How Do We Set Up a Bi-Weekly/Monthly Budget?
November 12, 2008 5:51 PM Subscribe
So my wife and I want to set up a budget to monitor expenses and so forth. Very responsible, yes? Here's the snag, we are paid bi-weekly, and have both bi-weekly and monthly bills/expenses to track. All the online budget tools seem to be set up for monthly tracking. What to do?
Basically, we are very unsure how to track expenses while accounting for the variance in bill and pay schedules. We are looking both for any tips on how to set up such a budget, as well as what free online services (or Excel spreadsheets) can be used to automate/facilitate the task.
This is common, right? Lots of people are paid bi-weekly, so there must be some way to set up a budget that includes both bi-weekly and monthly items. We are stumped (and quickly losing enthusiasm for setting up a budget at all).
Basically, we are very unsure how to track expenses while accounting for the variance in bill and pay schedules. We are looking both for any tips on how to set up such a budget, as well as what free online services (or Excel spreadsheets) can be used to automate/facilitate the task.
This is common, right? Lots of people are paid bi-weekly, so there must be some way to set up a budget that includes both bi-weekly and monthly items. We are stumped (and quickly losing enthusiasm for setting up a budget at all).
Is the issue that bi-weekly occurs twice or thrice a month, depending on how the weeks fall? Personally, I would either
a) Ignore this, and just look at longer-term averages
b) Keep track of your expenses in the software, but instead of entering the paychecks as they are received, simply take your salary, divide it by 12, and add that as a dummy income. This can be more complicated if you have issues with overtime and other forms of unstable pay, but normally it should be OK.
Regardless, I suspect that using the budget to keep track of your expenses will be the most productive part of the exercise -- keeping track of income is typically easier since there are fewer sources.
posted by bsdfish at 6:35 PM on November 12, 2008
a) Ignore this, and just look at longer-term averages
b) Keep track of your expenses in the software, but instead of entering the paychecks as they are received, simply take your salary, divide it by 12, and add that as a dummy income. This can be more complicated if you have issues with overtime and other forms of unstable pay, but normally it should be OK.
Regardless, I suspect that using the budget to keep track of your expenses will be the most productive part of the exercise -- keeping track of income is typically easier since there are fewer sources.
posted by bsdfish at 6:35 PM on November 12, 2008
Does it have to be online? I use gnucash, and it'll handle this with ease. Plus, there's the proprietary quickbooks, which probably can also do this quite easily.
posted by philomathoholic at 6:47 PM on November 12, 2008 [1 favorite]
posted by philomathoholic at 6:47 PM on November 12, 2008 [1 favorite]
Response by poster: The issue is mainly that certain expenses occur monthly (for example electricity, car payment), while others are bi-weekly (mortgage, RRSPs). The income issue can be handled by Salary/12, but we're having a harder time coming up with a monthly budget that incorporates the bi-weekly expenses.
I guess basically it is the twice-or-thrice issue. It just seems that if we set up the budget monthly, the bills that occur bi-weekly would gradually slide out of sync, rendering the budget inaccurate.
posted by joelhunt at 7:03 PM on November 12, 2008
I guess basically it is the twice-or-thrice issue. It just seems that if we set up the budget monthly, the bills that occur bi-weekly would gradually slide out of sync, rendering the budget inaccurate.
posted by joelhunt at 7:03 PM on November 12, 2008
I am paid biweekly, but I set up my budget as if I were paid twice a month. My reasoning is that there are only ever two months a year where I will get three checks, but ten where I have to live on two.
The practical result is that twice a year I get this extra chunk of change, which goes into emergency fund, debt reduction, travel fund, or wherever I am stashing savings, but I don't budget for it. It has made me more apt to stick with the budget (I have developed a hefty aversion to spending one of the "extra" checks on budgeted items), and it makes using a budgeting tool a lot easier. (I use YNAB, for what that's worth, and the forums there have been helpful with the biweekly issue.)
posted by catlet at 7:22 PM on November 12, 2008 [1 favorite]
The practical result is that twice a year I get this extra chunk of change, which goes into emergency fund, debt reduction, travel fund, or wherever I am stashing savings, but I don't budget for it. It has made me more apt to stick with the budget (I have developed a hefty aversion to spending one of the "extra" checks on budgeted items), and it makes using a budgeting tool a lot easier. (I use YNAB, for what that's worth, and the forums there have been helpful with the biweekly issue.)
posted by catlet at 7:22 PM on November 12, 2008 [1 favorite]
We do the same thing as catlet & kate blank, we set our budget up as getting paid only twice a month. There are only two months of the year with 3 paychecks, so on those months we dump the extra money into savings, buy clothes or splurge a little. Those are really the only two months that would mess with a monthly plan incorporating bi-weekly expenses.
posted by pokeedog at 7:41 PM on November 12, 2008
posted by pokeedog at 7:41 PM on November 12, 2008
Best answer: I'm in this boat too (paid fortnightly / some bills monthly, some fortnightly).
