How to get one month ahead on bills and meet your financial goals

Are you living paycheck to paycheck, or do you have enough money in a savings account or an emergency fund to cover next month’s bills? A 2021 study by Philadelphia’s Federal Reserve Bank showed that approximately 2 million American households owe about $15 million in unpaid rent. The same research links high levels of debt to psychological and emotional turmoil. 

Follow the steps below to learn how to get ahead on bills by creating a budget, tracking your spending, and saving for long-term goals.

Step 1: Analyze your current financial situation

The first step is to analyze your current financial situation. Understanding how much you bring in and where your money is going can help you set financial goals and create a plan for reaching them.

Step 1A: Evaluate your current income and expenses

When analyzing your financial situation, start by determining how much you earn each month and how much you spend. Look at all sources of income, including your paycheck, investments and any other side hustles. Then look at your spending, including rent, utilities, food, entertainment and other bills.

Once you’ve done that, you can allocate an amount to save each month. Knowing this information will help you determine how much money you have to work with each month, assuming your current spending habits remain as-is and how quickly you can reach your financial goals.

Step 1B: Determine how much you need to set aside each month to meet your goals

Your goals can be anything from saving up for a large purchase or travel to building an emergency fund or retirement savings. When setting financial goals, start with the most critical items first. 

In this case, your goal is to save enough money to pay your bills a month in advance. Add up all your monthly bills and set a goal to save an equivalent amount. 

Based on the amount of money you have left, how many months will it take you to save up for your financial goal? You can then determine if you need to save more aggressively or not. Step 2 below will help you make the most of your money.

Step 2: Set up a budget and save

Budgets are essential. They help you to allocate funds to where you need them most. It also enables you to save money and plan for the future. 

Creating one that works for you is essential when setting up a budget. There is no one-size-fits-all approach to budgeting. Your budget should reflect your needs and lifestyle. 

Step 2A: Create categories 

The first step is to break your budget down into categories. Common categories include housing, food, bills, entertainment, transportation and savings. 

You can also add other categories that reflect your specific needs. For example, if you have children, you should create a category for childcare. 

For our purposes, create a savings category for bills. 

Step 2B: Set up a savings plan

Once you’ve broken your budget into categories, setting up a realistic plan to save money is essential. For each type of expense, you can decide what percentage of your income you can reasonably allocate to it. 

You might decide that you’ll save 10% of your monthly income to get ahead on bills and for a rainy day fund. Calculate how long it will take you to meet your goal. 

For example, if your monthly bills total $2,000 and you can save $200 a month, it’ll take you ten months to save up enough to pay one month's worth of bills. If you want to meet your goal earlier, this calculation tells you to generate additional income or cut expenses elsewhere. 

Creating and maintaining a budget can be daunting, but it’s essential to achieving your financial goals. With the right plan, you can ensure that you’re living within your means and setting yourself up for success.

Step 3: Track your spending

By tracking your spending, you can ensure you’re staying on budget.

The good news is that there are plenty of ways to track your spending. You can use online tools or apps to help you keep track of your money and investments. 

Online tools and apps offer several advantages. Most tools and apps allow you to set budget goals, track your spending in real time, and see where your money is going. This can help you stay on top of your budget and ensure you're not spending more than you should.

With the right tools in hand, you can keep your budget on track. Start by setting reasonable budget goals, and then use the many tools and apps available to help you stay on budget and make better financial decisions.

Step 4: Make a plan to get ahead 

It is essential to focus on three key steps to make your plan work: setting up an emergency fund, making extra payments on bills whenever possible, and considering setting up an automatic payment plan.

Step 4A: Set up an emergency fund for bills 

A large part of getting ahead on bills is saving up enough cushion to pay all your bills in case of emergencies. Creating an emergency fund is a great way to ensure you can pay for unexpected expenses without going into debt. 

Start by setting aside a specific amount of money each month into a savings account designated for emergency bill payments. This money should not be touched except in an emergency, and if you have to use it, begin rebuilding the fund as soon as possible. Aim for one to three months’ worth of expenses to start. 

Step 4B: Redirect extra savings to bills 

If you still have any extra money left over, make additional payments on bills whenever possible. If you receive bonuses or gifts of money, put them towards bills so you can get ahead.

Step 4C: Set up automatic payments 

If you’re having trouble keeping track of your bills, you can set up an automatic payment plan. This will ensure your bills are paid on time, and you'll never have to worry about late or missed payments and the associated penalties.

Many companies also offer discounts for automatic payments, so be sure to inquire about this option.

Getting ahead on bills can be challenging, but it's achievable with a little planning and discipline. These simple steps can help you get a month ahead on bills and enjoy greater financial freedom.

Step 5: Re-evaluate your financial goals 

Re-evaluating your financial goals is essential to keeping your finances on track. Taking the time to review and adjust your goals can help ensure that you’re still on the path to achieving them. Here’s how you can re-evaluate your financial goals.

Step 5A: Re-identify your goals

Take the time to review your financial goals and ensure they’re still relevant and attainable. Determine if they still accurately reflect your current financial needs and situation. Setting a timeline for each goal and sticking to it is also essential. It will help you stay on track and avoid procrastination.

Step 5B: Revisit your budget

Make sure your budget still reflects your current financial situation and goals. Are there any changes you need to make to accommodate any changes in your income or expenses?

Step 5C: Review your progress

Check your progress to ensure you’re still on track to reach your goals. Are there any changes you need to make to stay on track?

Step 5D: Adjust your plan

If necessary, adjust your plan to ensure that you’re still on the path to meeting your goals. Consider any changes in your income or expenses and make the necessary adjustments to your budget.

Time to get started 

Getting a month ahead on bills and meeting financial goals is an essential step toward achieving financial success. The earlier you start, the sooner you can start seeing results. 

Understanding the importance of budgeting, setting goals, tracking expenses and automating payments makes it possible to create a financial plan that helps you stay on track and reach your financial goals. Taking these steps can lead to both short and long-term financial success.

 

This article was written by Ash and Pri from Wealth of Geeks and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.