Let’s get started, shall we? Throughout this post, we will be following Betty and Joe. Keep in mind that everyone’s financial situation is different and this is just one example.

Create a monthly projection first.

You may be thinking that I’ve already ignored your pay frequency, but I haven’t. By writing down your entire month of income and expenses first, you’ll be able to make a plan for each pay period without wasting time trying to figure out your complete financial picture later on in the process.

Here are the items you’ll need to list before you create your bi-weekly budget:

• Total income (after-tax and paycheck deductions)
• All fixed expenses (bills & utilities)
• Any variable expenses (general spending)
• Minimum payments for all debts
• All savings contributions (sinking funds, after-tax retirement contributions, emergency funds, etc)

Regardless of what method you choose to craft your budget, make sure to include the pay dates and due dates for all bills.

Check to see if your expenses are greater than your income.

If your monthly expenses are greater than your income, look for ways to cut or eliminate expenses and/or find ways to increase your income.

When we started budgeting, we cut out everything we could live without. This included cable, our 2nd car, hair stylists, nail salon appointments, magazine subscriptions, etc.

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A post shared by DJ & Dannie – Debt Free (@penniestowealth) on Apr 26, 2018 at 4:55am PDT

If your expenses are less than your income, congrats! You can still follow the steps above if you want to increase the amount of money you’ll be able to direct towards the things that matter to you.

Even after becoming debt-free, we still look for ways to save or cut costs. The fear of being broke again keeps us motivated to spend intentionally but we definitely have loosened the reins a little bit.

Plan your bi-weekly budget out per paycheck.

Many of you may normally receive 2 bi-weekly paychecks per month. Then, 2 months out of the year you receive a “bonus 3rd paycheck”. I personally recommend that you budget based on 2 paychecks and then use those “extra” paychecks to beef up your emergency savings, pay down debt or save for large expenses.

Sorry for the semi-monthly budgeters out there, you always receive a paycheck on the 1st and 15th – so that means no extras 😞.

Here’s a snapshot of how this would look in our bi-weekly budget template:

Click here to learn about the best biweekly & semimonthly budgeting spreadsheet available right now! Use code “ptwlove” at checkout and you’ll get 15% off of your purchase simply because I love you! 🤗

Not enough money to cover the expenses during a particular period?

1. Contact companies to see if you can change your bill dates.
2. Split bills up over multiple paychecks.
3. Allocate full amount for certain bills in another period.

As you can see below with Betty and Joe, their $1,200 rent is due by the 5th but that would take up 50% of their income in the first half of the month. In order to even out their budget, they decided to split the rent over the 2 pay periods.

It’s important to keep in mind that in order to do this approach, you’ll need to have the full payment for the current month to cover the bills that you choose to split going forward.

If you’re starting your budget in the middle of the month then you’ve already paid your large bill and can just start splitting them in order to provide yourself with some relief. If this is confusing, don’t hesitate to email me.

How to stay on track when budgeting bi-weekly paychecks.

It doesn’t matter what your pay frequency is, staying on track once you do create a budget can be hard. Here are a few things that I recommend you do in order to stay on track and achieve your goals:

1. Set up a separate bill account.

Guys and gals, setting up a separate bill account changed our lives for the better. This not only keeps you from spending your rent money on a quick getaway, but it also keeps companies from auto drafting funds out of the account where all of your money is deposited.

Make sure to choose a bank that doesn’t require minimums so you aren’t paying extra to have another account. I’d also recommend that you keep a buffer in the account so that you don’t overdraft ;).

2. Track your variable expenses.

This is the part where folks want to fight me or give up on budgeting altogether, but I swear tracking your spending will help you know where your money is going.

I prefer to use the Goodbudget app but I’ve also tried Everydollar and I even wrote a post comparing the two. Want more options? Try one of these:

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A post shared by DJ & Dannie – Debt Free (@penniestowealth) on May 17, 2019 at 6:35am PDT

3. Adjust your budget as needed.

At the end of the month, you’ll input your actual spending and income into your bi-weekly budget or semi-monthly budget template (or another document) and this will provide you with an overview of what needs to be adjusted going forward. We don’t want to spend more than we make, like ever, but living below your means can help cover those “Oh crap” months if they happen to occur.

