Thursday, 26 May 2016

Managing the Swells and Wanes of your Pay

Unless you are on Salary or otherwise getting a fixed and regular amount each and every payday, your pay (like mine) will vary greatly from one payday to the next. It is just one more thing to make your payday that much more special . . . anticipation and guessing what you are actually going to get.

This can also make budgeting challenging and some might say impossible. If you had budgeted expecting more pay than you actually got, then you have to toss out your budget and start all over again . . . hastily. (Either that or lots of Ramen Noodles and Mac and Cheese are in your future.)

The first question is why does your pay swing so much? The answer for most people rests in how many working days (or hours) are actually on this paycheque? The next reason is if you had too many hours did that nudge you up to just over and into the next tax bracket? 

For me, my pay-cycle works like this. I have two pay periods per month.  The first is between the first and the fifteenth; the second is between the sixteenth and the end of the month. My paycheck is issued and written for seven days after the end of the pay cycle. This means my paydays are always on the seventh and the twenty-second of each month, like clockwork. 

The challenge is that these dates don’t line up with the work week and some months have thirty days, some have thirty one and February usually has twenty-eight days, but on leap years it has twenty-nine. This means that the exact number of “workdays” varies from payday to payday. 

The second reason for me is that I get a slight commission on the orders that we process on our website. I have no control over this as I do not act as a salesman, but I do process and ship orders, so there is that. This means that my commission will vary greatly due to a number of factors outside of my influence.  

The last reason is my boss’s generosity and/ or magnanimousness, as in if the company made a great sale and he wants to spread the cash around a bit. This has happened a few times and each time it is usually kept quiet until you look at your paycheque (woo-hoo). 

All of this can make it very tough to do any sort of budgeting that a lot of people just give up and decide what to do after they have their paycheque in hand. This leads to hasty decisions and yes, one feeling like the scrawny kid holding his lunch money while surrounded by bullies. You decide how much to give to each of them and hope you have enough left over to buy your lunch.

What I advise is this: budget anyways, but budget for the Wane and not the Swell. Generally we all know how much (approximately) our pay will vary. There are always exceptions, but generally speaking we know that at least we will make “X” amount. 

What I suggest is that you establish your monthly budget based on that lower amount. Assume that you will only make that much and work your budget so that you still pay your bills. This way if and when more money comes in you can then decide what to do with that surplus (as in extra money). 

This is the core concept on how I have been able to get myself out from under credit card debt and how I am still able to keep my debt elimination and savings plans moving forward, despite the various life events that have hit me and yes my own poor choices. (I never said I was perfect, just adaptable and determined.)

Most of you reading this will say “Duh, that’s obvious, but I can’t do that!” To that I say that once again imagine that you just got a pay cut due to no fault of your own. Pretend that all you had to work with was that lower amount. Trust me; you are smart enough to make that lower budget work. 

This will be a start and hopefully help you see that you can make your own seemingly dismal fiscal realities better. Once again, if anyone wants or needs a copy of my budget spreadsheet, here is a blank one . . . Pay Period Budgeter.

As always: Keep your head up, your attitude positive, and keep moving forward! 

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