Sometimes people say that they run out of money before they run out of month. Perhaps, the people who make this statement are trying to be funny, but often the statement is true. Many people would benefit from having a written guide that helps them to allocate their income so there will be sufficient money when they need it. This is particularly true for those who are on a tight budget.
For people whose earnings do not vary significantly from one pay period to the next and who are paid monthly or semi-monthly (i.e., twice each month), income allocation is relatively easy, if they have already prepared a monthly budget for their family. In fact, if pay is received monthly, the monthly budget should be sufficient to determine how the income will be allocated.
If you are paid either weekly or bi-weekly (i.e., every two weeks), the allocation process is somewhat more complex. The increased complexity is caused by “extra” paychecks. If you are paid weekly, you will receive 52 paychecks during the year, but there are 12 months, so you will have a fifth paycheck in four of the months of the year. Similarly, if you are paid bi-weekly, you will receive 26 paychecks during the year, so you will have a third paycheck in two of the months of the year.
For all pay periods other than monthly, it will be beneficial to prepare a separate page similar to the following illustration:
INCOME ALLOCATION FOR EACH PAY PERIOD
| Budget Category |
First Pay Period |
Second Pay Period | Third Pay Period | Fourth Pay Period |
Fifth Pay Period |
| Net Income after Payroll Deductions | |||||
| Donations to Church, etc. | |||||
| Savings additions, including 401k, IRA, etc. | |||||
| Expenses: | |||||
| House and related | |||||
| Groceries | |||||
| Transportation | |||||
| Insurance | |||||
| Medical | |||||
| Debt Repayments | |||||
| Entertain. & Recreation | |||||
| Gifts, cards, etc. | |||||
| Personal allowances | |||||
| Miscellaneous expenses | |||||
| Total Donations, Savings, & Expenses |
Note #1: Your Total Donations, Savings, & Expenses must be equal to Your Net Income after Payroll Deductions. If not, there is an error in the calculations.
Note #2: It may be helpful to you to change the expense categories to those you use in your family’s budget. Then, for each pay period, allocate your net income after the deductions that are made by your employer.
If you are paid weekly or bi-weekly, follow the guidelines in whichever of the two following lists applies to your family:
Completion Of Income Allocation Page When Pay Period Is Weekly
For the usual (i.e., first four) pay periods each month:
- Contributions: Show your tithe or other contributions for each of the four usual pay periods of every month.
- Savings: Estimate the total annual amount you plan to save and allocate at least some of this amount to one or more of the four usual pay periods of every month.
- Expenses – Regular (expenses that occur every month, such as groceries, mortgage payments, etc.): Estimate the total annual amount for each type of regularly occurring expense and divide by 12. Then, allocate to one or more of the four usual pay periods of every month the resulting monthly amount for each of these expenses.
- Expenses – Irregular (i.e., expenses that do not occur every month, such as vacation, Christmas gifts, etc.): Estimate the total annual amount you plan to spend for each of these expenses and allocate to one or more of the four usual pay periods of every month any amounts that cannot be paid with funds from the extra (i.e., fifth) pay periods.
For the extra (i.e., fifth) pay period that occurs in four months during the year:
- Contributions: Show your tithe or other contributions for each of the four extra pay periods.
- Savings: Allocate to one or more of the four extra pay periods the balance of your budgeted annual savings that has not been allocated to the four usual pay periods of every month.
- Expenses – Irregular: Allocate to one or more of the four extra pay periods the balance of the amount budgeted for each of the irregular expenses that have not been allocated among the four usual pay periods of every month.
Completion Of Income Allocation Page When Pay Period Is Bi-Weekly
For the usual (i.e., first two) pay periods each month:
- Contributions: Show your tithe or other contributions for each of the two usual pay periods of every month.
- Savings: Estimate the total annual amount you plan to save and allocate at least some of this amount to one or both of the two usual pay periods of every month.
- Expenses – Regular (expenses that occur every month, such as groceries, mortgage payments, etc.): Estimate the total annual amount for each type of regularly occurring expense and divide by 12. Then, allocate to one or both of the two usual pay periods of every month the resulting monthly amount for each of these expenses.
- Expenses – Irregular (i.e., expenses that do not occur every month, such as vacation, Christmas gifts, etc.): Estimate the total annual amount you plan to spend for each of these expenses and allocate to one or both of the two usual pay periods of every month any amounts that cannot be paid with funds from the extra (i.e., third) pay periods.
For the extra (i.e., third) pay period that occurs in two months during the year:
- Contributions: Show your tithe or other contributions for each of the two extra pay periods.
- Savings: Allocate to one or both of the two extra pay periods the balance of your budgeted annual savings that has not been allocated to the two usual pay periods of every month.
- Expenses – Irregular: Allocate to one or both of the two extra pay periods the balance of the amount budgeted for each of the irregular expenses that have not been allocated among the two usual pay periods of every month.