Can getting one month ahead save your budget?

Can getting one month ahead save your budget?

There are usually ways to save money each month — believe it or not.

For instance, once upon a time, my husband and I were pretty clueless when it came to how we spent the money we earned at our 9 to 5 jobs. We made a decent income but struggled to keep track of where it was all going and, more importantly, why it always managed to disappear into thin air. I won't bore you with the details again, but we ultimately discovered that we were spending ridiculous sums of cash on groceries and eating out, home repairs, and miscellaneous frivolous purchases. But how did we find that out? Now, that is the interesting part.

Using a Zero-Sum Budget

Once we decided that we needed to make a change, we poured through bank statements from previous months and began tracking our current spending. This led to a plethora or discoveries — including the realization that we were eating out more than we were eating at home and were much deeper in debt than we knew. Still, we kept digging through data and strategizing a plan for debt repayment and escape. However, as we put all of our efforts into figuring out how to create some sort of budget, I realized something. Our incomes were fluctuating — a lot. With that juicy detail in mind, we talked endlessly about what we were going to do about it. After all, how could we budget without knowing how much money we would make in any given month? And how could we create a plan of action when the most crucial piece of data (our income) was missing? My light-bulb moment came when it dawned on me that, instead of budgeting on this month's income, we could build a budget based on what we earned last month instead.

Related >> How to Track Your Spending (and why you should)

How to Get One Month Ahead — And Why You Should

I didn't know it at the time, but getting a month ahead is actually a popular budgeting strategy and one of the main principles of zero-sum budgeting. Popular budgeting software programs such as You Need a Budget are even built around the idea of getting a month ahead. From their website: “Spend this month, what you earned last month. How? Save enough money to go an entire month without touching your regular income. Then the next month, spend last month's income while earning this month's income. You'll spend this month's income next month.” When we first decided to get one month ahead on our bills, we were unaware that these types of resources existed but still able to conceptualize it somewhat on our own. And, thanks to the fact that we earned a decent income, it didn't take long to figure out how we were going to save enough money to get a month ahead — we just needed to put together one month's worth of expenses. Here's how we did it (and how you can do it too):

  • Step 1: Figure out what your monthly expenses are. The first step to saving one month's expenses is figuring out what those expenses are. Thankfully, we had already done much of the grunt work when we tracked our spending and realized how much money we were making (and wasting).
  • Step 2: Save enough to cover one month's worth of expenses. At the time, our monthly expenses were around $3,000, so we began our journey by stashing away that much cash plus another $1,000 for debt repayment. If I remember correctly, it took a few months to get there.
  • Step 3: Create your new budget based on last month's income. Once we had that money put away, we started a new month with $4,000 to spend. We created a zero-sum budget that used up every cent of that money, then paid bills and kept our spending in check accordingly.
  • Step 4: Save the current month's income to spend next month. While we progressed through our first month of zero-sum budgeting, we saved our monthly income to use for the following month's zero-sum budget.

A lot of people would look at this budgeting strategy and think it's far too much work, but it was truly the only thing that made sense in this sometimes backwards-thinking head of mine. To be honest, I just couldn't think of any other way to budget “in the moment” without knowing how much I would earn from week to week. Because, like I said, our incomes were fluctuating a lot at the time. I was working as an hourly employee back then; and the time I put in varied wildly due to seasonal activity, overtime, and other things beyond my control. My husband was paid his salary as a mortician, but was often rewarded with fairly large commissions for selling headstones. Those factors combined meant that our income could be as much as $1,500 higher or lower from one month to the next, with no real method to predict the swings.

Related >> How I Budget With a Variable Income

The Benefits of Getting One Month Ahead

Fortunately, getting one month ahead was just what we needed. And once we saved up the sum of cash we needed to do it, we were well on our way to the debt-free and financially sound lifestyle we enjoy today. In a lot of ways, I think getting one month ahead was just as important as budgeting for us when we got started. Here's why:

