Time Periods for Budgeting

When I first started out budgeting, I started budgeting my money on a monthly basis. My mom sat down with me after high school when I was planning on moving out, and helped me construct a budget based on my monthly income. I think this is the way that she always did it, so it never occurred to me to instead budget on a bi-weekly basis, or that any other time period for budgeting would work.

source: moneymanagement.org

Many people budget on a monthly basis, but then some also budget on a biweekly basis. Here are some pros and cons of each method to help you decide what would work best for you:

Monthly Budgeting

Budgeting monthly is by far the most common practice. This is common because:

Bills, payments, and other expenses are usually issued monthly
Bank statements are usually released once per month
Commission cheques and other ‘bonuses” are usually issued monthly for those who have a fluid compensation structure
Debt payments are usually due on a monthly basis

Because of these norms, people tend to add up their income and budget on a monthly basis. It can be a lot easier and requires far less math and exceptions than some of the other methods.

Bi-Weekly Budgeting

I started budgeting on a bi-weekly basis as well as a monthly basis because I am paid bi-weekly. This way I know which part of each cheque needs to go where. Here are some advantages:

Most people are paid on a bi-weekly basis
The time period is shorter and therefore allows for easier adjustments as needed
You are less likely to forget about cash output when tracking your spending and comparing to your budget at the end of the period

Some disadvantages exist for bi-weekly budgeting as well:

Since bills, payments and other financial responsibilities tend to come out monthly, you may have to either split them or do some fancy math, otherwise your budget will be unbalanced
You may have to rely on memory when tracking spending at the end of the two weeks because bank statements, if you rely on them, come out monthly

Quarterly Budgeting

Some people also budget quarterly. This may work best for you if you have an irregular income, because that way you can average it over three months instead of change your budget each month depending on what comes in.

This may make your budget inaccurate, however, because over a period of months many costs can fluctuate drastically (ie gas prices, bills).

Yearly Budgeting

I’ve yet to come across somebody that budgets on a yearly basis, but one large disadvantage of doing so would be that yearly budgeting would make it very difficult to anticipate changes to your budget, or changes in priorities.

Do you budget on a monthly basis like me, or take a different approach?

Get Rich With Passive Income

Have you ever heard of passive income? What about residual income? Many people have heard of the term, but they don’t know exactly what it means, and they certainly don’t know how to start earning passive income. In reality, it’s very possible to get rich through passive income streams.

Look at all of the people who make passive income while they are watching TV, or cooking dinner, through peer-to-peer lending. I make more than $900 per month through passive income, through traditional investments, peer-to-peer lending through sites like Prosper , and rental income.

For most of us, we earn our income. We wake up and head to a job that pays us an hourly wage for being there. There’s absolutely nothing wrong with that, but if you want to earn true wealth, it is incredibly difficult to do on earned income alone. Passive income is the way to go.

credit: https://buyhomesdetroit.com

What is Passive Income?

Passive income is exactly as it sounds. It is income that comes in regardless of whether you lift a finger or not. It used to be that all you had to do was go to the mailbox to get your check, but today everything is just directly deposited into your account, so you literally don’t have to move a muscle! Hence the word “passive”.

Now, of course there must be some work involved in order to earn an income. But, the difference between passive income and earned income is that for passive income, you do the majority of the work upfront before there’s even a chance of getting that direct deposit. There’s a chance that your hard work will make you very wealthy in the future, or your tireless efforts might never produce a cent! This is the challenge of passive income. You really need to have a great vision for the future and trust that your efforts won’t be for nothing.

The classic example of passive income is from Bruno, the bucket carrier. Every day, Bruno would get paid to carry buckets of water from the stream to the village. The pay was good, but Bruno thought there must be a better way! After thinking for a few days, he figured that he could dig a trench from the stream to the village and water would flow freely. He took his idea to the governing counsel of the city. If his idea was a success, he wanted to be paid 1 cent for each cup of water that came in through his trench. The city leaders thought he was nuts, but they agreed.

Bruno worked early mornings and late nights, all with the hopes of making great wealth, but got paid absolutely nothing until his job was completed. Finally, the day came when he reached the village. Many people laughed at him when he was working for nothing, but now they realized his vision. He could simply sit in a chair and effortlessly collect his money while the village received their water. His money was now entirely passive.

Get Rich Through Passive Income

Passive income is starting to sound pretty good isn’t it? But how could someone earn passive income today? There are quite a few avenues actually. One of the most well-known is renting out real estate. It’s been around for a while, but this practice is still producing many millionaires each year. If you’re a talented writer, collecting royalties on your book qualifies as passive income. Music also counts as passive income since you’re collecting money each time someone purchases a song (with no continual effort on your part). If you can think of a way to work hard now, but collect money continually in the future, then you’re well on your way to developing a passive income. Do this again and again, and you will soon be a very wealthy individual.

Have you started earning passive or residual income? Are you looking to become wealthy through residual income?

Learning About Money

Savings rates are low and the debt to income ratio in the US and other developed countries is higher than it’s ever been. People are taking more and more on financially, sometimes without knowing the consequences. Many people are financially illiterate, simply because they have never put forth the effort to learn about money.

Others are financially unsound because they didn’t have good role models growing up that could demonstrate how money should be used.

Even if you are financially sound, there is always an opportunity for learning about money; whether that is about investing, saving, cutting expenses, or retirement.

If you want to learn about money, but don’t know where to start, here are some suggestions:

Learn About Money Through Blogs

You’ve already made a great first step in starting with Suburban Finance. There are some great, informative blogs out there about every money topic under the sun: investing, debt, student loans, earning, saving, spending, inflation. You’ll be able to find it all. Start with a Google search about your money topic of choice, and go from there.

Learn About Money Through Books

Many personal finance enthusiasts became enthusiasts after reading a book by Gail Vaz Oxlade, Dave Ramsey, Suze Orman, or others. Some popular books may include (affiliate links):

The Wealthy Barber: The Common Sense Guide to Successful Financial Planning
Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
The Total Money Makeover: A Proven Plan for Financial Fitness
Dave Ramsey’s Complete Guide to Money: The Handbook of Financial Peace University
Debt-Free Forever: Take Control of Your Money and Your Life
Money Rules: Rule Your Money or Your Money Will Rule You
Easy Money
The Money Book for the Young, Fabulous & Broke

There are certainly more books out there that will help you learn about money and different financial topics, however, these are some of the more popular ones. I love the way Gail Vaz Oxlade’s books speak to audiences of all knowledge levels. The first money book I read was Debt-Free Forever: Take Control of Your Money and Your Life.

Use Tools to Learn More About Your Finances

There are so many tools out there that can help you learn, and they are all helpful in their own way. If you are a learn by doing type of person, seek tools out to learn a bit more.

Financial calculators can be found through a simple Google search. Google things like “interest calculator” or “extra mortgage payment calculator” and you’ll find websites that have calculators that will help you find out how much you’ll save by making extra payments or ramping up your debt payoff.

Tools like Mint.com and Quicken will help you budget and learn about budgeting, as all the categories are in the tool already.

Take Some Courses to Learn About Money

If you learn better by somebody teaching you, look for short courses or information sessions on money management in your community guide. Check at local universities and libraries to find out whether they have any offerings. Even some banks and financial institutions have sessions on money management.

One of my favorite short, cheap, and easy courses to learn about investing is the Investing 101 course (click to enroll below):

It’s straight forward and simple once you start learning.

Learning about money management and financial topics can seem daunting at first, but once you get the ball rolling you may find it easier.