All this budgeting talk sounds great, but what if you're currently spending more than you make? You might be counting yourself out of this budgeting conversation because you know that each month your credit card debt is growing or your savings is shrinking, or both. But stick around because I want to talk today specifically to the people who are consistently spending more than they make.
First of all, I wanna let you know that I build over 40 budgets a month for different people, and as their numbers come in and I set up the numbers and look at where they're at, most of the time, they are currently spending more than they make. So while this might not be something people are willing to say online or share with those closest to them, I want you to know that you are not the only one spending more than you make. There are things we can do to correct it.
Today in the mini episode as we continue focusing on pay period budgeting, I specifically wanna speak about budgeting by pay period in the context of how it can help those of you who are spending more than you bring in. Now, first of all, there's a difference between occasionally having times throughout the month where your expenses are larger than your current income, and having an overall budget that's consistently negative month after month after month. For those of you who are paid more frequently than once a month, is very expected to have these rhythms in the month where a larger expense comes out of your bank account, and it makes your account seem so small because the timing is off compared to your pay periods. This is what we use rollover for the next pay period for in our pay period budgets. To plan ahead several pay periods in advance and identify pay periods that will be negative, using extra income from other pay periods to cover that deficit or to spread out the income across the pay periods. That's different than looking across your next six pay periods and seeing that overall your spending is larger than your income. That's what I wanna address today. People who are consistently spending more than they.
So why does a pay period budget help in this situation? Well, first of all, when you're in that emotional kind of situation where your expenses are larger than your income, you're getting frustrated, you're getting worried, you're getting burned out, you're concerned, you're embarrassed. It tends to balloon in our mind what the problem actually is. We tend to then take what started as a true problem and grow it in our minds. The solution might actually be more available to you or closer to you than you expected.
When we set your numbers up by pay period across your next six pay periods, we're gonna identify a couple things. Number one, is this happening on all of your pay periods or just some of them? Number two, exactly how much is the deficit? So you might know that you spend more than you make, but you might think it's a thousand dollars more a month, when really it's $300 more a month. These are two very different problems. And number three, we identify where your money is actually going. So in order to solve the problem, in order to stop the bleeding from a negative budget, we need to know those three things. Is it happening all the time or some of the time? How much is the deficit? And where is the money actually going? And that third one is the most important in terms of finding the solution. This is why I really encourage people who are consistently spending more than they make not to run away from the idea of a budget because they say, oh , my money is too much of a mess. There's no point in me budgeting. It's actually even more important for you to build a budget because we need to answer these three questions so that we can move you from where you currently are, which is spending more than you make to a place of having a positive gap between your income and expenses that can actually go towards your goals. So we need to know what this deficit is.
Ignorance is not bliss. So while it might temporarily feel a little bit safer or a little bit better to avoid looking at your real numbers, it actually allows the problem to fester. It allows these deficits to grow if we ignore them. So if your ultimate goal is to get out of this deficit, get out of this rut, and start to have a positive gap between your income and expenses, then the first thing we need to do is to look at the real numbers, to get rid of the idea that ignorance is bliss, and instead say awareness is bliss. Knowing what the real numbers are allows you to make a real plan and having a real plan allows you to make real solutions.
So building a budget by pay period allows you to identify those three things. So let's go through those three things again. Number one, if you set up your pay period budget, you will have exactly how much income you have available, which dates it's available, and which expenses need to be covered during that income before you get paid again. So a pay period budget, we'll show you those things. Number two, the Debt Free Mom pay period budget then calculates exactly how much money is or is not available during each pay period. So as you build your numbers into the template, the amount left is a bold number at the very top of the pay period. If it's a positive number, that means you have extra income available during that pay period. If the amount left is negative, it means that during that window of time, your expenses are going to be larger than your income, but it's not just gonna be negative, it's gonna show you negative by how much. This allows you to see if this is happening on all of your pay periods or on some of them, exactly how much the deficit is. And then number three, to look critically at your spending, at your plan for your next six pay periods.
If you look at the right side of the Debt Free Mom pay period budget template, you'll see that it's gonna show you what percent of your overall take home pay is going to each category listed. So you'll see things like how much of your money is going to housing, how much is going to food, how much is going to subscriptions and fun, how much is going to debt, minimum payments. This can help to guide your thought process when you're identifying which areas of spending you could cut back. Some of you are gonna see right away that some of the spending categories like food and personal spending, cash are eating up so much of your take home pay. This helps you to narrow your focus and give you a few categories to start with when dialing back your spending and reducing these deficits. Others of you might find that you've already reduced your food spending as much as you possibly can. You don't currently give yourself any spending in personal cash . And your regular bills are pretty low, like your utilities and your cell phone. However, you see that your housing is taking up 40% of your take home pay or your debt minimum payments are taking up 35% of your take home pay. This identifies a budget that most often is going to need to. Increase income in order to close the deficit because there's not a simple or quick way to dramatically reduce your housing cost, and there's not a quick way to dramatically reduce your debt minimum payments outside of paying the debt in full or selling the car that it's associated with, for example.
