When I do our budget, I always budget for two pay periods each month. My husband gets paid every two weeks. In July, he’ll have three pay periods. We look at this extra check as a bonus. If you get paid every two weeks, you might be seeing an extra check next month as well. Here are some suggestions what to do with that money:
1. Start your emergency savings account – if you don’t have $1,000 in savings, now would be the time to fund that account or finish funding that account. This will give you a cushion so that if you do have an emergency, you won’t have to turn to your credit cards to get through it.
2. Make sure your budgets are up-to-date – we all have expenses that we have to pay for once of twice a year. For example, we pay our trash fee each year at the beginning of each year. We make sure we put away 1/12 of the cost each month. Our car taxes are due once a year as well and we budget 1/12 of the cost each month for that as well. We are also budgeting for gifts for the year, including Christmas gifts. Look at the items you pay for once or twice a year. Are you currently budgeting for these items? Now might be a good time to put some money away for those items. Say you have a large bill due in January, like a trash fee. Our trash fee is about $250 a year. In order to budget for this each month, we put aside $21 a month. By the end of July, we should have $147 saved. Consider using some of that extra paycheck to sure up these items so you’ll have the cash saved when the bill comes. This will make it less likely that you’ll have to turn to debt when these bills come due.
3. Jump start a fun savings account – Put some of the money aside for something fun. Maybe you’ve always wanted to go to Italy (ok, maybe it’s just me) but saving $5,000 seems like it will take forever. Consider using some of the money to jump start that savings account. By putting some of bonus into this account, you’ll feel like you’re making more progress and will be more apt to save for this event. If a trip is not in your future, jump start savings for a car, an appliance or other item you’ll need.
4. Pay down debt – This is where most of our bonus will go.
5. Do something nice for yourself – sometimes when you are living on a budget, you don’t get to do some of the nice things for yourself that you wish you could do. Consider going on a nice dinner, seeing a movie, getting a massage or getting yourself something you’ve wanted for a while. Reward yourself for sticking to your budget, just don’t go overboard.
The most important thing is that you need to budget this money. If you just let it go into your account, the money will slip right through your fingers. Allocate every dime of the money. Take a bit for fun, take a bit to save, give a bit to charity if you’d like, pay down some debt. Enjoy July’s windfall and get yourself closer to financial security.
{ 4 comments… read them below or add one }
Very good advice, thank you. I love the name you gave the FUN SAVINGS ACCOUNT. Makes sense. We already have the debt funds and savings set aside each month. It would be nice to have a fun account too. Thanks, Kristin!
You have to make sure you are saving for the fun things in life as well. If you don’t, you are going to end up breaking your budget because it is too strict.
Trouble is there seem to be at least 12 “big” bills every year – so if you are putting that aside every month . . .
Trash fee, car insurance, home insurance, Xams, vacation, emergency fund, repairs to car, repairs to home, repairs to your body, school fees, repairs to boat, emergency help for the kids, emergency help for the parents, add the ones I’ve forgotten and your own big bills and all of a sudden you are putting aside 20 times 1/12th every month! Might as well just pay them each month as they come due.
David,
You say “might as well just pay them each month as they come due” but some of those expenses are larger than others. My trash fee is $250 a year, an easy bill to swing, but my car insurance for the two cars is $800 a year. That’s a little tougher to swing. I put about $500 a month away for all these little savings accounts. I don’t care if you just want to call it savings and put the money in there, but I like to know the money has a purpose so I don’t short change anything when I need the money for a specific purpose.