I keep track of things in excel, and find that the easiest way to actually manage things is to use a separate "bills account". The amount to cover the fortnightly & monthly bills goes straight in when I'm paid. The fortnightly ones are easy of course, but for the monthly bills, I just divide these by two & put that amount in. They will slide out of sync, but it will do so in your favour (rather than not having enough & getting dishonoured).
The trick to funding this is that the first time you put cash into the account, is to put enough in for the monthly payments as if you're covering your previous fortnightly pay as well.
You can set up a spreadsheet to manage things on a fortnightly basis (one entry per 14 days), or if you wanted to be really particular, go for daily entries where you can account for what you spent that day (but probably shouldn't have, right...).
It also allows you to set up a separate account for this concept (that I've only just come across) called "saving". That way, whatever's left in your everyday account, is what you spend on a day to day basis.
Also, and somewhat tangentially - is "bi-weekly" some kind of regional term? I've never heard it before (but then I am a touch out of the way...) Not being Regional-IST, just wondering
posted by MatJ at 8:04 PM on November 12, 2008
I keep track of things in excel, and find that the easiest way to actually manage things is to use a separate "bills account". The amount to cover the fortnightly & monthly bills goes straight in when I'm paid. The fortnightly ones are easy of course, but for the monthly bills, I just divide these by two & put that amount in. They will slide out of sync, but it will do so in your favour (rather than not having enough & getting dishonoured).
The trick to funding this is that the first time you put cash into the account, is to put enough in for the monthly payments as if you're covering your previous fortnightly pay as well.
You can set up a spreadsheet to manage things on a fortnightly basis (one entry per 14 days), or if you wanted to be really particular, go for daily entries where you can account for what you spent that day (but probably shouldn't have, right...).
It also allows you to set up a separate account for this concept (that I've only just come across) called "saving". That way, whatever's left in your everyday account, is what you spend on a day to day basis.
Also, and somewhat tangentially - is "bi-weekly" some kind of regional term? I've never heard it before (but then I am a touch out of the way...) Not being Regional-IST, just wondering
posted by MatJ at 8:04 PM on November 12, 2008
Best answer: I get paid varying amounts by one client on the 15th and last day of each month, and get payments from other clients at rather more unpredictable intervals, so I know how difficult it can be to make a standard monthly budget work.
I built my own Excel template dividing each month into 1-15 and 16-end, using one worksheet per period. In your case, you should use 26 worksheets, not 24, because you're going to label them weeks 1-2, weeks 3-4, etc. Each worksheet includes a row for projected and actual payments for all budget items, even if I don't expect to pay anything that period. I put in a 0 for the projected and actual costs if they don't apply for a line item that period, but I keep that row for a placeholder. This allows me to sum across months easily, and also allows for the occasional migration of costs to a different part of the month.
Then I fit in my projected costs for each line item for each period.
Fixed costs includes car payments, house insurance, etc. The same amount, on the same date, every month. Easy. Plan out your worksheet a year in advance: wk 1-2 jan 1-14, wk 3-4 jan 15-28, wk 5-6 jan 29-feb 11, etc. Plug in the fixed costs that occur within each period. Your bi-weekly payments won't have fixed dates, but you will know they occur once per worksheet period.
Reasonably predictable costs include utilities bills and credit card monthly balances, which are vary slightly by amount and date each month. I put in a slightly high estimate each month, plugging in the value to the appropriate worksheet. This also includes things like the groceries budget: I figure out what I expect to spend over a month, then split that between the two halves of the month.
Irregular costs includes dental visits, vet bills, house maintenance items like furnace filters, and everything else that doesn't fit a nice bi-weekly or monthly pattern. I estimate what I have to put away each month to be ready to pay a lump sum toward these items when they come due. I sock that money into an ING account so I get a little interest out of it. I don't track what I actually end up spending on each of these items, but it would be easy enough to build in if you liked.
posted by maudlin at 8:05 PM on November 12, 2008
I built my own Excel template dividing each month into 1-15 and 16-end, using one worksheet per period. In your case, you should use 26 worksheets, not 24, because you're going to label them weeks 1-2, weeks 3-4, etc. Each worksheet includes a row for projected and actual payments for all budget items, even if I don't expect to pay anything that period. I put in a 0 for the projected and actual costs if they don't apply for a line item that period, but I keep that row for a placeholder. This allows me to sum across months easily, and also allows for the occasional migration of costs to a different part of the month.
