For about a year now, we’ve had a one month cushion in our budget checking account for our monthly expenses. This checking account holds all of the money for our monthly expenses. Most of our bills are on autopay via this account and some are charged on our joint rewards credit card that we pay off in full every month.
Having a one month cushion in this account allows us to:
- Stay one month ahead.
- Break the paycheck to paycheck cycle.
- Send the same amount of money over from each paycheck
- Have the freedom not to worry about being behind on bills due to late pay or life emergencies.
So, how did we build this 1-month cushion in our account when we started with only $100 extra every month?
Glad you asked!
How to set up your one month cushion
- Create a budget.
- Make an account that is strictly used for budgeted expenses.
- Add your leftover income at the end of the month to this account until you reach one month’s worth of expenses.
- *Optional* Treat this cushion as your emergency fund or have it in addition to your emergency fund like we do.
How to maintain the account
Once you have your 1-month cushion in your account you can begin splitting your contributions by the number of checks you get (for us it is 2).
Example Of New Process:
- Starting account balance: $3,000 (one month’s expenses)
- Divide total expense by the number of paychecks expected – $3000/2 = $1500
- Deposit $1,500 from Paycheck #1
- Deposit $1,500 from Paycheck #2
- Pay bills manually or with autopay throughout the month
Old Process with no buffer:
Expenses = $3000
Paycheck #1 = $2300 to cover expenses from 1st – 14th.
Paycheck #2 = $700 to cover expenses from 15th – end of month.
Important Tip: Keep in mind, your budget will always be fluid. Things might change month to month so you’ll need to track what you’re spending so you can make adjustments when necessary. If your expenses increase or decrease you’ll need to adjust the deposits you make during the month to reflect those changes. You can also use sinking funds to plan ahead for irregular expenses or things that you know will be coming up in the future.
This process works well for people that have inconsistent income or get paid on schedules that don’t align with their bill payment dates. By not having one check completely consumed by your expenses, you’ll now have a balanced amount coming out each month and you won’t have to struggle bus to your next payday.
I hope this helps you as much as it has helped us!
$tay Wealthy Friends,
— Dannie
The idea of essentially getting ahead a month financially is something I have been interested in for some time. We have a well stocked emergency fund – we went $5k instead of $1K, as hubby is doing contract work and the local economy means being out of work is a realistic concern/potential emergency for us. We also use sinking funds extensively, which has always made the one month buffer feel out of reach. That said, I liked the breakdown on how to get there – specifically, the idea that the process can look as simple as putting aside anything left… Read more »
The one month cushion helps you get a great sense of freedom. I’m glad our breakdown made things sound a little more attainable. Thank you for reading and commenting!