Remember, it takes 3-4 months to create and fine-tune a budget that actually works for you. Even after that time frame, things may still pop up that will need to be addressed in your budget. This is why it’s so important to make sure you at least have the basics covered so emergencies are simply inconveniences.

Financial Extra Credit

So, now that we put our weekly budget together, what’s next? Glad you asked!

I challenge you to make a plan for accomplishing the things below in order to make managing your money each month as painless as possible.

Start small and work your way up. Rome wasn’t built in a day and your bank account won’t start overflowing in a day either.

1. Get one month ahead on your expenses
2. Save an emergency fund
3. Pay off high interest consumer debt

***
That’s all Wealthy Fam! I really hope this helps you get started budgeting your money. Please remember to be patient with yourself while you work on following your semi-monthly and bi-weekly budget.

I still want to throw my budget out the window every now and then but I’ve learned that keeping your goals in the forefront of your mind helps to ease the frustration.

Click here to learn about the best biweekly & semimonthly budgeting spreadsheet available right now! Use code “ptwlove” at checkout and you’ll get 15% off of your purchase simply because I love you! 🤗

$tay Wealthy Fam,
— Dannie

Random things that pop up at the end of the month.

1st, I don’t want you to be hard on yourself. Life happens! If you’ve noticed that multiple random things pop up at the end of the month, save for them.

For instance, if you go “over” your budget every month and you’ve done all that you can do to write down what’s coming up, allocate a buffer in your budget to account for the extra expenses.

Getting it set up properly / Getting Started

We have a getting started series on our site that can help you. It definitely takes a few months to work out the kinks, but you’ll eventually get the hang of things. If the series doesn’t help you, just email us! 🙂

Making a budget and sticking to it.

I used to get so down on myself for “going over” in a budget category (and I still do). The best advice that I can give you is to automate your bills and then track your actual spending using an app like Goodbudget or utilizing the cash envelope system.

If you still keep going over and you know that you aren’t splurging, look at increasing that category’s amount. Also, make sure you’re using a quality spreadsheet to manage your budget. You need to see the details to really make things work!

Murphy screwing it up / Unexpected Expenses.

I always joke and say, “I don’t know Murphy”. Do we have random things pop up every once and a while? Heck yes and it pisses me off.

Does it knock us off of our plan? No.

Here’s why:

• We have a one-month cushion
• Our emergency fund is adequately funded
• We live well below our means

Whether you can do only one or all of the above, it will save you a lot of stress when Murphy DOES decide to pop up on your doorstep. So many people hate using their emergency fund, but that’s literally what it’s there for, lol!

Separating business and personal funds.

We had issues with this too and decided that the best thing to do was to create separate accounts. All business income is now deposited in the biz account and all of our biz expenses are taken out of it.

Having our money in separate accounts clears up the confusion and we never spend the biz money by accident because the debit cards stay locked away in our house!

My expensive taste.

I FEEL YOU! Although I’m pretty frugal, I always gravitate to expensive -ish and it is so frustrating! I’m not sure what your guilty pleasure is but mine is home decor. Going to bougie-on-a-budget places like Home Goods and TJ Maxx allows me to get my pretty things, but for a discount.

Keeping up with expenses. Any app suggestions?

We use the Goodbudget app to track our daily expenses and it works really well for us. There are a lot of other budgeting apps you can check out as well:

• Every Dollar
• Mint
• Personal Capital
• Clarity Money

These are just a few that we know of, but there is definitely something available to fit your needs!

Not finding additional savings.

We struggled with this when we started our journey as well. After we completed our first budget we realized that we only had $128 left to work with at the end of each month.

To start seeing progress, we had to make some serious changes in order to continue paying off debt while we only had a little extra money to work with.

Getting my spouse on board.