Then I fit in my projected costs for each line item for each period.
Fixed costs includes car payments, house insurance, etc. The same amount, on the same date, every month. Easy. Plan out your worksheet a year in advance: wk 1-2 jan 1-14, wk 3-4 jan 15-28, wk 5-6 jan 29-feb 11, etc. Plug in the fixed costs that occur within each period. Your bi-weekly payments won't have fixed dates, but you will know they occur once per worksheet period.
Reasonably predictable costs include utilities bills and credit card monthly balances, which are vary slightly by amount and date each month. I put in a slightly high estimate each month, plugging in the value to the appropriate worksheet. This also includes things like the groceries budget: I figure out what I expect to spend over a month, then split that between the two halves of the month.
Irregular costs includes dental visits, vet bills, house maintenance items like furnace filters, and everything else that doesn't fit a nice bi-weekly or monthly pattern. I estimate what I have to put away each month to be ready to pay a lump sum toward these items when they come due. I sock that money into an ING account so I get a little interest out of it. I don't track what I actually end up spending on each of these items, but it would be easy enough to build in if you liked.
posted by maudlin at 8:05 PM on November 12, 2008
I use Money Manager Ex, a free open source budgeting tool. It lets you set stuff up to repeat daily, weekly, biweekly, monthly, bimonthly, quarterly, every four weeks, every three months, etc.
posted by jacalata at 12:41 AM on November 13, 2008
posted by jacalata at 12:41 AM on November 13, 2008
I like the "pretend you only get two checks a month" thing. But for "big picture" budgeting, I'd add up everything to yearly expenses and income- you know, I have $50,000 in income and $60,000 in expenses = bad.
posted by gjc at 5:09 AM on November 13, 2008
posted by gjc at 5:09 AM on November 13, 2008
I use a spreadsheet and take two approaches
1) Approximate. I determine how much something should cost and how many times per year it should happen, and divide through to my time period of interest. Easy peasy. The advantage is that short-term averages aren't very meaningful, and it keeps me from overfitting noise and worrying about random irregular events (dentist says you need a crown). I'm not super concerned that I have $5382 going into savings from day X to day Y, but at the end of the quarter that I have approximately the right amount is important.
2) Retrospective Exact. Everything gets entered on the day it happens, and I plot out the empirical yearly projection based on the data.
I have the third sheet where I merge these two approaches by breaking everything down by category and using both my knowledge of the underlying reality and the empirical data. For example, some things come in large discrete units (quarterly taxes, car insurance, etc) and I can take that into account better than just saying {$X over Y days projects to $X*365/Y per year}. OTOH my history is a much better predictor of how much I spend on food n booze than my guess.
If you'll be close to going broke you'll need to try to project exactly, but it's inherently an inaccurate exercise because of the random stuff I mentioned.
posted by a robot made out of meat at 5:49 AM on November 13, 2008
1) Approximate. I determine how much something should cost and how many times per year it should happen, and divide through to my time period of interest. Easy peasy. The advantage is that short-term averages aren't very meaningful, and it keeps me from overfitting noise and worrying about random irregular events (dentist says you need a crown). I'm not super concerned that I have $5382 going into savings from day X to day Y, but at the end of the quarter that I have approximately the right amount is important.
2) Retrospective Exact. Everything gets entered on the day it happens, and I plot out the empirical yearly projection based on the data.
I have the third sheet where I merge these two approaches by breaking everything down by category and using both my knowledge of the underlying reality and the empirical data. For example, some things come in large discrete units (quarterly taxes, car insurance, etc) and I can take that into account better than just saying {$X over Y days projects to $X*365/Y per year}. OTOH my history is a much better predictor of how much I spend on food n booze than my guess.
If you'll be close to going broke you'll need to try to project exactly, but it's inherently an inaccurate exercise because of the random stuff I mentioned.
posted by a robot made out of meat at 5:49 AM on November 13, 2008
Response by poster: Thanks for the input, you've all given us much to discuss and hash out. Now... onward... to BUDGET!!
also - MatJ - I've only ever called it "biweekly". I'm Canadian, so maybe that has something to do with it...
posted by joelhunt at 10:13 AM on November 13, 2008
also - MatJ - I've only ever called it "biweekly". I'm Canadian, so maybe that has something to do with it...
posted by joelhunt at 10:13 AM on November 13, 2008
This thread is closed to new comments.
posted by kate blank at 6:00 PM on November 12, 2008