Tuesday Night Reflections: The Calendar Method

One of my favorite past-times is watching creators on YouTube. Whether it be on sewing, crafting something, cleaning (I'm a total domesticated nerd, lol), or on money-making, I'm hooked. I love watching people pour their passions into teaching or showing other people how to do something. So here I am, pouring my heart into something I love doing: budgeting.

I love budgeting because it makes it easy to understand what expectations you have for your money and how to apply it to your dreams and your goals. The one thing we don't discuss in financial literacy courses at the college level is how to make your money work for you. That's where I come in. I'm more than happy to share my budgeting strategy that I use every month to plan how my money is going to work for me.

Disclaimer: This example is not all inclusive and does not account for student loans or credit cards.

First things first, ignore your income. Whether it's fixed or fluctuating, ignore it. I'm sure this is counter-intuitive to everything your parents taught you, but for this exercise, it's going to be effective. Trust me.

Next, get a calendar. Whether it's on your phone, in your planner, or on your wall, pick your favorite one.

Start with a blank calendar (think of it like a blank canvas)

Let's say the following bills are due:

Rent/Mortgage - $1500 on the first of the month

Car Insurance - $250 on the 15th of the month

Health insurance (If you're paying out of pocket) - $300 on the 3rd of the month

Gym Membership - $40 on the 20th

And let's not forget those other subscriptions:

Music Streaming - $15 on the 21st

Video Streaming (You know the several) - $20 on the 25th

Delivery service for groceries - $14 on the 10th

And the few remaining bills that don't really have a schedule but we're going to schedule anyway:

Groceries - Depending on your family size (family of 1: $200; of 2: $250; etc. I like to split the budget for the month between the number of days I go grocery shopping for example instead of $250 for one day and the entire month it's $125 one day and $125 the next)

Dinner out - (Let's pretend you go out once a week) $150 for one person or $250 for two

Car Detailing service - $35 (once a month)

(Don't worry if these don't all apply to your situation, I promise it's going to be relevant to the example)

After you've collected all the information on when your primary bills are due you're going to want to fill in those blanks first. Go ahead and write them on your calendar with some kind of abbreviation (because we know there's never enough space to write the whole name) and the amount.

So your calendar should look roughly like this:

Next, fill in your remaining subscriptions...

...and you'll have a visual representation on how and when your money is leaving the nest.

Now, before we go any further, I'm sure you're wondering why grocery day is only $125 a day and not significantly more. Frankly, I made up a number. I know groceries are much more expensive, but this is just to get us started and familiarize you with how to use this method of budgeting.

Now we actually pay attention to your income. For this example we're going to pretend that you get paid bi-weekly at a rate of $2,000 per paycheck. Naturally there would be deductions and taxes and 401(k) investments taken out. However, for the sake of this example we're going to pretend that's already done for us and the remaining amount is $2,000 every other Friday.

(I know many of us in the service industry get paid once a week as well as every day we work but I will be addressing this tomorrow in the next blog post.)

Now we have everything on the calendar. We can see that for the rent, grocery day number 1 and the health insurance we need to account for those bills with the income from the previous pay day.

So $2,000 - $1500 - $125 - $300 = $75.

We are left with $75 to our name. Not good, but not horrible if you're a single person and living on your own trying to make ends meet. $75 is enough to get you from point A to point B and maybe a coffee, but that's as far as it's going.

Let's check in for the following week.

$2000 - $150 - $14 - $150 - $250 - $125 - $40 = $1271

Okay, this week is significantly better. But we're only looking at the first payday of the month. Let's go on and look at the next pay day (I promise this will all make sense shortly).

$2000 - $15 - $20 - $35 = $1930

Beautiful! That looks great! However, this leaves us with a challenge and that is how to get our money from the end of the month to work for the beginning of the month.

We know the first of the month expenses equal to $1925, the middle of the month expenses equate to $729 and the last of the month expenses equate to $70. Which gives us a wiggle room of $1276 for the month (found by subtracting all the expenses from the monthly total income). Which means if we take a little from the middle and a little from the end and put that aside we will have plenty for the beginning of next month. Here comes the catch: How do I decide what goes into the emergency fund and what goes into the next month fund? Ah, ha! I'm so glad you asked.

Look at the next month of the calendar and go ahead and fill it out. You'll see that March comes up quick and maybe we need to be a little prepared for handling the first of the month bills. While it looks like we have an extra $1930, we actually have significantly less because we have to pay rent on the first. Then we have to pay our health insurance and go grocery shopping. This right here is going to cost us $1625. Our $1930 is actually $305. Thankfully, that's the end of our bills for the first of the month.

Now, this looks picture perfect, but the reality is we're human. We like to spend money on a cup of coffee or that afternoon snack on our way home. The key is to know your limitations. If you have an extra $305 then sure, that coffee isn't going to break your bank. But if it's earlier in the month and you have $75, I'd save it for filling your tank.

To answer the question of where to put the extra money I'd leave the $1930 in the main account at the end of the month. But when you're looking at the $1271 in the middle of the month I'd put a solid chunk in the emergency fund and a slightly smaller amount in the "next month fund". That way you're covered if your car breaks down or if you're short on rent $100 and either way all your bills get paid.

There are many other scenarios in which this may not always work. It does work best if you're on a weekly or biweekly pay schedule and not relying on tips to pay your bills. For my servers out there reading this I'm making something extra special just for you so stay tuned for tomorrow and learn one more of my many secrets to making ends meet.

Happy Budgeting!

TBM