Thank you for all of your comments on how to budget for twice-a-month paychecks last month! I predict it will take a few paychecks to get the hang of my budget, but I think I came up with a good system to keep it flexible. I’ll give you the breakdown of everything tomorrow, but first here’s a high level of how my new budget will reflect my goals:
Checking Account Buffer
Because my old job paid once a month, I got paid June 1st from the old job and then got a paycheck June 15th from my new job. I had $1,000 leftover from the old paycheck, so I decided to leave that in my checking account. All I want to do is put it into my Emergency Fund (then I’d be up to $7,000!), but I think I need a buffer in my checking to avoid overdrafts and give me security. It will be better in the long run.
Retirement
I have gone back and forth about retirement, debating when and what amount to contribute. Sometimes I get afraid I will lose valuable time, and other times it feels foolish contributing when I have so many immediate needs (aka: my car that is fast approaching its 20th birthday!). My current employer will match up to 2.5% after I’ve been here for one year. Since I’m not losing any free money now, I’ve decided to continue contributing to my Roth IRA but not contribute to my 401(k) until I have my Emergency Fund at $10,000. Come 2011, however, this is going to be my major focus.
Savings
My new job’s paycheck is $1,025, for a total of $2,050 per month. It is significantly less than my old job, but the cost of living down here makes it about even. I am able to direct deposit into two separate banks, so I decided each pay period $400 will go into my Savings Bank, and $625 will go to my Spending Bank. I’ll break down the details tomorrow, but for now here is the break down for my Savings Bank:
Emergency Fund: $300/paycheck
Right now the balance is $6,100. I will reach my goal of $10,000 by December after adding my security deposit and $600 per month. It will be SO nice to have $10k in savings! I cannot even imagine that now.
Roth IRA: $50/paycheck
See above for details about retirement.
Me Fund: $25/paycheck
I started the Me Fund initially for buying my debt-free Tiffany’s necklace, but now it’s just a “whatever” fund for me to use towards extra clothes or trips or pampering or anything not really affordable in my regular monthly budget. There’s no goal amount, but $50 will be added per month.
Gift Fund: $25/paycheck
Right now the gift fund is down to $0 after buying J’s gift and a wedding gift for this weekend. There’s no goal amount, but $50 will be added per month.
Future/Wedding Fund: $0
After my Emergency Fund is fully funded then I will start to add towards this. I’m eager to get this one started. ;)
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Note: My Car Repair fund is tied to my Spending Bank because I like to connect that saving account to my checking for quick access (in case my car suddenly dies–a very real possibility.)
Any questions? Comments? More spending budget details tomorrow. :)
I see your reason for keeping the extra $1,000 in checking instead of savings for a buffer – but is there any reason you can’t count this as part of your “emergency fund” even though it is physically located in a different place? Isn’t it still serving the same purpose – covering you for emergencies? :) I say you count it!
Yeah, the $1,000 will definitely be for emergencies, but I kind of like the idea of having a solid $10,000 in that E-fund AND a $1,000 checking account buffer. So perhaps I’m going for a $11,000 as my goal emergency fund. ;)
Why have you scrapped the idea of the Tiffany necklace, I thought that was going to be a fitting reward for all your hard work ???
This looks a lot like my plan. My wife and I made the same decision you did in regards to the buffer in our checking account – although ours is $500.
It looks like you have no debt, you should reach your goals soon! I can’t wait to see your progress.