Setting up a budget is easy when you’re making the same amount of money every month and your expenses are fairly regular. It’s trickier when your income fluctuates. Get one month ahead on your bills and you’ll have more control.
Picture: Dee Speed/Flickr
Get Rich Slowly explains the concept using this quote from You Need a Budget:
“Spend this month, what you earned last month. How? Save enough money to go an entire month without touching your regular income. Then the next month, spend last month’s income while earning this month’s income. You’ll spend this month’s income next month.”
In other words, you build a zero-sum budget — using up all the income towards expenses and savings — but base it on last month’s income instead of this month’s.
So, for example, let’s say you’ve already saved enough for one month’s expenses. In November, when bills come around, you base your budget on October’s income, subtracting expenses and debt payments, and using every cent (the rest can go to savings). In December, base your budget on November’s income.
It takes more work to do this on a monthly basis, but it gives you a more realistic plan for when your income varies.
Can Getting OPne Month Ahead Save Your Budget? [Get Rich Slowly]