  • It made us recognize how much money we were really earning. When we first started tracking our spending, I made around $30,000 per year and my husband made around $50,000. That's not a ton of money in some parts of the country, but it's a pretty decent living in the rural Midwest. Getting one month ahead made us realize how much money we were squandering by forcing us to come to terms with it as we created our new zero-sum budget each month. Related >> The Power of a Zero-Sum Budget
  • It helped us celebrate small victories. In addition to fostering a greater understanding of how much we were earning, getting one month ahead also helped us notice and celebrate small victories. Before we began tracking our spending, any raises or bonuses were spent without much fanfare. Once we started using this method, we noticed any and all income gains … and used them as fuel to go even further.
  • It helped us create a zero-sum budget based on reality, not on how we hoped things would turn out. Tracking our spending and getting one month ahead made us far more realistic about our future goals, mainly because it made us deal with real numbers — not the projections or figures we imagined based on wishful thinking.
  • It forced us to save a larger percentage of our income. To me, zero-sum budgeting is all about getting real. Once we got real with ourselves and learned to look at our situation for what it really was, it was far easier to transition into a lifestyle where our financial goals were given the attention they deserved. For us, that meant saving more of our income and pushing the envelope in an effort to save more each month.

When it comes to our finances, getting one month ahead was one of the best things we ever did for ourselves. First, it made it abundantly clear that we were wasting not only our resources, but also an excellent opportunity to get ahead. But more importantly, the fact that our spending decisions were finally based in reality and actual dollar figures is what helped us make solid progress for the first time instead of continuing on in some idealistic belief that everything would turn out fine somehow. I'm glad I learned how to get one month ahead on my own, but I'm also happy to discover that there are many resources out there for people who want to take charge of their finances. But, as with anything else, you have to decide it's something you need to do and then create a plan of action to make it happen. If you do, I hope you discover the same thing I did — that you already have more money than you realize. Are you one month ahead on your bills? Have you ever considered using this strategy?

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Lance
Lance
6 years ago

Anything proactive toward your finances puts you in a better position. It also lets you see that you can accomplish more than you realize money wise. The difference and peace of mind is so dramatic from being a month versus month to month living or being a month behind is pretty dramatic. It’s worth the time and effort to try this out in your own life and finances. You never regret being proactive with your money.

Mrs. Frugalwoods
Mrs. Frugalwoods
6 years ago

I like this approach! We don’t budget a month ahead, but we do analyze all of our spending at the end of every month. Our backwards, budget-free method involves always spending within the same confines and not changing our spending too much month to month–we call it our frugal autopilot. This enables us to save anywhere from 65%-85% of our take-home pay every month. Our incomes don’t fluctuate like yours did, but, we do have months with an extra pay cycle as well as bonuses and raises. All of that gravy goes straight into savings since we don’t inflate our… Read more »

Emily @ SImple Cheap Mom
Emily @ SImple Cheap Mom
6 years ago

When I was self employed, our income would fluctuate from month to month. I found the best way to deal with it was to set the budget based on last year’s income and keep a healthy buffer in the bank. That was the simplest for us. Eventually I opened a business bank account and started paying myself a “salary” that was a minimum amount for me. All my extra earnings were saved/went against the mortgage.

Vasiliy
Vasiliy
6 years ago

“Popular budgeting software programs such as You Need a Budget are even built around the idea of getting a month ahead.” – This is not true in the part where it says “popular budgeting software programs” – this implies there are others similar to YNAB. However, Quicken, for example, doesn’t apply this method and Quicken is by far the biggest out there for personal budgeting software.

Beth
Beth
6 years ago

I think this is a great strategy because you never know when you’ll miss a pay cheque. For example, my former employer used to outsource our payroll and one time, the company had a holiday that we didn’t and our pay cheques were late — right before rent, mortgages and end of month bills were due. The inconvenience annoyed me, but then I realized a day or two delay would be very challenging for people living pay cheque to pay cheque. I agree with the comment above about peace of mind. Whether it’s being a month ahead or having an… Read more »

Trevor
Trevor
6 years ago

We’ve been a month ahead for over a year now. It is easily one of the best financial decisions we have ever made, right up there with becoming completely debt free. It is so nice not to ever have to worry about ‘timing’ checks based on when we get paid. One the first of the month we already have everything we need to pay bills, buy groceries, and have fun before we’re even paid!

tas
tas
6 years ago
Reply to  Trevor

it also means that you can pay loans (mortgage, student, etc.) early, which reduces the overall amount of interest you pay.

