How to Organise Your Monthly Income

Have you been looking forward to that paycheck at the end of the month so you can treat yourself? Have you told yourself the previous month, the next month is going to be different – you’re only going to buy what you really need and you are going to start saving? 2 weeks later you check your bank balance and you can’t remember where half of the money has gone?

You’re not alone! Whether you have been working for a while or are just starting off, it can be tricky to find the right balance on how to best spend and save money. It most certainly took me a few years to get me to where I am now. It doesn’t have to take you that long if you apply what I have learnt.

I’d like to share with you how I manage my money and how I saved over €20,000 in less than 3.5 years, stress free!

Prioritize your savings

I can very clearly remember the day I got my first paycheck. I was working in a take-away restaurant the summer before starting college. At the time, I was getting paid fortnightly so when I opened my payslip and saw €200 written at the bottom of it, I was over the moon. I was an 18 years old with very little experience of managing money. In my head I already knew what I wanted to buy. However, before taking out my bank card the first thing I did was… I transferred €50 into a savings account.

There was still €150 to spend and at the time it was more than enough. It felt great having my own money. After putting away my savings, I didn’t mind how I spent the rest of it or if I even spent it all.

It was mid-July when I started my first job and I stopped working in mid-September as college began. Do you know what was amazing at that time? That summer I had earned approximately €1000. I had enough spending money to treat myself but I had also managed to saved up €250 on top of whatever I had left over each week. That’s 25% of what I had earned that summer. It may not seem like much but it was easy and I didn’t have to think twice about it.

Identify your needs

Having hobbies and interests is important. It is important for our physical and mental health, and therefore it is important to make sure that we have enough finances to enjoy what we love each month. I love getting new clothes but I know that if I was to spend all my money each month on clothes I wouldn’t get far. If I wanted to buy a house or if my car needed a service, I wouldn’t have the money for it. By having a designated amount of money for hobbies and interests, I was able to ensure I could enjoy these every month.

You might say “your bills and monthly expenses are more important than your hobbies”. Well… yes and no. When you have a good system you can have enough to cover both and still have money left to spend on other adventures.

Remember your monthly bills!

We all have bills. We all need to make sure these bills are paid on time so we can keep our bank history looking good. Bills don’t always stay the same. You might pay the same amount for the internet each month but your electricity bill is not necessarily going to be what it was the previous month. One trick I’ve learned is to get an average cost of the bills per month (say 6 months) and have that figure designated for it.

My Monthly Budget Plan

Now you know a little bit about how I started my budgeting journey. I’d like to explain to you how my budget plan allows me to save and plan my finances each month. I have one bank account with a few sub-accounts to help me with this process.

I typically aim to create my monthly budget plan between 3-5 days before the start of my budget month. This allows me to consider any planned expenses (trips, presents, etc) or other incomes that may be more specific to the coming month. Like most of you, I have different expenses in December than I have at other times of the year.

Here is an example of what my monthly plan looks like.

Income

The start of the budget month is marked by the day you get paid. Not everyone gets paid on the same day: some of you might get paid at the end of the month, some might get paid every week. This strategy can work for everyone, you’ll just need to adjust how much you designate to each section per pay.

Automatic transfers

There are two ways that I transfer money to the different accounts after being paid: I transfer the money myself or a Direct Debit does this for me. I have divided this section into two areas: Savings and Variable Money to Spend. As mentioned earlier I like to prioritise my savings. Think of it as paying yourself first. Between long and short term savings I make sure I put away at least 20% of my monthly income. This is a figure that works for me, however you may want to increase or decrease this figure as suits.

Savings:

  • Long Term Savings: Money you want to save for a long term goal. I define this as something that you might like to buy in more than 1 year. I would suggest an account that would also give you some percentage back on your savings.
    • Example: Deposit to buy a house.
  • Short Term Savings: Money you intend to save for a goal in 1 year or less.
    • Example: Moving abroad in the next 12 months, going traveling.
  • Extra: This is money you would put away for unexpected situations. I would keep the money in this account for surprise events.
    • Example: unplanned family and friends events, last minute holidays or weekend away.

Variable money to spend:

  • Bills: You might be wondering why I have bills in this section – let me explain. I estimate that between internet, gas, electricity and bins I would pay around €100 per month depending on the time of the year. Some bills such as gas and electricity would be paid every 2 months. Those would normally be higher in the winter and lower in the summer. By having regular amounts put away each month, I always have money available when I have to pay the bills. Without having to use any of the spending money.

Note: if you are payed weekly and have a bill that is due monthly, you can put aside one quarter of that bill each week.

  • Treat Yourself: This is money dedicated to your hobbies/ things you love to buy.

Over 3.5 years ago I decided to put €500 each month to my Long Term Savings.
€500 x 12 months = €6,000
€6,000 x 3 years and 6 months =€ 21,000

I was putting that money away automatically as soon as I got paid. I didn’t need to worry about how much money I needed to have left to save at the end of the month. It was easy and stress free!

Expenses

This section includes all expenses planned for the month:

  • General
  • Car Expenses
  • Insurance
  • Loans
  • Miscellaneous

Most of these figures can be expected to stay the same, however there may be a few exceptions:

1. Car expenses: Fuel is one which might be hard to estimate as you might cover different distances each month. Also, the price of fuel fluctuates. In this case I would take an average for the last 6 months. If you go over the estimated amount you can always use money from your Spending Money or from the Extra Savings for unexpected expenses. If you spend less than estimated – that’s even better!

2. Miscellaneous: Expenses that could be specific to a particular month. I would suggest only including them in your budget plan if you know it’s definitely an expense for that month. An example of a miscellaneous expense could be a planned spa day with a friend.

