Managing money can be tough, especially when you get paid and feel like spending it all at once. A lot of people struggle with balancing income, expenses, and savings. Today, I will share how I, as an accountant, manage my money on payday. I’ll break it down into three simple sections: income, expenses, and savings. These are key areas that help me stay financially healthy and prepared for the future.

1. Income: Understanding Where My Money Comes From

How I Track My Income

The first step to managing money is knowing exactly how much you make. For me, this starts with my salary. I get paid once a month, and I know how much will be deposited into my bank account on payday. I also have some side jobs, like freelance work, that bring in extra money. It’s important to track every bit of income you earn, even small amounts. You can use a notebook or an app to keep track of your income.

Gross Income vs. Net Income

It’s easy to think that your salary is the same as what you can spend. But, there’s a difference between gross income and net income. Gross income is the total amount you earn before taxes and other deductions, like health insurance or retirement contributions, are taken out. Net income, on the other hand, is the actual amount you get to take home and spend or save.

For example, if I earn $3,000 a month but have $500 deducted for taxes and benefits, my net income is $2,500. It’s important to budget based on net income, not gross, so you don’t overspend.

Additional Sources of Income

Besides my salary, I make a small income from investments. For example, I earn dividends from stocks and interest from savings accounts. Even if the extra money is small, every bit counts. Keeping track of this extra income can help you reach your financial goals faster.

2. Expenses: Controlling Where My Money Goes

Fixed Expenses vs. Variable Expenses

Once I know how much money I have, I focus on my expenses. Expenses can be divided into two types: fixed expenses and variable expenses.

• Fixed expenses are things you have to pay every month, and they usually don’t change. This includes rent or mortgage payments, utilities, and car payments.
• Variable expenses are costs that can change month to month. For me, this includes groceries, gas, entertainment, and shopping. These are the expenses you have more control over.

The 50/30/20 Rule

To manage my expenses, I use the 50/30/20 rule. This is a simple way to divide your money:

• 50% goes to needs (rent, utilities, groceries)
• 30% goes to wants (eating out, shopping, entertainment)
• 20% goes to savings or debt repayment

This rule helps me ensure that I’m not overspending on things I don’t need while still allowing some room for fun.

Budgeting for Unexpected Expenses

Life is full of surprises, and unexpected expenses happen. For this reason, I always set aside a portion of my money each month for emergencies. It’s not a fixed amount, but I try to save at least $100 into an emergency fund. This fund has helped me cover unexpected car repairs, medical bills, and even last-minute travel without having to use a credit card.

3. Savings: Planning for the Future

Why Saving Money is Important

Savings are crucial because they provide financial security. Whether it’s saving for retirement, a vacation, or an emergency, having money set aside can give you peace of mind. I make sure to prioritize saving each month because it ensures that I’m prepared for the future.

How Much Should I Save?

As part of the 50/30/20 rule, I try to put at least 20% of my net income into savings. This might seem like a lot, but it’s a habit that has really helped me build financial stability. For example, if my net income is $2,500 a month, I aim to save $500. If this amount seems too high for you, start with a smaller goal and work your way up.

Types of Savings Accounts

There are different ways to save money, and it’s important to choose the right account for your goals.

• Emergency Fund: This is a basic savings account that I can access quickly if something unexpected happens. I recommend keeping at least three to six months’ worth of living expenses in this account.
• Retirement Savings: I also save for retirement by contributing to a 401(k) through my job. Some companies offer to match contributions, which is free money! Make sure to take advantage of any matching program your employer offers.
• Investment Accounts: In addition to basic savings, I have money invested in stocks and mutual funds. This helps my savings grow faster than they would in a regular savings account because investments typically have higher returns over time. However, they also come with more risk, so it’s important to invest wisely.

How to Balance Income, Expenses, and Savings

Balancing income, expenses, and savings might sound difficult, but it’s easier if you follow a plan. Here’s a quick overview of how I manage my money on payday:

1. Track income – I make sure to know exactly how much money I have coming in each month.
2. Budget for expenses – Using the 50/30/20 rule, I allocate money to needs, wants, and savings.
3. Automate savings – I have my bank automatically transfer a portion of my paycheck to a savings account each month.

By sticking to this routine, I’m able to meet my financial goals without feeling stressed. It’s important to review your budget regularly and adjust it as needed.

Conclusion: Simple Steps to Managing Your Money

Managing your money on payday doesn’t have to be complicated. Start by understanding your income, and then budget for your expenses. Prioritize saving so you can build financial security. With a little planning and discipline, you can take control of your finances and feel confident about your future. The key is to start small, stay consistent, and adjust your plan as your life changes.

Following these steps has made a big difference in my life, and I believe it can help you too!