Gretchen
Gretchen
6 years ago

Getting a month ahead is even more helpful for those with fluctuating incomes – or those self-employed! Not only do you have a built in one-month cushion, you know exactly how much you can spend. This is one of our long term goals, so I love this!

adult student
adult student
6 years ago

How is this different from what you would do naturally if you only got paid at the end of the month? Like, if you get September’s paycheck on September 30 and live on it from October 1 to 31? Or would “getting one month ahead” mean living on your August 31 paycheck until October 31? I may be misunderstanding something because I only get paid monthly, and if I get extra money mid-month, I just don’t consider it “there” until the next month.

E.B.
E.B.
6 years ago
Reply to  adult student

I think the difference is that a lot of people would live out September on their credit card, assuming that the money would come in at the end of September. If they didn’t make as much money in September, then they can’t pay off their credit card and they’re behind. That’s my guess.

LL
LL
6 years ago
Reply to  E.B.

I think so too, and I didn’t realize that people did that. But I live in Europe and I don’t know any people who use their credit card to buy groceries. In the past I have gone in the red on my checking account paying my bills, because I always “had a piece of month left at the end of my money”. I guess it is the same problem. The negative figures in my bank account were probably more visible than a credit card bill though; even when I didn’t track my spending and did stupid things with my money… Read more »

Brian @ Debt Discipline
Brian @ Debt Discipline
6 years ago

Not there yet, but recently becoming debt free has given us that ability. I like the idea. I’d much rather be ahead on bills, instead of waiting for the next paycheck to come in.

Kim @ Simpugal
Kim @ Simpugal
6 years ago

We haven’t done this yet, but very interested in putting “One Month Ahead” into play in advance of an upcoming 3-month road trip. Thanks for sharing your experience!

nicoleandmaggie
nicoleandmaggie
6 years ago

We think of this more as an emergency fund than being one month ahead. There’s at least a month’s expenses in there, but sometimes there’s more.

Adam
Adam
6 years ago

The YNAB Method. Started doing it 1.5 years ago, and it has made an amazing difference.

Mike
Mike
6 years ago

I always preferred just meeting my savings goals first and practice conscious spending. I started out 20 years ago at 10% and now we are at 50% as incomes have increased. I do keep track of regular bills on a spread sheet so I can add them up but don’t tabulate discretionary spending since conscious spending for me is automatic. It also helped that my wife agreed to go without a credit card, (cash only-except for emergencies) because she has a harder time using credit in a responsible manner. I think whatever works for your personality is the best way.… Read more »

cherie
cherie
6 years ago

We don’t have a fluctuating income – it’s steady – with the occasional extra big influx, but we NEVER budget for that influx – we use it to fund things like a vacation, or a large purchase – which we don’t MAKE until that influx comes. But I think it’s always a good idea to be a month ahead – because it’s also the instant emergency fund should something go seriously amiss. Ideally that would mean being several months ahead – but we haven’t gotten there yet. However for an irregular income I think it’s a decent plan – but… Read more »

Brian @ Luke1428
Brian @ Luke1428
6 years ago

This is an interesting approach Holly. I’m not sure we’ll pursue it but I can see how it would be beneficial. We have an emergency fund in place and are saving each month for irregular bills that only come once or twice a year. I’d just assume deal with the bills and all other expenditures as they arrive.

not impressed
not impressed
6 years ago

This is great for a couple of yuppies, but really impossible for someone who actually has a single income and lives very close to the cuff financially, even with things like student loans, some minor debt and a paid off auto, this really is just a symptom of this site’s oversite of the working poor. It’s always gibberish by money drunk affluents who manage their money like they are waiting for daddy’s check to pay their sorority/fraternity dues. Then epiphany!!!! Yawn. I am not impressed. One day this site will get it. In the meantime “OMG! I CAN LIVE ON… Read more »

Jen
Jen
6 years ago
Reply to  not impressed

Hey there — Financially, I’m on the same page as you .And I agree, sometimes this site can be out of touch with how lots of folks actually live (side note to any employers reading this: PAY PEOPLE WHAT IT ACTUALLY COSTS TO LIVE IN THE AREA, NOT WHAT WAS COMPETITIVE IN THE 1980s /end rant). I don’t have much to spare, am constantly living on the edge and when things are REALLY bad, going negative in my account for a week or two. But I figure, I should try something else before I assume it’s useless, and this actually… Read more »

Stephanie @ Six Figures Under
Stephanie @ Six Figures Under
6 years ago
Reply to  not impressed

We are a living example of how this works well for folks who aren’t “a couple of yuppies.” My husband makes under 40K to provide for our family of 5 and we are working hard to get out from under over 130K of student loans. Living on last month’s income has made an incredible difference in our finances and the headway we’ve made on our debt. You can see how it works for us here: http://www.sixfiguresunder.com/living-on-last-months-income/

Froto
Froto
6 years ago

i love grs!!!

