That Financial Black Hole


Some companies have the audacity to expect us to pay them every month.  Worse yet, they expect us to pay them (get this) on time!  On top of that, we often find ourselves having all of our bills due on the same day of the month every month.  So, every month we watch out bank accounts go from hero to zero in a matter of days, and then we have to figure out 14 different ways to prepare ramen noodles while we wait for the next paycheck to bail us out for the rest of the month.

Budgeting is about as fun as getting a root canal.  However, if you can find a way to spread your expenses more evenly, you may find those budget busting expenses a little more tolerable each month.

What this Plan is Not

This plan has nothing to do with what you are spending on your household.  If you are over paying for cable from Comcast or have chosen the most expensive data plan from AT&T, this article is not going to advise you on how to cut down those expenses (though that should be a priority).  What this article does provide is a plan so, when those bills do come in the mail, they do not leave you with 2 cents to call your own until next payday.

Step 1: Where is the Financial Pain?

Without even looking at your financial situation, I can probably guess where the real financial pain is in your monthly cash flow.  My guess would be around the 1st of the month when the rent or the mortgage comes due (we'll call it 'RM' for short).  We all have to live somewhere (those of us not living anywhere have bigger problems), and the real owners of our residence (either the landlord or the bank) want us to pay for the privilege to live there.   So, we get our last paycheck before the bill is due, and we have to hold on to it so we have enough to pay it.

If we are lucky, we get another paycheck before the next bill is due and we can go on with our lives.  If we are unlucky, and desperate, we write the check to the next bill and hope it doesn't get processed until the next paycheck is deposited.  DON'T DO THIS (loud enough?).

Instead, find a way to make these moments less painful and it will make those 'lean' cash flow periods easier to manage.

Step 2: Pay Through the Pain

So, the financial pain is finally over because that next paycheck has arrived.  Life is good for the next week or two, and then we realize that financial pain is about to arrive again.  Once more, we pull out that worn copy of 'Ramen: 365' and look in the grocery circulars for 'shrimp flavored' noodles to go on sale again.  However, there is a way to alleviate that financial pain, and that is to Pay Through the Pain.

Here is what I mean...

Every month, we have those bills that we know are going to be around the same amount every month.  RM, phone, cable, electric, etc.  We know they are coming, and we know they will always take a certain amount of our money every month, so why not send them the money when you have the money available?

Forget the RM for now, let's focus on the other bills.  On average, lets say you spend around $100 per month on your electricity, $100 on your cell phone, and $100 on cable.  Sometimes it is higher, sometimes it is lower, but you can count on the fact that you will spend about that much on those bills in an average month.  If this budget were mine, and I was paid every 2 weeks, I would send each bill $40 per paycheck.  If I was paid every week, I would send each bill $20 per paycheck.


For starters, they will be happy to get the money early.  So happy, in fact, that they will subtract the money you sent them from the next bill you have to pay them.  What happens then?  Well, that $100 electric bill, when it arrives, might only be for $20.  If you are paid every two weeks, that means that one paycheck paid $40 of the bill, and the other one paid $60 of the bill.  If it is one of those magical months where you get 3 paychecks, you may not have to pay the bill at all that month (and have $20 towards next months bill).

This may tighten things up when the RM comes due, but if you set aside part of the money from the 'off paycheck(s)' (maybe even in a separate account), then when the bill comes for the RM, you have part of it already set aside and the financial pain you feel in that single paycheck is reduced.

Spread the Pain, and it Becomes Less Painful

When you deposit your next paycheck, start small.  Send every bill you pay regularly just $5-10.  Do it again when the next paycheck comes.  See what it does to your bills when they arrive later in the month (ideally, you want to set up your online bill pay to do this for you because writing all those checks would be a hassle).  You will begin to see smaller bills arriving and you can adjust that amount higher (15, 20, 25, etc).  Focus on putting less stress on a single paycheck, and sharing the load between all/both of them.  It works in engineering, and it will work in finance, too.

Now, obviously, if you are only paid once per month, this plan is not going to help you.  In that case, you need to focus on lowering your expenses to relieve the pain.  For everyone else, it turns some of the larger variables into smaller ones, which makes them easier to handle when they arrive.

If you don't think this plan would work for you, I would respectfully disagree.  Consider this:  When you are eating your ramen noodles, do you try to eat all of the noodles at once (the noodles certainly want you to eat them all at once), or do you (eventually) bite it off to make it more manageable?