Budgeting when moving pay frequencies

datlex

I may be moving from weekly to monthly pay due to employment status changes. Won't know for a week or two due to folks holidays.

I have been on weekly pay for over a decade and really like it for the monetary control it gives.

I could potentially get my first monthly payment on 25th September, how much this would be would obviously depend on agreed "start" date.  I realise I would get my weekly pay up to "start" date as well as any built up holiday pay.  What would be a long period of time for me would be the month without any additions to my pay bank account up to 25th October.  

It has been a very long time since I had monthly pay.  Back then I did not really budget my pay and had just one bank account.  Now I have a few for things like cashback (every penny helps).

With my current weekly pay I budget as follows: 1/4 of my monthly bills get sent to an account which holds the money pending the bills for that month being paid. (I built up to that over a few years), the rest I allocate between saving and spending.  I have a month buffer in my bills account at present.

I am considering options for the transition to monthly pay.  

Once on the monthly pay properly I am considering my budgeting options

Options are:

1) put income into a holding account and allocate weekly at same rate as was paid, this would require ensuring a buffer to cover 5 week months.
2) put income into holding account, replenish bills account with monthly bills requirement and then distribute rest weekly.
3) as two but replenish bills and add to savings before distributing rest weekly.
4) attempt to budget monthly- replenish monthly bills, add to savings and then have the rest of month to spend the money.

What are folks experiences of moving from weekly to monthly pay?

Emmia

Have your mionthly pay go into one bank account, which will also deal with rent /bills etc. Then pay yourself a weekly income from that account into a separate account (ideally with a second bank, so you use different apps) which you use for spending money.

This is the method I've used for years to budget 

[Deleted User]

I suggest costs +  buffer (say 10% extra) in the current account.

Either a secondary current account for spends or credit card on full repayment by Direct Debit shortly after pay-day.

It depends what works for you mostly. 

datlex

Emmia said:

Have your mionthly pay go into one bank account, which will also deal with rent /bills etc. Then pay yourself a weekly income from that account into a separate account (ideally with a second bank, so you use different apps) which you use for spending money.

This is the method I've used for years to budget 

Hi  I already have several accounts across a number of banks to earn rewards and cashback. So definitely know the benefit of multiple accounts.  My current pay goes into one account.  I send 1/4 worth of my bills to an interest earning account with another bank to hold to replenish the accounts from which my bills are paid.  My bills are paid from a few accounts, this is due to cashback and requirements to earn rewards/interest on related accounts. I distribute savings across a number of accounts.  I then use a cashback account for my card spending. (I calculate I earn over £300 a year in rewards etc- which for me covers my budgeted spends on family presents).  There's a couple of bills I use cash for: window cleaner and takeaway (we found they were leaving on door step when using card and didn't always realise had arrived, we like the food and moving to cash solved the issue). 

With my options 1 to 3 I am considering holding the money in an easy access interest earning account.  I am leaning towards 3 but with a small buffer on the monthly bills to get further ahead :-:smile:  

datlex

[Deleted User] said:

I suggest costs +  buffer (say 10% extra) in the current account.

Either a secondary current account for spends or credit card on full repayment by Direct Debit shortly after pay-day.

It depends what works for you mostly. 

Definitely agree a buffer on bills is important  I have one on my weekly budget would continue with that on a monthly budget :-)

datlex

Seems a weekly spends allocation works for folks.  So question is what day of week works best to "get paid".  I currently get paid on a Thursday so may stick with that.

blue.peter

I feel your pain. I went through the same transition (albeit a long time ago - in 1979), and still remember how hard I found it at the time.

Do you have any savings? If so, I'd be inclined to go with a version of option 4:

• budget monthly
• dip into the savings to fund your first month without income
• replenish the savings gradually.

The key to getting it right in, in my view, is good financial planning. A money management program is very helpful in this context. I use, and recommend, AceMoney. If you want a free one, you might try MoneyManager Ex. Microsoft's Money is no longer being developed, and is also available free - you can download the most recent UK version from my Dropbox

Once you've got your money manager set up with your bank accounts, credit cards, savings and loans/mortgage, you can put all your regular bills etc., and your salary, into its schedule, and you'll be able to see how much money you'll have available, and where it is, until your next pay cheque comes in. You'll also be able to see if you've got a shortfall coming up, and compensate for it by shifting money from savings. Once you've got into the swing of it, you should see surpluses coming up, and compensate by shifting money back into savings.

Another possibly useful thing that you might do is to have one bank account to receive your salary and hold money for ad hoc spending, and transfer enough to a second account to fund regular bills (energy, mortgage payments, telecoms, council tax, water and so on) each month when your salary comes in.