Patrick
Patrick
6 years ago

I didn’t quite understand the budget in the article. We live on 400 a month for everyday expenses. Everything else goes to savings and bills. Keeps things simple.

Jen
Jen
6 years ago

This is a great idea and I like it in theory. I work on commission, which means feast or famine. I’m not sure I quite get it though, I don’t expect you to answer, but I don’t really see how I would really be able to get ahead. Example: on an “average’ month for me, I bring home $2800/month. I spend about $2200/month including rent, groceries and gas (I live in an expensive area of the country and use my car quite bit for work…I’m not reimbursed for gas). So, If I save $2200, get a $1900 paycheck, use the… Read more »

Jen
Jen
6 years ago
Reply to  Jen

Also, as a follow up: if, let’s say I do get on track with this, how do you account for the little luxuries? If I had $2,000 sitting in my account after bills and savings, I’d have a hard time saying no to going out for a nice meal, or buying a nice bottle of wine for my cellar, or even spending a bit more at the grocery store and cooking for my friends. Isn’t that why you stop living paycheck to paycheck in the first place? So you can be comfortable and live the way you want? Obviously, it… Read more »

Julie
Julie
6 years ago
Reply to  Jen

When I was a server with a fluctuating income I started doing this, kind of. All my income for the current month went into a separate account which is just a holding account. At the beginning of the month I transferred over a predetermined “salary” into a different account from where I paid bills, etc. On months I had extra I would put it into my emergency fund and on months I made less I would pull from my emergency fund. I have a par value that I keep my emergency fund at so on slow months I would pull… Read more »

Jen
Jen
6 years ago
Reply to  Julie

Hi Julie — thanks for responding! That sounds really savvy. I’m trying to revamp my budgeting for 2015. I miss my serving days (except for the hangovers)! Paradoxically, that’s when I was most financially secure. My day to day expenses/little splurges came from my cash tips, my monthly bills came out of my paycheck (where credit card tips also lived). And I always had money leftover before payday and a cushion in my savings. Moving away from that was tough and I never got back into that habit.I should start back up. Thanks again, cheers!

Kim
Kim
6 years ago

For most of my working years, I have worked on long-term (6-18 month) contracts for a single client, sometimes involving sudden, unexpected travel that disrupts my active involvement in bill payment. And sometimes the abrupt end of a project (it happens). Interviewing for and signing onto a new project usually meant a 1-3 month gap before the next paycheck was deposited. Before most banks offered billpay, (a scheduling feature under my control; I have an inherent distrust of auto-pay which is a scheduling feature under my creditor’s control) I found it very useful to get 90 days ahead on my… Read more »

Bree
Bree
6 years ago

Holly do you use the budgeting program YNAB? Four rules are give every dollar job, save for a rainy day, roll with the punches, and live on last months income.

Michelle
Michelle
6 years ago

We have always tried to get one month ahead, but were never able to save that money to do it. It might be something to look at doing again.

Emma @ Life. By Emma
Emma @ Life. By Emma
6 years ago

Yes – we did this. And we lived on that fixed income amount for the month no matter what we earnt. Once we’d saved up 6 months of living expenses we set up a transfer from our high interest savings at the beginning of each month for the total of that months budget – in our case $2500 New Zealand Dollars. All wages, overtime and any extra tax credits go into our high interest savings which allows one free withdrawal per month – which we use for our monthly budget transfer.It’s the easiest way to budget, and sometimes when we… Read more »

MomofTwoPreciousGirls
MomofTwoPreciousGirls
6 years ago

This month was a year for us being a month ahead and I agree it was life changing for our finances! I think the best benefit for us is when something unexpected comes in (tax return, gift, class action checks) it’s not our first instinct to spend it. It goes in the savings with all our other income and we have time to think about how to use that windfall wisely. Usually we put a percentage toward the vacation fund or entertainment but the bulk gets saved.

