This Payday Routine Will Completely Change Your Finances

Source: Elevae
Source: Elevae

I wish fewer people believed that living paycheck to paycheck was negative. If you’re one of those people, I challenge you to reframe your mindset. Each paycheck allows us to improve our money mindset, take hold of our finances, and ultimately, set us up for success in the future. More specifically, when payday rolls around, we have a brand new chance to check in on our financial picture, adjust our budgets, make positive changes, and set new habits. And the paycheck after that? Well, that’s another new opportunity to fine-tune your spending and saving habits. This continuous payday check-in is something that we should all be doing regularly—no matter how much money we have coming into our accounts.

Whether your paycheck comes in regular intervals or your income streams are less predictable, payday routines are important, and I’ve got mine down to a science. Ahead, I’m sharing steps you can follow to establish your personal payday routine, inspired by my very own that completely transformed my finances, along with a few hacks you can use along the way.

With every paycheck…

Review your pay stub

It’s tempting to skip the basics, but simply reviewing your pay stub is a really important step we often overlook. For many of us, our specific paycheck amounts flex by some amount every month for several reasons. Tax rates, contributions to retirement accounts, or benefits expenses, and our pay rate can change regularly, even if we have a relatively fixed salary.

Freelance gals know this well: Every income stream should be matched back to your invoices as soon as possible to catch errors and stay on top of accounting. If your income is more routine, this is still an important habit. We often take for granted that the layer between our gross and net income is humming along just fine and don’t check in on how these things change from month to month. It’s important to understand any variances and know if you need to make changes to benefits, withholdings, or retirement contributions.

Check on automatic transfers and payments

Automating my savings and investments has been one of the most helpful changes I’ve made thus far to benefit my financial wellness. The less thought and time we put into these actions, the more likely they are to stick over the long term. I have transfers set up to go toward my savings, investment accounts, and debt all ready to go on payday. That way, by the time I’m reviewing my finances on payday, many transactions I was expecting have already taken place. Out of sight, out of mind.

“Micro-bills” (smaller expenses like recurring app payments, streaming services, or memberships) are another automatic transaction that we need to stay on top of. They add up quickly, and since they vary, they can be hard to “group” or think about in aggregate. Apps like Truebill and other recurring payment analyzers can help you easily see what recurring payments you have. Some analyzers can even help you take the first step in canceling the ones you don’t use. Each time I get paid, I review my micro-bills to decide what, if any, unnecessary charges I can clean up.

Scan your accounts for unexpected charges

The more digital our world is, the more we expose our payment tools to fraud or unexpected charges. I’m pretty cashless (especially nowadays), meaning my account ends up littered with small dollar expenses. A $10 charge for lunch, a $2.75 charge for coffee, and a $4.80 charge for a bagel are charges that are way too easy to glaze over, especially if I don’t give them a proper review periodically. Once a month would be too overwhelming to review and add up these small expenses, so I actually scan my accounts biweekly to make sure I not only recognize all my charges (ensuring there is no fraudulent activity) but also take note of my spending habits.

If you want to take this a step further, take advantage of automatic alerts offered by your bank or credit card company. They can send you spending notifications (usually a quick text or email) if a charge falls outside the parameters you specifically set like within a certain location or above your usual dollar amounts.

Find a job for every dollar

Sometimes called “zero-based” budgeting, I find a job for every dollar I earn each payday. For me, this looks like knowing my savings and investment payments come off the top first automatically, followed by bills. What’s left is not only “fun money” but also money that gets allocated toward smaller spending goals, like a closet investment piece I may be saving for. I might also choose to put a larger portion of a paycheck toward any debt I have lingering. If I only have to think about the next two weeks before I get paid and consider if I have any potential planned or unplanned expenses, it is more manageable to organize the money I have left accordingly.

If doing this monthly feels as overwhelming to you as it does for me, I recommend doing this step with each paycheck like I do—or at least until you get the hang of it and are confident enough to check in monthly. This can also work well if you have multiple income streams or you share expenses with a partner or a roommate. For example, rather than saving an entire paycheck for a big expense like rent, allocating a portion of your paycheck (or giving those dollars a “job”) for rent each payday might feel more manageable than looking at all of your different expenses and how you’re going to manage them by income stream or individual.

Source: @karolina-grabowska | Pexels

With sporadic paychecks…

Whether you work freelance roles and earn paychecks periodically, have a side hustle that you cash in on now and then, or even earn extra paychecks (we love a bonus check!) throughout the year that venture from your typical pay schedule, these paydays require extra management, care, and attention. In addition to following the same steps noted above, consider doing the following things to ensure even your sporadic paychecks are fueling your financial success and future.

Check-in with financial advisors

It can be helpful to have a team of financial professionals who can advise you, especially as it pertains to freelance checks or larger sums of money (like those that would come in a bonus check). Financial professionals can help you manage these dollars, allocating some to taxes and other longer-term savings or expenses. For example, if you earn income as a contractor, you need to ensure you are putting enough money aside for taxes or expenses. But how much and where should you put it? Lean on your financial advisor for those answers. You may not have to call their desk line every time a paycheck comes in once you get the hang of it, but keeping their number close by for advice and guidance will help you manage your money effectively.

Contribute to your emergency fund

Earning income that is… unpredictable means that you might need to (or want to!) build a heftier emergency fund that you can rely on in between paydays. When sporadic checks come in, consider contributing even a small portion of it to your emergency fund, instead of allowing all your spare change to sit in your spending account. As this builds, it can act as a cushion for any unexpected expenses that may come up throughout the year that you didn’t particularly budget for or earn enough to take on (did someone say car troubles?!).

Think longer term

Budgeting and understanding your expenses with a little bit of a longer view, specifically how seasonality affects your revenue and spending, is crucial. Be sure that you are thinking about taxes and expenses with every inflow. It can be so easy to think you’ll “put the next” check toward your big expenses but don’t fall victim to that mindset. Keep an eye on where your money is going regularly, consider what you have coming up later in the year, whether it’s a vacation or tax season, and plan ahead. Future you will thank you.