Mayday Before Payday?

It’s a problem many of us face: running out of money before payday. Especially for those of us who are paid monthly, may day can sometimes come well before pay day. Do you find yourself grappling a manic-depressive spending regime, from splashing out to skint? I used to – but have had some reasonable success in reducing this problem. Let me share three suggestions with you.

Know where your money goes
Keep track of your actual expenses as they happen. This is actually quite an easy task – there is little thought required, just a bit of discipline for five minutes at the end of every day. The easiest way is to set up a spreadsheet as I suggested in this post. Start on the first day you get paid.

The most useful element of recording is all the little expenses that add up. It’s hard to know how much you actually spend on the food shop when you’re always getting small amounts here and there as you need them. With a month of records, you’ll know if you need £25/week on groceries or £40/week.

Anticipate future expenses
You don’t have to be exact about this one – simple guesses will suffice. You might not know what exactly you’ll be doing in 3 weeks time, but you’ll probably be having a meal and a beer at a pub somewhere if this is something you typically do. If you normally spend £40 on a night out, just set aside £40 x 8 allowing for two nights out a week until next payday.

In an earlier post I introduced the envelope concept, which is a handy way to track anticipated expenses against actual expenses. Set up correctly, you can see how much is left in your envelope at any given day between now and the next pay day. This is advantageous, as it can help you slow down earlier if you’re overspending.

Keep a bit aside
‘Saving for a rainy day’. If you want to make sure you’ve got enough to cover big expenses – a new computer or an upcoming holiday – get into the habit of putting some aside on payday (not after). If this is hard for you, start off with smaller targets. You can use the envelope concept over a longer time frame to plan holiday expenses.

However, it is easy to be tempted to dip into these funds if you run out before month end. Firstly, know how much you can realistically save by keeping records of your expenses. Secondly, define – in writing if possible – the specific rules under which you can access these funds. If it’s a travel fund, state “only to book flights and hotels” so that you’ll have cash on hand for cheap flights and deals that might come up just before payday.

In conclusion, if you have a good idea of where your money actually goes, you’re setting yourself up to be in a much better position to plan ahead. Use a spreadsheet to anticipate your future expenses and try to predict what circumstance you’ll be in at month end. Finally, put a bit aside – and write out the rules by which you can access this money. This’ll help to keep you covered for the unexpected. Taking control of your personal finances isempowering!