Do you have a routine or are you just winging it?
I consider the first business day of a new month to be a cash cow. There was a time I struggled with payday. We had a real love/hate relationship.
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Establishing a routine was shoved down my throat with no option but to grin and bear it. While I begrudged giving up my anything goes and winging it attitude, the best thing I ever sunk my teeth into was a routine.
Why is routine good?
· It erases the possibility of error or forgetting.
· It eliminates the option for late fees and interest charges.
· It lets you know financially where you stand for the rest of the month.
Many moons ago I had an employer who paid all his employees once a month on the last Friday of the month. Accepting the job as EA to the CEO came with the task of many financial responsibilities of the company. So while I was being advised of the tasks that needed to be done this fact surfaced.
Needless to say, my heart skipped a beat. Not because I was unfamiliar with doing payroll for a company this size, but rather because the reality of I’m not getting paid for 4 weeks would rock my budget. My panic button was immediately activated.
I remember going home that evening and pulling up my budget and checking my accounts to see the exact point where I would run out of money. I crunched numbers over and over again trying to make it stretch. After hours of numbers, I had finally reached a compromise of how I would master this obstacle without affecting the lifestyle of which I had become accustomed to. It did mean I would have to dip into my savings, which did not make me happy.
That first paycheck disappeared within moments of being deposited. Then the waiting game for an entire month began all over again. But within those first two months, I learned something really important.
Getting paid once a month was fabulous!
· It eliminated the need for saving from the one paycheck to another to pay large expense amounts.
· All the bills got paid at the beginning of the month so no remembering to do it mid-way.
· Contributions to savings by a specified amount and not what - by chance was leftover.
· It allowed me to know exactly what I had left to spend for the month.
Five years later the company got sold to a bigger corporation and boom the payroll nightmare once again rocked my budget. It was back to bi-weekly checks. Now you would think this would not matter much but the difference between 26 pay periods a year and 12 pay periods a year actually resulted in $300 less a month take home on a regular basis. It would be replaced with two months of the year with a 3rd paycheck instead.
I had become accustomed to paying all my expenses on the first business day of the month and enjoyed that style of financial freedom. Bouncing my expenses between two paychecks a month was something I just didn’t want to go back to.
I will admit I did have the advantage within my account due in part to what I had accumulated to continue to maintain paying all my expenses on the first business day of the month.
The routine that I was literally forced into had taught me more about budget and balance than any book or course had. As creatures of habit, we tend to live from one paycheck to the next simply because one paycheck is not enough to cover all expenses at one time.
This means that we are calculating how much from each paycheck needs to be set aside to pay larger amounts such as rent or mortgage. Those amounts will take the bulk of the paycheck leaving a balance for other expenses that may or may not need to be split between the two checks in a month as well.
So we end up forever checking our accounts to see if we have enough to pay just one expense before the due date. And if not we are willing to take the hit on late fees which ends up adding to our expenses.
Because of this, we are constantly left in panic mode. Shortchanging ourselves from what we want to do vs. what we can do, and regularly stretching the boundaries leaving no margin for error or omission.
We tend to dip into funds that would be directed to savings but end up funding our lifestyle instead. Which inevitably short changes our savings simply because it is much easier to draw out then to deposit back in.
But the biggest ah-ha moment comes when the pressure is off.
The money is coming in, the expenses are getting paid, the savings are getting topped up, and there is money still left for spending. Have you ever notice when you have money how you spend so much less.
Now don’t go shaking your head on me. Living paycheck to paycheck there was never any money left for the things that I wanted to do or believed I needed. But yet when I had actual money left and could spend it there really was nothing that I wanted to do or anything that I wanted.
The bonus was the money sat in the bank. When the next payroll rolled around everything got paid, and there was twice a much left over to spend. That was the moment my wants had changed from doing and having things to I wonder if I could actually accumulate enough to pay for a whole month’s expenses.
The challenge was on and accepted. There is something to be said when you look into your bank account and see the money. The ole’ pat on the back when you see that money increase from one month to the next, and the high-five when you know everything is paid and accounted for.
Now in today’s terminology, it is referred to as having a reserve fund. Anywhere from one to three months’ worth of expenses just sitting there as a guarantee you are going to be covered should the unexpected happen.
But when you reach that challenge everything over and above becomes additional savings for just about anything. Remember how you have been paying those expenses diligently each and every month. Well, this is a good time to review those expenses.
Are they an expense:
· From a vendor that will never be paid because they are for a service?
· Are they monthly because you have never been able to pay the yearly charge?
Do you have outstanding debt:
· That could be paid off in full?
· Could you make a lump-sum payment on an existing mortgage?
· Could you buy out the lease on your vehicle?
· Be gone those student loans?
Is there enough to turn dreams into reality:
· A new vehicle?
· A long-awaited vacation?
· Down-payment on a mortgage?
The possibilities are truly endless once you have a routine in place and make it a habit to attain what perhaps you may have thought you could never accomplish. The truth of the matter is when we have nothing we want everything. If we can’t have everything we create the pretense that we do have it at such a high cost that it builds resentment and regret.
Did you know: By identifying and defining your money vision and goals they will be easier to achieve. No longer will you be wishing for a miracle but, rather you will become the miracle by taking the steps to make it happen.
I invite you to participate in one of my clarity masterminds: Money Vision & Goal Setting take a peak it might just be something to give you that balance you need to create the habits and build your routine.
As always if you have any questions just reach out and contact me.