I can’t tell you how important this rule is to our family. But if I had to boil it down to a few reasons, here they are. Spending this month’s income next month will revolutionize your financial situation. You’ll start to notice other people talking about waiting for the next paycheck – you won’t have to.
The funny thing is, we ran into this concept by accident. It came from the need to create a straightforward budgeting method that didn’t depend on rough estimations of income or variances in paycheck dates. It was born out of pure necessity. Later, we found out that it was not uncommon for financially aware people to implement this method.
The Top 5 Reasons:
- It creates a lack of immediate dependance on your next paycheck. We’ve all heard people around the office talking about payday. They have grand ideas of what to do with their money the day they receive it. Receiving a large sum of money can tempt a person to spend a good portion of it on discretionary items. When you are a month ahead of the game, you can focus on what’s most important: making money for next month and budgeting it accordingly.
- It reduces greed. By having a plan for your money, you can reduce your constant focus on the next paycheck which may result in greed. I’ve found this to be true in my life, because I now feel that the work I’m doing is for the future and has a purpose.
- It creates a one month emergency fund automatically. Having a month’s worth of income between you and the unknowns in life will ensure that you don’t have to dip into your fully-funded emergency fund as often. It’s simply another way to automatically save your money!
- It provides peace of mind because you don’t have to worry about whether your money will come before your bills. On the 1st of every month, you’ll have all the money you need for paying every bill from the 1st to the 31st. No more having to time your bills with your income!
- It gives you an unbiased look at your financial situation. At the end of every month, my wife and I look at our budget and adjust as needed. Having the money written down that we’ve made this month shows us our true income, and allows us to give every dollar a name for the next month. No more do we have to estimate what we make. We see every dollar earned, gifted, and sifted from underneath our car mats.
Yeah, but how do I get to that point?
Whenever I tell people about how important it is to spend money they make this month next month, they usually ask the same question: “Yeah, but how in the world do you get to that point?”
It won’t be easy, and it may take you a few months. The fastest way to get ahead is by budgeting and squeezing your income for every extra dollar you can muster to put into a savings account. Once you have enough money in your savings account to match your average net income, you can begin the process of spending this month’s income next month.
It’ll take sacrifice. But it is a short journey that will result in years of financial peace. It is, however, only one small step towards financial freedom. Stay tuned for daily tips and subscribe for free to The Christian Dollar.