Spending Money

I look at this as money left to spend on whatever I want for the rest of the month. This can be shown with the below short formulae:

Income – (automatic transfers + expenses) = Spending money

Note: It’s handy to keep a record of what you’ve spent your Spending Money on as it can help you keep track of how much you have spent and to make sure you are not overspending. A simple sheet with a description of what you’ve spent the money on will help.

End of month budget review

Now that we have organised our budget plan and have got to the end of the month, before starting to plan for the next month I like to do an end of month budget review.

This allows me to identify how much Spending Money I have left. It also allows me to update my Automatic Transfers section of the Budget Plan. But let’s start with Spending Money.

Spending Money

At the first stage of my end of month budget review, I like to look back over the planned Expenses from the month. Sometimes it’s a case that not all of the money that was designated to a specific expense is used. This can also be the case for Spending Money. When carrying out my end of month budget review, I take these two figures and add them together, which gives me a sum of money that has not been spent during the month.

Now, I know what some of you are thinking; “Let’s take this money and put it straight into next month’s Treat Yourself”. Of course, this is completely up to you. If you have a well balanced budget (putting enough into your savings) this extra could be seen as a reward. I however like to look at this as an opportunity. I divide this unused sum of money evenly and transfer it over to the following for the next month:

  • 20% stays in Spending Money
  • 20% goes to Long Term Savings
  • 20% goes to Short Term Savings
  • 20% goes to Extra
  • 20% goes to Treat Yourself

I am particularly happy doing this as it allows me to achieve my goals quicker across all areas, rather than just spending this on random items or experiences.

Automatic Transfers in My Budget Plan

As I have mentioned, I like to transfer money to my Savings and Variable Money to Spend as soon as I get paid. However, the work doesn’t end there. I’d like to give you some more details on how I manage those two accounts.

Savings Example:

In this example we are on Month 2 with a €100 surplus from Spending Money divided into 5 accounts (€20 per account) that carried over from the previous month:

  • The Previous Month’s Total in Month 2 for Long Term Savings (shown above as €370) is equal to the Total from Month 1 (not shown). The Total from Month 2 (shown above as €740) will become the Previous Month’s Total for Month 3.
  • The Deposited Amount per Monthis the amount of money transferred at the start of the month into the respective account.
  • This Month’s Total (shown above as €720) is calculated at the start of the month. 
  • No money was taken out during Month 2 from any of saving accounts.
  • There was a surplus of €100 from Spending Money at the end of Month 2. This was equally divided among the 5 categories, therefore €20 per each category.
  • Total is calculated at the end of the month during the end of month budget review.
  • Total = This Month’s Total – Money Taken Out This Month + Spending Money Surplus per Account for Month 2.
  • As noted above, the Total from Month 2 (shown above as €740) will become the Previous Month’s Total for Month 3.

Variable Money to Spend Example:

As mentioned earlier your Variable Money to Spend has money in the account designated for bills and hobbies/things you love. The money in these accounts have been transferred directly at the start of the month but the money is used during the month.

As you may have noticed from list of accounts that I add the surplus money to, the surplus money is not added to the Bills account. 

Bills:

  • The Previous Month’s Total in Month 2 for Bills (shown above as €100) is equal to the Total from Month 1 (not shown). The Total from Month 2 (shown above as €132) will become the Previous Month’s Total for Month 3.
  • The Deposited Amount per Monthis the amount of money transferred at the start of the month into the respective account.
  • This Month’s Budget (shown above as €200) is calculated at the start of the month. 
  • €68 was paid for bills in Month 2.
  • There was no Surplus from Spending Money as this does not apply to bills.
  • Total is calculated at the end of the month during the end of month budget review.
  • Total = This Month’s Budget – Money Spent During the Month.
  • As noted above, the Total from Month 2 (shown above as €132) will become the Previous Month’s Total for Month 3.

Treat Yourself:

  • The Previous Month’s Total in Month 2 for Treat Yourself (shown above as €150) is equal to the Total from Month 1 (not shown). The Total from Month 2 (shown above as €230) will become the Previous Month’s Total for Month 3.
  • The Deposited Amount per Monthis the amount of money transferred at the start of the month into the respective account.
  • This Month’s Budget (shown above as €300) is calculated at the start of the month.
  • €90 was spent on hobbies/things your love in Month 2.
  • There was a surplus of €100 from Spending Money at the end of Month 2. This was equally divided among the 5 categories, therefore €20 per each category.
  • Total is calculated at the end of the month during the end of month budget review.
  • Total = This Month’s Budget – Money Spent During the Month + Spending Money Surplus per Account for Month 2.
  • As noted above, the Total from Month 2 (shown above as €230) will become the Previous Month’s Total for Month 3.

Final Thoughts

Now that I have explained to you how I plan my monthly budget, I hope that you can apply some of these suggestions to your own budgeting method. Some of these may integrate nicely into your current budgeting plan, however, if you are only starting, I hope that this will provide you with a good foundational structure to start with. I have gradually built this budgeting plan over the last few years, and find it works very well for me, but I would love to hear any suggestions or methods that you feel may be useful to include in it.

For me, I like to have access to my budget on the go and so I keep this in the cloud on Google Drive. I am also aware that I started out on paper and others may prefer this medium in order to do their budgets. There is something satisfying having the physical papers in front of you. I’ve made a couple of templates in different formats (Word, Excel and PDF) to share in order to help you. These can be found below. Please feel free to download these from the Dropbox links (the images) below and use these as your own Monthly Budget Plan. I would love to hear your feedback and if you found these useful.

Happy Budgeting!

Rose

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