Listen, I have been there with DJ *insert long sigh*. But I swear, after I started crying and showed him how broke we were, he got his act together – FAST! He actually wrote a blog post about how he finally stopped being so difficult.

I do have to fight him every few months because he gets amnesia when it comes to food purchases. Sometimes he thinks, “Since we have it, we can spend it”. This is why I think allotting personal spending money and couple-fun-money is necessary for the long haul.

Being content when I have to cash flow things that I at least have the cash saved for.

Isn’t it amazing how underwhelmed we can get with the act of cash flowing expenses? Especially when we’ve either experienced not having extra money or seen someone else struggle to cash flow necessary things?

I sometimes hate cash flowing expenses too, even if I’ve planned for them in advance. The only thing that brings me out of my funk is acknowledging how blessed I am to even have the money to pay cash for what I need in the first place. Be patient, this will take time and if you’re like me, it will be a long battle.

Eating out from working so much. Too tired to cook and meal prep.

You probably know that I hate cooking lol. Some finance bloggers may tell you to suck it up and meal prep, but I’m not. Work is exhausting and so is cooking and cleaning. Check out the freezer sections of your favorite grocery store. If DJ leaves for a while, I go stock up on all of the yummy frozen meals at Trader Joe’s and Costco. Most can get thrown in a pan for 10 minutes or in the microwave for 5 minutes max.

Do what brings you the most peace. Even look at meal delivery services in your area if your budget has room for it!

Food!

If you mean that you hate cooking, see above. If you spend too much on food, it’s probably because you’re eating out a ton or buying lots of stuff you don’t need at the grocery store.

First, set a reasonable grocery budget (~$150 per person). Try meal prepping if you haven’t or my frozen food trick and also set a budget for fun which includes eating out. Once you’ve eaten all of your fun money (like I usually do) you’ll have to rely on your grocery stash lol.

Giving myself enough “fun money” or “mommy money”. I pull the strings way too tight.

Listen, you probably work a minimum of 40 hours a week. You may have a commute, family to take care of, a part-time job or something else that consumes your time.

BUDGET YOUR FUN MONEY! If you have the room in your budget to increase it by $50, $100 or whatever it is – do it! I know I struggle with this too, but I swear we NEED to have money set aside to treat ourselves.

Setting realistic goals for clothing, toiletries, etc.

It’s annoying to budget for those things since they usually don’t occur every month. I decided to add a $100 “home expenses” category for toiletries and random house crap in addition to our other expense categories.

For clothing, we usually spend our “personal” money but I know that some people have a sinking fund for this category. If you average $1000 per year in clothing costs, divide it by 12 and put it away in a separate account.

Confusion over categorizing all miscellaneous spending

If you’ve ever seen our budget, you know we like to keep it simple. Find out what takes up the majority of your miscellaneous spending and then make it a category. If your misc spending is irregular, set up a sinking fund and then pull from it when needed. 🙂

Of course, make sure that the budgeted amounts are within your means, but this worked well for us with our miscellaneous spending.

Sticking to it. I JUST can’t!

This is a hard one for many people to overcome. We learned that we had to figure out what helped us stay focused:

• Using the digital envelop method
• Not comparing ourselves to others financially
• Having monthly budget meetings
• Celebrating our small wins

You’ll have to really figure out what helps you and continue doing those things. Budgeting is a fluid process and might take time for you to get the hang of it, but you’ll get there.

Making enough.

This is going to be different for most people but there are a lot of ways to bring in more money so that you feel like you have enough. We made most of our progress with DJs’ salary alone, but I’ve done a few different things to help us make more:

• Negotiated pay raises and promotions
• Found ways to make money working from home
• Started delivering food as a side hustle
• Learned some new skills to kick start a career change

***
That’s all for now, but there are a few more questions we still want to answer. We’ll save them for our Budgeting Q&A – Part 2, so check it out!

$tay Wealthy Friends!