For what it's worth, I started doing things this way many, many years ago (initially using pen and paper), and still operate a system like it to this day. It's served me well.

enthusiasticsaver

I have always received my income monthly although now because I have more than one stream of income in retirement payments do go in on different days throughout the month.  I really would prefer to get it all on the same day.  

Budgeting for me was always done on the last day of the pay period and I started by pushing all unused funds into savings (unless they are there to pay a credit card bill if used throughout the month. I always pay them off in full each month) 

I would then leave enough money in my current account to pay bills for the month with a small buffer.  Some would go into an account for food, fuel and entertainment and some would go into both mine and  my husbands personal accounts for personal spends.  The rest would be divided into pots for car, house, holidays, gifts and long term savings (no more as we are retired now). 

If you are moving from weekly to monthly pay I would do the same and do a budget on your payday and divide it out.  You need to get out of any mentality of splurging on payday if you do that though as you do not want to go through all your money at the very beginning of your pay period. If you cannot trust yourself to be disciplined divide  the spare money after bills etc accounted for and move three quarters over to another account and transfer it back weekly until you get used to monthly pay. 

blue.peter

enthusiasticsaver said:

I have always received my income monthly although now because I have more than one stream of income in retirement payments do go in on different days throughout the month.  I really would prefer to get it all on the same day.  

Budgeting for me was always done on the last day of the pay period and I started by pushing all unused funds into savings (unless they are there to pay a credit card bill if used throughout the month. I always pay them off in full each month) 

I would then leave enough money in my current account to pay bills for the month with a small buffer.

Yup. All exactly the same as me.

datlex

blue.peter said:

I feel your pain. I went through the same transition (albeit a long time ago - in 1979), and still remember how hard I found it at the time.

Do you have any savings? If so, I'd be inclined to go with a version of option 4:

• budget monthly
• dip into the savings to fund your first month without income
• replenish the savings gradually.

The key to getting it right in, in my view, is good financial planning. A money management program is very helpful in this context. I use, and recommend, AceMoney. If you want a free one, you might try MoneyManager Ex. Microsoft's Money is no longer being developed, and is also available free - you can download the most recent UK version from my Dropbox

Once you've got your money manager set up with your bank accounts, credit cards, savings and loans/mortgage, you can put all your regular bills etc., and your salary, into its schedule, and you'll be able to see how much money you'll have available, and where it is, until your next pay cheque comes in. You'll also be able to see if you've got a shortfall coming up, and compensate for it by shifting money from savings. Once you've got into the swing of it, you should see surpluses coming up, and compensate by shifting money back into savings.

Another possibly useful thing that you might do is to have one bank account to receive your salary and hold money for ad hoc spending, and transfer enough to a second account to fund regular bills (energy, mortgage payments, telecoms, council tax, water and so on) each month when your salary comes in.

For what it's worth, I started doing things this way many, many years ago (initially using pen and paper), and still operate a system like it to this day. It's served me well.

Yes I do have savings :-)  With my current weekly pay I run several accounts.  Partly for budgeting reasons and partly to benefit from cashback and rewards- might as well get ever extra penny eh?

My bills accounts are all sitting with a month worth of bills in and I have over another month's worth in another account.  I normally add to this every week and replenish the bills accounts as the money is spent.  

It will be the self control to make the remaining money last over the month that will be the challenge :-)

datlex

enthusiasticsaver said:

 
Budgeting for me was always done on the last day of the pay period and I started by pushing all unused funds into savings (unless they are there to pay a credit card bill if used throughout the month. I always pay them off in full each month) 

If you are moving from weekly to monthly pay I would do the same and do a budget on your payday and divide it out.  You need to get out of any mentality of splurging on payday if you do that though as you do not want to go through all your money at the very beginning of your pay period. If you cannot trust yourself to be disciplined divide  the spare money after bills etc accounted for and move three quarters over to another account and transfer it back weekly until you get used to monthly pay. 

Thanks I also send any left over at end of week.  So always start from zero. I get regular emails from my bank telling me my balance has reached zero- erm yep cos the money is moved where it works better.  I only use my credit card now for larger payments which are already funded (again paid off in full).  Am using Chase currently for the cashback as better than on my credit card.

Definitely important to have a buffer on bills :-)  I round mine up to the nearest £5. Then send the change to savings :-):smile:  I like my accounts to look tidy so each day I send the loose pennies to my mortgage.  Amazing how it mounts up.  

Am planning on after bills, savings and giving having £100 per week ( I currently use £95) i.e. £500.  I believe this will help me build up a buffer in my pay account.  Just have to be disciplined.  I have set up a "hidden" account in Chase to use for my monthly pay.