In the UK, payday typically takes place only once a month, which – when I first started working here – I hated. Now I prefer it. I find it keeps my finances very simple, as all my bills are also paid monthly. I can’t imagine the headache that must come from being paid weekly or bi-weekly and having to pay rent and bills monthly. Or maybe I’m just being precious.
Anyway, here are the top money-saving tips I’ve compiled regarding payday. Thanks to everyone who contributed!
1. Both Andy from Saving to Invest and Nicole at The Budgeting Babe wholeheartedly suggest paying yourself first. This doesn’t mean you should head straight to Debenhams and buy that dress you’ve had your eye on for a month. Paying yourself first entails making payments towards savings you need but can sometimes neglect – your savings account or retirement fund/401K, for instance.
2. Even if you’ve been working at a company for several years, you should always make a point to verify the amount on your pay cheque. Mistakes can happen, and it is your responsibility to ensure that you are duly paid for your services. You should make a habit of checking your pay slip as soon as you receive it – it might be hard to address a lapse in pay to your employer if you wait too long to say something.
3. Ginger suggests making regular payments towards an emergency fund as well – something that many of us can take for granted. If you do this before you ever consider the remaining balance of your pay cheque, you’ll never know what you’re missing. And don’t let it take having an emergency to realise how useful an emergency fund would have been.
4. Look into any retirement or pension plans that your employer offers. If they match some or all of your contributions this is something worth beginning to pay into now. It’s no extra work for you, your company will simply take the money out of your pre-tax paycheque and pay it straight in for you. Starting this earlier rather than later is invaluable, even if you’re not contributing huge amounts, thanks to the wonder that is compound interest.
5. One for the hard-core savers: Sheryl from Young Money Talks suggests limiting your spending to a quarter of your total pay cheque, though some months you may have to forego the extra cash in order to pay off outstanding debt. In other words, budget your savings and your spending – and be prepared to tap into your spending allowance if a conveniently forgotten bill pops up in the post.
6. Don’t be complacent if you have set up automated direct debit payments for utilities bills or monthly fees. Even on a salary, pay cheques can be irregular, and some utilities bills may be especially high during certain times of the year – gas bills during winter, for instance. Stay on top of your bills and your bank balance, or you may risk having to paying a hefty overdraft fee.
7. Once you’ve transferred money into your savings account for the month, consider that money to be like a paid bill: it’s gone, spent, and you can’t dip into it again unless it’s a proper emergency! If you get into that mindset and budget for the rest of your cash to last the month you won’t constantly be paying back your savings account every payday.
8. Avoid payday loans at all costs. And I mean it! They come with very high interest rates and must be paid back once you receive your next pay cheque. This means that you’ll already be in the red once the next payday comes around. On top of credit card debt or a hefty utilities bill, making a payday loan repayment could simply wipe away a month’s earnings – or even worse, require you to take out another payday loan. And this is exactly what payday loan lenders want to happen. They’re evil! Don’t fall for it.
9. If you’re easily prone to a case of payday madness (sweaty brow, crazed eyes, need to own a certain top in every colour), you might be wise to re-evaluate your payday rituals. Many of us feel entitled to certain pleasures once we’ve been paid – and rightfully so (cue Donna Summer’s ‘She Works Hard for the Money’). But this doesn’t mean we should be so eager to spend a large amount of a pay cheque right away. If you usually eat an expensive meal out on payday, consider cooking your favourite dish at home instead. You’ll appreciate the cash you saved when you reach the end of the month.
10. Payday is the beginning of a new cycle, an opportunity to draw a line under the last month and begin again. Take the opportunity to spend an hour getting your finances in order for the month to come. Spend an hour cleaning the junk out of your purse, filing your receipts, submitting work expenses, balancing your chequebook, and checking your monthly bank and credit card statements for mistakes. Try keeping things as simple and organised as possible and you’ll be surprised how much this positively impacts your finances.