Here’s a strategy that I’ve used to stay out of the red and in the black for many years. I haven’t seen this published anywhere and I figured it would be something that someone could use to keep from going broke, always have money in their pockets and most importantly: avoid paying non sufficient funds fees! Those just drive me crazy.
First, take your paycheck and subtract your expenses till next paycheck. This becomes your personal profit. For example a $1,500 paycheck minus $1,000 in expenses til next payday equals a $500 personal profit.
Divide your personal profit by the days til next Payday
$500/14 = $35.71
Multiply this by .8 (saves 20% of your profit)
$35.71 X .8 = $28.57 And round down = $28
This is your new daily spending limit! Don’t go over this amount!
Overspending Rule: Divide the total you spent in one day by your limit, minus one and round up to make it whole. This equals “No-Spend” days that you must commit to until payday.
Example: You spent $60… 60/28 = 2.4 – 1 = 1.4 round up = 2 no-spend days!
In this example, you will save $100 from your check and “connect checks” next payday!
Instead of having $1,500 when you get paid you will have $1,600 in your account!
At the end of the year you will have saved $2,600 ($100 x 26 weeks).
Also you will never go broke or have overdraft fees!
Forces you to find you personal profit and plan your money!
Tell me what you think in the comments section!