The 8-Step Payday Routine That Will Unlock Your Financial Freedom
Payday is not just about receiving your paycheck—it’s an opportunity to take control of your financial future and achieve financial freedom over time.
Break the cycle of overspending and debt by regularly reviewing your finances. Trust me—I got into $300K plus of debt in my twenties because I did not have a payday routine. I would get paid and spend as if I were a Kardashian.
That said, here is the best payday routine that has helped me pay over $29K and save about $10K in only seven months!
This blog post is all about the best payday routine to unlock your financial freedom.
1. Set an Annual Budget
Let me paint a familiar picture for you. You divide your annual income by 12 and set a monthly spending goal. At first, things seem to be going well. However, life throws unexpected bills your way, and suddenly, you find yourself overspending in every pay period.
I faced the same challenges every pay period until one day at work, when everything changed. I became responsible for part of the Annual Operating Budget and discovered a game-changing approach. So, I created the first Annual Budget Template, which revolutionized my payday routine.
Creating an annual budget provides a panoramic view of your financial situation. This macro view allows you to assess all your income sources, fixed expenses, and financial goals for the entire year.
Get the Free Annual Budget Template (PDF) or the Editable Google Sheet template in the Shop.
2. Review the Previous Pay Period
The first thing I do is open all my accounts and make sure all my tracking is up to date. I track my spending manually because it helps me see where my money is going and coming from every week. I use the Press Reset Ultimate Wealth Spreadsheet to keep track of all my spending and overall finances.
Check your Accounts for Unexpected or Fraudulent Charges
We live in the digital age, so our accounts have a high risk of fraud and unexpected charges. If our accounts are not regularly reviewed, small charges are easily overlooked. To avoid this, I check my accounts biweekly to ensure that all charges are legitimate and to track my spending patterns.
Automatic Transfer and Payments
Implementing automation for my savings and investments has proven to be highly beneficial for my financial well-being. By setting up transfers towards savings, investments, and debt on payday, I can ensure that these transactions are taken care of without thinking about them every payday. This gives me a clearer picture of my finances when I review them on payday, as many expected transactions have already occurred. Automating these processes makes them easier to maintain in the long term.
Keeping Track of “Micro-bills”
Keeping track of “micro-bills” such as recurring app payments, streaming services, and memberships is essential to managing finances effectively. These smaller expenses can quickly accumulate, and their variable nature can make it challenging to track and analyze them collectively. Personally, I make it a habit to review my micro-bills with each paycheck to identify any unnecessary charges that can be eliminated. I also keep track of all my subscriptions and recurring expenses in my Press Reset Ultimate Wealth Spreadsheet.
Previous Pay Period Review – Questions to Ask Yourself
- Did all my bills get paid and come out of your bank?
- Are all the expenses and withdrawals from my accounts legitimate?
- Are there any miscellaneous bank fees?
- How much did I budget for _____, and did I stick to the budget?
- If I overspent, why?
- Were there any surprise expenses?
- Do I need to update my budget?
- Do I have leftover money?
- Where is my leftover money going?
3. Review Your Paystub
Mistakes happen. And you do not want to be the victim of an error. I started reviewing my paystubs after I realized that I was not getting paid the right amount after a promotion. It was a clerical error, and my pay was not updated when I officially started my new role.
For many people, paychecks fluctuate each month due to various factors such as tax rates, retirement account contributions, and benefits expenses. These changes can impact our overall pay rate, even with a set salary.
It is also crucial for self-employed gals to regularly reconcile their income with their invoices to ensure accuracy and maintain good financial record keeping.
It is easy to assume that the process between our gross and net income is running smoothly, but monitoring any changes that may occur regularly is vital. Understanding these variations can help you make informed decisions regarding benefits, withholdings, and retirement contributions.
4. Pay Yourself First
Speaking of gross and net income, part of my gross pay goes toward my 401 (k) retirement account and my Health Savings Account (HSA) before I receive my paycheck. I also have a direct deposit to go directly to my High Yield Savings Account.
This was a game changer for me and the only way I’ve been able to start investing and saving now. I also have an automatic transfer set for my son’s 529 Account, which is taken monthly. Before this major change in my payday routine, I never had money left over for savings and investment accounts.
Now, I have over $100K set aside for retirement and short & long-term savings goals.
