How many times per month do you get paid? The answer, if you’re in America, is probably twice. In Canada, it varies between once and four times. Bills, however, are often due at scattered times of the month, and often don’t correspond with pay dates. What can you do then, to make sure that you are able to pay your bills on time?
The largest bills that households have are housing and transit costs. These two costs can add up almost 50% of your budget and if you don’t plan ahead, you will oftentimes reach the first of the month and realize that the amount of money in your bank account is not enough to pay your rent!
The same story plays out the last week of the month – people around me start to mutter absent-mindedly to themselves about rent being due next week; the same people will also talk about how their beer budget will be affected and how maybe we should all stay in tonight instead of heading downtown. The week after, lines will form at the metro wickets. Students, yuppies and the middle-aged alike will all stand in a line, often 25+ people long at each wicket, to buy tickets to ride the metro.
The solution is simple. Add up your monthly bills, divide by the number of paycheques you have in a month and voila! Put that money aside (in a different bank account) each pay period. When your bills’ due date comes up, you take the amount from the money you’ve set aside, and you use it to pay the bill!
Here’s an example:
In this example, I would calculate $1495/4 (because I’m paid 4x per month) and transfer $373.75 each pay period to a separate “bills” account. Any month I have leftover after the $373.75 transfer is the money that I will spend on groceries, entertainment etc. I do not touch the money set aside, except to pay bills.
By following this method, I make sure that I always have the money to pay my bills each month and am able to, literally, spend my primary bank account down to zero without having to worry about how I’ll pay rent the next day
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