At the beginning of our journey, we had $10,684.01 in credit card debt and $60,228 in loan debt. Please note that we aren’t perfect and sometimes we’re a little dumb. We racked up ~$10k more in credit card debt (after paying off the initial balance 😑) and we even bought an RV that added…wait for it… $50,000 to our loan amounts. What the F**K?!

Listen,  we got over our stupidity and are now sharing our knowledge to hopefully encourage others to work on their finances and credit health.

Borrowing too much money and being unable to pay it back is a serious problem in our country. Excessive debt affects more things than just your pockets.

Bad credit history can prevent you from getting:

• Jobs
• Certifications
• Security clearances
• Cars
• Houses
• Ahead in life…

Today’s post will be about all things credit. By the end you’ll hopefully understand what it is, how it’s scored and also how it’s reported. (Also read our Ultimate Credit Repair Guide)

But wait there’s more!

I’ll even give you tips on how to build (or repair) your credit health and how to use credit wisely.

P.S. Do me a favor:

Stop paying these “credit repair companies”! Nothing against them personally, but they’re crooks because you can do everything yourself. Trust me I’m debt free and we both increased our credit scores 100+ points in months.

Let’s begin friends!

What is Credit?

Credit is simply your ability to borrow money. The money you owe is called debt and you HAVE to pay it back. Car loans, mortgages, credit cards and student loans are all a form of “borrowing”. The goal is to limit the amount you borrow and to pay your obligations on time and early if possible to avoid paying large amounts of interest .

Your Credit Score

I absolutely love discussing credit scores because people can see how their poor money habits translate to a rating. Of course you could just check your bank account because it’s probably empty if you have poor money habits (ha!). You can check you credit score easily and for FREE by creating an account with Credit Sesame!

All joking aside, credit scores are a numerical rating that show lenders how reliable you are at repaying your debt(s).

Here is a visual of the credit score range:

Since there are multiple credit scoring models, generally, a good credit score is anything above 700. However, a good credit score varies by lender and credit bureau.

Speaking of credit bureaus, the big 3 are: Equifax, Transunion and Experian. Credit bureaus collect information relevant to a person’s credit habits and history, and they use this information to assign a credit score.

Here is a visual of what your credit score is made up of:

How to Improve Your Credit Score

To build a good credit score, you’ll need to:

• Pay on or before the due date
• NEVER skip a payment
• Keep your credit balances low, ideally 30% or less
• Limit applying for and opening new credit accounts (Disclaimer: you should NEVER open new credit accounts while you’re in the process of cleaning up a prior mess)

Read our detailed post on How to Increase Your Credit Score On Your Own!

If you’ve struggled with maintaining your credit cards or getting approved for one in the past, try a secured credit card with your local bank. With a secured credit card, your maximum credit limit will be determined by the amount of the security deposit you provide, your income, and creditworthiness.

Have a good credit score? Congratulations, you’ll have lower interest rates, increased borrowing options, and you’ll save money (which is the best part)! 🙌🏽

Have a bad credit score? Unfortunately, you’ll tend to have higher interest rates, less or even no options to choose from and you’ll lose money on all of the fees and interest you’re giving away. 😭

Your Credit Report

A credit report is a document that describes an individual’s history of borrowing money and repaying what they owe.

When was the last time you looked at your credit report? Has it been a month, year, or never? You should review it at least once a year to check for errors or evidence of fraud and to verify your creditworthiness (we check ours monthly).

How to easily Obtain your Credit Report

The big 3 credit bureaus offer a free report online, go to www.annualcreditreport.com and follow the directions. Be wary of other websites that advertise free credit reports! The site above is a proven source for obtaining your official credit reports from Equifax, Experian and Transunion.

To view and track your credit scores throughout the year I suggest the following:

1. Check your scores for FREE with Credit Sesame
2. Your Bank (i.e. Wells Fargo)
3. Your credit card apps (American Express, Discover, Visa, etc)

Just keep in mind that the scores shown on 2nd party sites are estimates and can be off by 10 to 30 points in either direction.

What’s Next?

