will give us more security over time. Doing this step will help us understand if our expenses exceed our income or if we should have money left after paying all of our bills.
- Understand our debt – Many of us do not really know how much we owe. Put together a list of all debts such as car loans, credit cards, and mortgages. Include the minimum monthly payment amount and the total amount owed. A great way to start paying down debt is to pay off the smallest debt first which provides encouragement and the emotional boost to start getting the next debt paid off.
- If you are behind on any payments, the magic month provides an excellent opportunity to get caught up and hit the reset button on controlling your finances. If you are not behind, the extra paycheck can be used to set aside funds to make car repairs, replace an appliance, or save for a vacation or other spending. Just paying attention to our money is the first step to financial security.