Hi. I am new user, wondering what the best practice is for setting up my budget to reflect the frequency of my income and expenses. My wife is paid biweekly, but I am paid quarterly. Therefore, every three months we have larger inflows of cash that need to be apportioned over the next three months to cover expenses. And, except for once a quarter, the monthly budget will always indicate that expenses exceed income.
My goal is to be able to reflect the reserved savings in my budget. I think the “savings budget” will allow me to do this. But I do not understand how to set it up or how the adjustments should be used.
For example, if in January I get paid and reserve 3 months of mortgage payments, how should this be entered into the regular or savings budget?
Hi @Florsbabba and welcome!
You are on the right track with using the savings budget to accommodate “bursty” income. If you are using your quarterly paycheck to budget for mortgage payments, my recommendation would be to budget three times your monthly payment in the months you get paid. Doing this will seed your savings in your mortgage category and leave you with savings to draw on in the inbetween months.
This would also work for your wife’s paychecks. I’m paid biweekly as well, which means that I have an extra paycheck twice per year to allocate. I use that extra paycheck to seed my IRA contribution for the next six months.
The savings budget also works well in the same way for budgeting for “bursty” expenses such as yearly membership fees or biannual insurance payments. You can budget a portion of the total expense to the category each month so when it comes due you will have the full amount available while maintaining a more consistent monthly budget.
I hope that helps!