Since we decided to buy a place, Petra and I obviously spent quite a bit of time thinking about our budget. After all, how would we know how much we could actually afford?
The “natural” schedule for a budget is a month – many of the major expenses you pay are on a monthly basis. Yet my paycheck arrives on a bi-weekly basis (i.e. every 14 days), and Petra has an even more irregular income. That’s no basis for planning.
So we sat down and figured out a few things. First steps, what’s the minimum income we’re guaranteed to make in any given period. For me, that’s two paychecks. For Petra, we picked the worst month in the last year and went a bit below that. That’s our ‘base salary’.
Next, we set up our ING account1. There is a ‘Salary’ account that receives my paychecks, plus Petra’s monthly contribution from her account. From there, we have an automatic fund transfer every 1st and every 15th – into an account aptly named ‘PayForIt’. As a result, each month we have the same amount of money available.
We also save some money – a paycheck every two weeks translates into 26 a year, and only 24 of them go to the pay account. In other words, two full pay checks a year sit in a savings account – I’m automatically saving money without doing anything. Any ‘extra’ money that Petra makes above the assumed minimum also gets squirreled away.
This has the side benefit that we have to learn to live with slightly less money than we actually make – never a bad skill to have.
If you implement this yourself, be aware that the transition period to this scheme can be a bit awkward. Often, a lot of items are due on the 1st, so you’ll end up having to pay them in the month before. If you don’t plan for that, you will encounter moments where your PayForIt account is underfunded – and you definitely want to avoid that.