THE SHORT · BUDGET
Budgeting on two pays a month makes you forget $4,062 a year
A year has twenty-six fortnights and twelve months. Two months a year get three pays — and a budget built on two treats them as a surprise instead of a given.
You are paid every two weeks. You build your budget on two pays a month, because that is what usually happens. It is right ten months out of twelve — and wrong over the whole year.
Twenty-six pays divided by twelve months is 2.17 pays a month. Not two.
| Per month | Over the year | |
|---|---|---|
| Your real income | $4,400.00 | $52,800.00 |
| Your budget, built on 2 pays | $4,061.54 | $48,738.46 |
| Gap | $338.46 | $4,061.54 |
The annual gap is exactly two pays. They do not vanish: they land in the two months that hold three, and they arrive there as a pleasant surprise.
That is where the budget takes its revenge. A sum you were not expecting almost always gets spent, and two pays spent as a bonus is 7.7% of your annual income that never had a destination.
Two dates worth noting at the start of the year: the two three-pay months. They are the only ones where an annual provision — insurance, tyres, property tax — is funded without cutting anything else.
The same reasoning runs the other way for your spending. Rent is monthly, groceries are weekly: twelve against fifty-two. Our entry on disposable income puts both on the right side.
Your money, with no made-up numbers.
Accounts, budget, savings, debt and investments in one statement. Free with manual entry.