Budget periods: why the calendar month is often the wrong one
If your pay arrives on any day but the 1st, a budget that runs from payday to the day before the next one measures the money you actually have. A calendar month splits each pay packet across 2 budgets, and near the end of the month it shows money as left that has already been spent.
The calendar month still fits some people: those paid on the 1st, and some of those whose income has no fixed date.
The calendar month splits your pay in 2
Say you are paid on the 25th. That pay has to last from the 25th to the 24th of the next month. A budget that runs from the 1st sees that stretch in 2 pieces: 6 days at the end of one month and 24 at the start of the next.
So the budget resets on the 1st, 6 days into what your bank account sees as one period. From then on, the 2 disagree. The budget counts from the 1st, and the money counts from the 25th.
For most of the month the difference is small. In the last week before payday, it is the whole story.
A worked example: paid on the 25th
Your pay is 2,100 and arrives on 25 September. You spend an even 70 a day. Your budget is 2,100 a period. Here is what each kind of budget says on 24 October, the day before the next pay:
| On 24 October | Calendar month | Payday to payday |
|---|---|---|
| Counting from | the 1st | the 25th |
| Spent in the period | 1,680 | 2,100 |
| Left in the budget | 420 | 0 |
| Left in your account | 0 | 0 |
The calendar budget says you have 420 left. Your account is empty. The 420 went on the last 6 days of September, at 70 a day, and it counted against September's budget instead.
The payday budget empties on the same day as the account. What it says is left is what you have.
A warning at 80 percent shows the same gap. The payday budget passes 1,680 on 18 October, with 6 days of pay still to steer. The calendar budget passes it on 24 October, the day the account runs dry. The warning is the same. Only one of them arrives in time to change anything.
Real spending is not an even 70 a day. A big shop the day after payday, or rent on the 1st, moves the numbers around. The mismatch stays, though. A calendar budget always counts the days since the 1st, and your account always counts the days since the money came in.
When the 1st fits
The calendar month fits when:
- You are paid on or near the 1st. The pay period and the calendar month are then the same thing.
- Your income has no fixed date. If you are freelance, or paid by several clients, there is no payday to line up with. One way to handle it is to budget each month with what arrived the month before, and then the calendar month fits.
- You want to compare with your bank statement. Many bank statements, and most monthly reports, run from the 1st. A payday budget will not line up with them, and checking one against the other takes an extra step.
If 2 of you share a budget and are paid on different days, there is no single payday. Pick the date the larger share of the money arrives, or the date most of the shared bills leave, and write it down.
Paid weekly, or every 4 weeks
Weekly pay fits a weekly budget that starts on payday. Each pay packet covers one period, and nothing is split. Monthly bills, such as rent, need their weekly share set aside from each pay, or the week the rent leaves will look badly overspent. Bills that come once a year need the same treatment over 12 months, as planning for the expenses that arrive once a year shows.
Pay every 4 weeks arrives 13 times a year, not 12. A monthly budget that starts on payday drifts by up to 3 days each month, and once a year a month has 2 paydays in it. A weekly budget that starts on payday avoids that: each pay covers 4 weeks, and a week is the same length every time.
When payday moves
Pay "on the 25th" can mean the working day before, when the 25th falls on a weekend or a holiday. A period fixed to the 25th is then out by a day or 2, a few times a year.
That does not matter much. On those days, the first purchases from the new pay count against the old period, and the budget is right again 2 days later. For the rest of the month it matches your account, which the calendar month does not.
Making the switch
Switch on a payday. Keep the old budget running until the day before your next pay, and start the new one on the day the pay arrives. Moving in the middle of a pay cycle puts half of one pay packet in each period, which is the problem you are trying to leave.
Your records will hold one short period after the switch. If you switch on 25 November, the 1st to the 24th of November is a 24-day calendar period with no pay in it. Leave it out of any comparison. Compare the first full payday period with the second, not with the short one.
Keep the same limits for the first 2 periods. A period that starts on payday will feel different, because the large costs now land near its start, such as the big shop the day after the money arrives. That is the budget showing you the month in the order the money moves.
The period is a separate choice from the method you budget with. Envelope, zero-based, and 50/30/20 each work with any period.
A budgeting app needs to be able to start a period on a date other than the 1st, and repeat it. In Skarb, a budget runs for a calendar month, a calendar week, or a custom range that can repeat monthly, such as the 25th to the 24th. Its weekly budget follows your calendar, so it starts on the first day of your week, not on payday.
What to do on Monday
- Look up the dates your pay arrived over the last 3 months, and write them down.
- On the day before your next payday, compare what your budget says is left with what is in your account.
- If the 2 disagree, work out how much of the gap was spent between payday and the 1st.
- Whatever period you settle on, change it on a payday, and give it 2 full cycles before you judge it.