patrick
patrick
6 years ago

I guess this method works for some people. Different methods, different people. Seems to much to think about for some of us. It’s like setting your clock 10 minutes fast and living 10 minutes ahead and you have to continually remember that you are 10 minutes ahead. Did that for awhile and now just set the clock to what it is. As mentioned before, our method is pretty straightforward. We live of a frugal set amount each month. Yes, things do come up, like every month there is some $100 thing that wasn’t planned for, like my daughter’s trip to… Read more »

LeisureFreak Tommy
LeisureFreak Tommy
6 years ago

Interesting method and I say if it works for you then it is an awesome method. I always appreciate seeing new ideas and even if it is not a full fit for me I love learning and using what will work for me. My monthly budget changes with the seasons. Water higher in summer, heating fuel higher in winter, etc. I have tracked expenses for the last several years and my budget is based on last year’s budget with adjustments plus 3% for inflation. I track based on the previous year’s same month cost. The idea is finding a sustainable… Read more »

patrick
patrick
5 years ago

We don’t worry about the seasons and changing utilities. We have about $500 a month for all of our food and necessities (consummables like food and clothing and whatnot), and the rest goes to mortgage, bills, and savings. We don’t keep it more complicated than that. Some months we only spend $300, other months $400-$500. If we have to go above that (car repair), that’s fine. Those things happen. In fact, if we try to only spend $300 on everyday expense, there always seems to be something that comes up. This month we bought a Christmas tree and stand and… Read more »

Lango
Lango
6 years ago

It is advisable to create a 3-6 month salary shortfall,to tied you over for such events as getting made redundant, job lose and illness!!

The LazyPanda
The LazyPanda
6 years ago

I remember when I got my first ever paycheck, that I realized I actually got money that I no longer need (theortically of course, but meaning that I got money for the previous month). In first in was quite counter intuitive for me, but I started doing what later I relized as the same strategy you mentioned here: budgeting on the money I currently have, and not on the money I will get later. I find this approach really helpful in staying within your limits – if you only spend what you currently have, then you can never spend more… Read more »

Millionaires Giving Money
Millionaires Giving Money
6 years ago

This is the first time I’ve come across this strategy and it sounds quite interesting. Being one month ahead would eliminate a lot of worry and anxiety to make ends meet. I suppose this could be extended to 2 months and then 3 and so on until you’ve saved enough for a years expense. Very interesting concept.

Tre
Tre
6 years ago

I’ve never thought of using this budget strategy, but the more I think about it, the more it makes sense. We also try to buget our expenses based on income projections, which is okay because we are both salary. Mr Tre would like it because he likes to pay all his bills at the beginning of the month and be done.

James
James
6 years ago

Saving money is important but it’s critical to focus on making more money when you’re trying to get ahead. There are plenty of ways to make extra money even from home in order to put additional cash into the bank.

Maureen Coffey
Maureen Coffey
6 years ago

Obviously eating out was one of your biggest expenses. I have a hard time figuring out how that could not be cut to zero from one day to the next. With most people things are not as simple. For food budgeting e.g. they need, without of course sacrificing food nutrient quality (too much), to first look at the price per pound or kilogram. Most “better” brands’ packaging is rather deceptive and their special offers are often actually hidden price boosters. Once you strictly make a custom of looking at the price per quanta and NOTHING else except quality (but not… Read more »

patrick
patrick
5 years ago

Another way to save is to search for “substitute” for expensive ingredients. For instance, we were looking for cake flour the other night. I could not believe how expensive it is. So I searched for cake flour substitute. It’s pretty easy and very cheap. We will have to see how that recipe works out. I’ve also cut my coffee habit costs buy buying a $10 can of Costco coffee. Goes a whole month and it tastes just fine. Used to make homemade espresso. Buy tea in bulk. And stick to a budget. I spent $500 last month at Costco and… Read more »

James Gordon
James Gordon
5 years ago

Hi. I love the advise and I would bless you if you can help me also start living a month in advance. It’s our dream… But looks so far away… How long did it take you to move from paycheck to paycheck to roll in the extra money and begin living a month in advance?

Jon
Jon
4 years ago

I also realised you can go with the lowest income made if it is over your expenses. Basically overtime and a part time job money would be extra money for savings to get ahead

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