5. Look at the Next Pay Period
This is where my monthly budget comes in handy. At the beginning of every month, I review my annual budget to create a monthly budget. This gives me a more realistic view of my current and next month’s expenses. I use the Press Reset Ultimate Wealth Spreadsheet to track my monthly expenses and look ahead to see what expenses are coming up and if I am appropriately budgeting for them. It is also a good time to be real with yourself. If you spend $1000 on groceries, the chances of sticking to a $600 budget are low. Do not set yourself up for failure, and be realistic.
Planning ahead for the Next Pay Period – Questions to Ask Yourself:
- What bills need to be paid?
- What events or holidays in the next pay period will require me to spend money?
- How much do I need for groceries until next payday?
- Are there sinking funds or savings goals I want to contribute to?
- Is there a large bill for which I must set more aside (e.g., car or house taxes, registration fees, etc.)?
Basically, make sure that you will have enough money to get you through the next pay period.
6. Set your Pay Period Goals (Review Monthly Goals)
I also set my monthly goals (based on my annual goals) before setting my pay period goals. I break down my monthly goals into mini-goals for the pay period. Setting these smaller goals challenges me and helps me stay focused on my budget instead of falling into a victim mentality or giving in to my shopaholic tendencies. I focus on my smaller habits, which have helped me make greater progress towards my bigger goals.
Mini Pay Day Goals – Questions to Ask Yourself
- Can I spend less on groceries, gas, and nonessential spending?
- How can I make extra money to put towards a goal?
- Can I contribute more towards paying off my debt?
- Can I contribute more towards savings or investment goals?
- Should I do a no-spend challenge this pay period?
7. Set Your Biweekly (or Weekly) Budget
I get paid biweekly, so I set a biweekly budget for every payday. However, this is based on my annual and monthly budgets. By the time payday comes around, I have a pretty good idea about where my money is going. I use the Press Reset Bi-weekly Budget Sheet to set my bi-weekly budget.
Also, by this time, I’ve already done the hard part. I’ve reviewed, analyzed, and reflected on my past, current, and future expenses, so this part should be easy. To summarize, here are my 10 steps to budgeting:
- Calculate your net income
- List your expenses in all categories, including your bills, savings, investments, etc.
- Subtract your expenses from your income
- Set realistic goals
- Track your spending
- Compare your income and expenses
- Consider your priorities and goals
- Make a plan
- Adjust your spending to stay on budget
- Review your budget regularly
8. Execute the Budget
By the time my paycheck hits my bank account, I’ve already paid myself first (through 401K and HSA contributions). This is also a great opportunity to prioritize my savings and investment goals. I personally have an automatic withdrawal for my son’s 529 Account and a direct deposit to my High Yield Savings Account. I have these set up to transfer automatically before I get a chance to spend it.
Savings and Investment Accounts
After savings are taken care of, I determine if there is extra to put towards debt. I am using the debt snowball method to pay off my $300K debt. So, every payday, I throw about $1000 extra towards a debt. This is how I’ve paid over $29K of debt in seven months.
Spending Accounts and Cash Envelopes
I no longer use cash envelopes—I am a digital gal—but I started my debt-free and financial freedom journey using cash envelopes. Cash envelopes are a great way to build new money habits if you are trying to figure out your spending expenses.
Personally, I use eight different accounts to help me stay organized with my money. Here is a breakdown of my accounts:
- Checking Account (Local Bank) – Bills, debt, recurring home expenses (e.g., HOA, taxes, etc.)
- Checking Account (Local Bank) – Direct Deposit, main account for expenses (e.g., groceries, eating out, etc.)
- Checking Account (HYSA)—I do not use this account, which is only set up if I need to access my Emergency fund or Long-term savings goals.
- Checking Account (Different Local Bank) – Personal spending (I rarely use this account now)
- CashApp – Babysitting and Baby expenses
- Venmo – I use this for subscriptions with free trials to ensure I do not get charged (in my main accounts) if I forget to cancel.
- Regular Savings Account – I use this to have a small cushion throughout the pay period.
- HYSA – I use this account to save my Emergency Fund and Long-Term Savings Goals.
You do not need eight accounts to manage your money. You need to stay organized. A structured approach to managing your finances can help you achieve financial freedom. I hope this blog post helps you recognize the importance of a payday routine in achieving financial success.
My Payday Money Routine Essentials
Press Reset Ultimate Wealth Dashboard
This blog post was all about the best payday routine to unlock your financial freedom.
