How to Use the Budget Mom’s Budget-by-Paycheck Method

Kumiko Love combined the envelope (left) and calendar budgeting systems to take control of her finances. Courtesy Kumiko Love

Zero-based budgeting.

The 50/30/20 rule.

The cash envelope method.

There’s no shortage of useful budgeting methods, but what works for one person may not work for the next.

That’s something Kumiko Love, an accredited financial counselor and founder of The Budget Mom, understands intimately.

“During my first couple years of budgeting, I tried so many methods — the calendar method, the paycheck method, percentage budgeting, the cash envelopes,” explains the 33-year-old single mother from Spokane, Washington. “I tried Dave Ramsey’s baby steps. Every single time, I felt like I was failing, because I wasn’t reaching my financial goals the way I thought I should be.”

After giving up on budgeting for almost a year, Love revisited some of the approaches she had tried in the past. This time, instead of focusing on where she failed, she picked apart each money management strategy to figure out which aspects worked for her.

Love combined key elements of three methods — calendar budgeting, paycheck budgeting and the cash envelope system — to come up with a custom plan she dubbed the budget-by-paycheck method.

How the Budget-by-Paycheck Method Works

A detail of a planner with a budget
Kumiko Love advises people to track their spending as a first step to organizing their finances. Courtesy of Kumiko Love

Before you can plan out how you’ll spend your money, you need to be aware of where it’s going, Love advises.

“The first step is tracking your spending,” she says.

Take a month or two and write down every time you spend money so you have a better idea of where your dollars go. Alternatively, you can use bank statements, credit card bills and old receipts to retroactively take inventory of your spending habits.

Once you’re aware of how you spend, it’s time to put together a plan for your money. Use a monthly calendar to write down bill due dates, scheduled events, doctor’s appointments, holidays, birthdays and other places your money goes.

“People think budgeting is just really paying your bills, making extra debt payments and saving, but … it’s those life events that set us back on our journeys, because we’re not prepared financially to pay for them,” Love says.

After you fill out your calendar, create a budget for each paycheck. If you get paid twice a month, you’ll have one budget to cover expenses early in the month and another budget dedicated to end-of-the-month expenses.

“For the longest time, I failed [with budgeting] because I was trying to squeeze myself into this monthly box of budgeting that the financial experts out there were telling me,” Love says. “Every single month, I was running out of money by the end of the month, and I couldn’t figure out why.”

She says once she started budgeting her money each time she got paid rather than once a month, she was able to better manage her spending.

The budget-by-paycheck system doesn’t dictate how much people should spend in each category or what percentage of income should go toward which goal. It’s completely up to individuals to decide where their money needs to go.

“It can be customized to your wants, your values, your beliefs and what you need for you and your family at this point in your life,” Love says, “and it can be customized as you grow and as your goals and as your feelings change.”

She says how you budget should reflect your personal priorities.

“If your priority is paying off debt but you want to save, you can do both, but the majority of your extra income should be going toward debt,” she says.

Once you’ve got your budget laid out, put cash into envelopes to pay for variable expenses. Love recommends scheduling bill payments online to avoid the hassle of trying to pay them via the cash envelope system.

Love’s money management system is all manual. Nothing is done on a computer or smartphone. She sells stylish workbooks, worksheets and cash envelopes on her website for organizing finances without having to do the work of creating templates.

3 Tips for Budgeting Success

Despite initially struggling with her finances, Love was able to pay off over $77,000 of debt and save nearly $60,000 toward her first home using her custom budgeting method. Here are three main takeaways she discovered along her budgeting journey.

1. Be Realistic When Creating Spending Limits.

“When I first started budgeting, I set my food budget at $300 a month when I was realistically spending $700,” Love says. “I set myself up to fail before I even began, because I drastically reduced a category in my budget that I wasn’t prepared for.”

Tracking her spending, she says, was the primary factor in transforming her budget.

2. Make Time for an End-of-Month Budget Review.

Reviewing where your money actually went compared to what you budgeted is crucial. Love has a habit of closing out her budget every month.

“It lets you know whether or not you’re on track to reach your financial goals, where you’re overspending [and] where you’re underspending,” she says.

3. Take a Holistic Approach to Budgeting.

Love found budgeting to be more than just a money management tool. To reach success, she had to face hard truths about herself, like how her insecurities led frivolous spending and how she can’t trust herself to use credit cards responsibly.

“I think a lot of people don’t realize that about their budgeting journey, just how much you’ll discover about who you really are and the things that really trigger you to spend money,” Love says. “[Budgeting is] a lifestyle, it’s a mindset change, and it’s a journey of self discovery.”

Nicole Dow is a senior writer at The Penny Hoarder.