We’re working on a follow-up to this post that discusses how to read your credit report and how to correct any mistakes that you may find. We’re also going to be discussing credit cards and loans in more detail. You’ll be able to find that post here.

In the meantime, if you’d like to know more about debt payoff methods, check out this post.

Listen I am not encouraging people to borrow money, but if you ARE going to borrow you should at least have all of the information you need. I believe in using credit responsibly, I get back $50 to $100 a month by buying things with my CC instead of cash. However, there was a time that I used my CC because I simply did not have any cash to my name and that is definitely not the right way to manage things.

I hope you enjoyed this post as much as I did writing it.  

Until next time, $tay wealthy my friends <3

— Dannie

If you are anything like us then you probably only want to know what is the best way to pay off debt. In part 3 of our series, we’ll be covering two of the most well-known methods: the Debt Avalanche and the Debt Snowball. We’re also including a secret 3rd method that doesn’t get mentioned very often. (Following these methods helped us become debt free!)

Avalanche Method

In the debt avalanche method, you pay off debts in order of highest interest rate to lowest interest rate, regardless of the balance.

This method is all about the math. In the long run, it can save you the most money by paying off the debts with the highest interest rates first.

During this process, you make the minimum payment on each of your debts except for the debt with the highest interest rate. Put all of your extra money towards that specific debt. Once that debt is gone, you move to the next highest interest rate and repeat the process until everything is paid off.

Do you only have large debts ($1,000+)? With the avalanche approach, you’ll have to wait longer to get the emotional pat on the back that you get after paying off a debt.

Why I love this method: I love saving money…

THE END.

In all seriousness, the way my brains works, I don’t actually care if I spend months chipping away at a large debt with huge interest. Are you also very emotional about money? If so, this method may not be best for you.

Dave Ramsey doesn’t like this method either because he doesn’t believe it is motivating enough to push you through to the finale!

Let’s use Amy & Eric as an example. They owe a combined $41,000 in debt to various creditors. They have decided that they can comfortably afford to put $1,500 towards their debt payments each month.

*Amy & Eric’s debts reorganized according to the debt avalanche method:

Snowball Method

In the debt snowball method, you attack your debts in order of smallest balance to largest balance, regardless of interest.

When you use this method, you make the minimum payment on each of your debts except the debt with the lowest balance. Put all of your extra money towards that debt until it’s paid off. Then, rinse and repeat the process until all of your debts disappear!

This method is more about the psychology of paying off your debts rather than the actual math. Each time you pay off a debt, you get an emotional boost that motivates you to continue the process.

Instead of looking at your debt as one large sum, you see it as a combination of various small amounts. This makes the idea of debt freedom seem more attainable. It ultimately causes your mindset to shift from “I can’t win” to “I can definitely do this”.

*Amy & Eric’s debts reorganized according to the debt snowball method:

Our Secret 3rd Method

Credit cards make up the bulk of the debt in most debt payoff plans. If you find yourself in this category, there is another method you can consider:

Arranging your credit cards in order of highest credit utilization.

Credit utilization is the percentage of your credit that is being used at any given time. You can calculate it by dividing your current balance by your total credit limit ($2,750 bal/$5,000 limit = 55% utilization).

You should strive to keep your credit utilization below 30%. Decreasing your credit utilization has a serious positive impact on your overall credit score because utilization is one of the main factors used to calculate it.

Using this third method will also help you stay motivated because your credit score will begin to increase very quickly. Our scores shot up from the low 600s to well over 750 by taking this approach!

So, what is the best way to pay off debt?

In our experience, we used a combination of all of these methods. We figured out that the best method to use is whichever method works best for your particular situation. At the end of the day, you need to do what works best for you and will keep you motivated throughout the process. Sticking to your financial plan is ultimately most important and any of these methods will help you achieve this goal!

***

In the final part of our series we will be talking about Understanding Your Credit Scores. You’ll learn what your credit score is, what is used to calculate it, and what affects it the most.

— Dannie

INFOGRAPHIC

We created the infographic below so that you can share it with friends or save it to use as a quick reference for yourself!