Have you ever started a month or a year with solid financial goals; you know what you want, how you want it and you have it written down. But then halfway through, you fall off the wagon so seriously, you almost don’t believe it. This is probably because you don’t have a payday routine and so you don’t know what to do when the money comes in. In this blog, we will talk about six things that you should do every payday to ensure that you remain consistent with your financial goals.
But first, what exactly is a payday routine? A payday routine is a series of activities that you do every time money comes in. These activities apply whether you are employed with a fixed salary that comes in at a fixed date, it also applies to someone who gets their salary at the beginning of the month, at the end of the month, or even in the middle of the month. Regardless of when the money comes in, you can use your payday routine to create a level of stability and order in your finances so that you stay on course with your financial goals.
Close the previous month’s budget and open the budget for the next one
This should be the first thing on your payday routine’s to-do list. Closing your budget for the previous month is accounting for how you spent the money. Ascertaining how much spent on needs, how much spent on wants and leisure, how much on debt repayment, and the portion you used to fund your investments. Doing this will help you identify the areas you overspent in so that you can adjust accordingly.
When it comes to opening your budget for the following month, you ask yourself: What do I want my money to do for me this month? Let’s assume that your birthday or your friend’s birthday is coming up so you budget for that. Is there a debt you need to finish paying off? Do you need to fund an investment or a saving account? This is the time to plan for those. This way, you don’t allow your salary to come and go, come and go, without seeing its impact.
Pay yourself first.
Immediately after you open your budget for the new month, the first thing you should do is pay yourself. This involves paying into your investments and savings before you pay anything else. If you wait to pay all the bills, then by the time you’re done, there will be no money left to go towards savings and investments. So if investing and saving is a priority, then prioritize that on your payday routine. The moment the money comes in and you’ve done the budget, first things first, actually take this money to your savings and investments.
You can also go a step further and automate your savings and investment by putting a standing order with your bank such that when your money comes in, the 5,000 is deducted to go to your emergency fund, and another 5,000 is deducted to go into your sinking funds, your stock market investments, or even your pension.
Pay down your debt
The third item in your payday routine should be to pay down your debt. It will help to prioritize your debt by listing them in order of their interest rates and immediacy. Debts attracting high-interest rates should be given high priority and at the same time, you don’t want to miss the repayment deadline. Here is where the Legacy Budget Tracker will come in handy for you. It has a whole sheet where you can plan your debts in order of priority so that you can easily keep tabs on them and pay them on time.
Pay the mandatory bills
Now it is time to take care of your mandatory bills, and expenses. Your rent, your internet, transport; whatever it is that you consider mandatory bills and expenses, pay them promptly.
Plan for your wants and leisure
Once you’re done paying the bills, the next thing that you need to do is to plan for the wants and the leisure with the remaining amount of money. At this point, you are probably left with little money and it doesn’t seem fair that your wants should be this lower on the list. But remember, the whole point of a payday routine is to help you focus on your financial goals.
If having a savings and investment portfolio is important to you, and if getting out of debt is important to you, then these are the things you should prioritize in your budget over your wants and leisure.
Reconcile your accounts
Once you’ve been able to do the above five things, you can now proceed to reconcile your accounts. Here, you want to check on the debts that you are paying, especially if you’re paying back a bank or a SACCO loan. Ensure that what they have in their records is also what you have. Then, proceed to confirm your savings and investment statements. To err is human and the people working where your money is might have missed a particular top-up you made.
Finally, it’s time to double-check your current accounts. How much money do you have in it? What needs to go to your investment or savings accounts? What needs to stay? Also, look at the transaction charges. Some of us are with banks we shouldn’t be with anymore. If your account has high maintenance and transaction charges, that’s a sign you should break up with your bank.
I know the payday routine sounds like a lot of work. But for you to actually take an active role in the management of finances, you actually need to show up for yourself. No one is going to come to do these things for you. Getting these things done in the first month is not going to be easy. Neither is the second month nor the third month. But if you keep at it, with time it starts becoming normal. It starts becoming routine, and that will really benefit you on your journey to financial freedom.