But we need to know where that money is going before we can make those solutions. And without a budget that clearly lays out exactly what your income is and exactly what your expenses are, and when you're going to have each of those things happen, the relationship between your income and expenses isn't always obvious. We can't just go by what your bank account balance is, because that balance is going to ebb and flow in a really large way. We need to see what the trend is over time, and a pay period budget can allow you to identify this.
So if you feel caught in the fog of spending more than you make and feel lost about where to start, I want to encourage you that you are not beyond help and a budget is not a waste of your time. A budget is actually going to be one of the best uses of your time, because it's going to clearly show you when do you have a deficit, how much is the deficit, and where is your money actually going that's causing this deficit?
So for example, once you see these three things, you can start to make specific plans. It's really hard to make a plan around someone who just says, I spend more than I make. Someone who can say, I spend $400 more a month than what I make, and I spend $600 a month on restaurants and $200 a month on clothes- we have a pretty clear action plan, right? If we reduce the restaurant spending from $600 to $200 and the clothing spending from $200 to $100, we have closed their deficit, but we can't know what the problem is and how much of a deficit we have until the numbers are laid out clearly.
On the flip side of that example, I also see custom budgets where people have tried so hard to drive down their expenses. They have cut subscriptions, they have removed fun, they have cut out restaurants, and they're always eating at home, and they still are running into a deficit because the large expenses are just taking up too much of their take home pay. If housing and transportation and food are taking 75% of your take home pay, and you are left with a quarter of your income to cover every other aspect of life, this is probably going to be a budget where I recommend increasing income because we've already bottomed out those expenses as low as we possibly could, and we're just gonna need to drive up that income number. While this might seem overwhelming or sound like something you don't even wanna know about your spending, this is something we can act on. Having this information allows you to make a plan.
It can also give you the freedom to let go of the pieces of your finances that aren't actually the problem. So you might be so frustrated by your grocery spending. Building your numbers into a pay period budget can help you to realize that your grocery spending is taking up maybe 11% of your take home pay, while your personal spending or your debt payments are taking up 40% of your take-home pay. We're gonna triage those categories and focus on the ones that are taking up the bulk of your income as opposed to the ones that are taking up just a small portion. So filling your numbers into this pay period budget will not only give you action steps, it'll also allow you to release the categories that you might have thought were a problem that weren't actually a problem.
So if you're listening to this today and you know or think that you are spending more than you make, I encourage you to take the next right step. Take one small step towards solving this problem. Download the free basic budget template at debtfreemom.co/store and just start entering your numbers. If six pay periods at a time is too intense, is too overwhelming, go with three or four. Enter your income. Enter the expenses that you're actually currently spending, not what you wish you were spending, not some goal amount. Enter what you're actually spending because this will show you the deficit amount and when it's happening. This will help you to see a window into your numbers before it actually happens in your bank account. As those light bulbs start to go off where you recognize, "oh, here's where my money is going. Here's when the deficit is happening, or it's not as bad as I thought, or it's worse than I thought." Those are all pieces of information that we can then use to build a specific plan that's right for you, and that starts to close that gap between your income and expenses.
It doesn't matter how much money you make or how much spending you have, this kind of problem can happen to anyone. So don't count yourself out because your income is too high or your income is too low, or your expenses are too low, or your expenses are too high. The amount of confidence and security we feel in our finances is all created by the gap that we have between our income and expenses. So if you have no gap, if that margin is razor thin and is regularly going into the negative, that's what's creating the feeling of living paycheck to paycheck. By establishing a budget that will show you when your deficits are happening, how much they are, and where your money is actually going, you can start to create a specific actionable plan that will grow the gap between your income and expenses.
So if you're ready to give your numbers a try inside of a pay period budget, even though you know there's a deficit, you can go to debtfreemom.co/store and download either the free basic template or the $9 Debt Free Mom template that will include a couple instructional videos, a worksheet to gather all your numbers into one place and analytics on your budget to show you these percents and these take home pays.
You're not a lost cause. Your money is not beyond repair. Even if you spend more than you make, we can help.
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