Budget Question

[laurannm]

We've been discharged for about 7 months now and we have set up a budget. I get paid bi-weekly while hubby gets paid weekly. The first few months were a bit of a struggle sticking to the budget, but as of around Feb we were much improved and even starting building an emergency fund (albeit small right now). Our mortgage is due on the 1st but has a 15-day grace period. We have always paid by the 1st, up until recently. We had some unexpected expenses creep up, and unfortunately our emergency fund is still in it's infancy stage and not quite big enough. So for cash flow purposes we had to utilize our grace period on the mortgage. Generally speaking the 2nd bi-weekly check I received every month would be put towards our mortgage payment. However, due to the unplanned expenses we had to essentially dip into our mortgage payment and then make up the difference after I got my next check (which is generally after the 1st of the month but well within the grace period). So basically we are utilizing the grace period for cash flow purposes. It is making budgeting a little more difficult because we are sort of carrying through this deficit from month to month.

Is this common? Are we asking for trouble down the road financially?

I hope this makes sense, it's a little tough to explain

Thanks!

[Flamingo]

It appears you are using one of your paychecks to cover your entire mortgage payment. Try this - save half your mortgage amount out of each of your paychecks which will give you more money in the long run instead of one big chunk to hold out from one paycheck. Since you are paid bi-weekly, you will have one "extra" mortgage payment amount per year that you can put toward savings (do you understand what I mean?). Mortgage companies do this but charge you for it - they have a bi-weekly plan where you pay your mortgage bi-weekly instead of monthly thus not giving one a big hit on one paycheck for the mortgage payment and paying an extra mortgage payment per year toward the mortgage.

That might work for you as you won't have so big of a hit on one paycheck with the mortgage payment.

Once you see something occur where you have to cut into other funds or delay payments on other items, that is a big warning sign for more trouble. Try to get a handle on it before it escalates out of control requiring you to miss payments entirely.

[laurannm]

Thanks Flamingo, great idea. You are correct, our mortgage is essentially taking up almost all of my second check.

But isn't that what we are doing now, sort of? Ideally we would want to take half my mortgage from the first check of the month (which is usually around week 2) and the remaining half of our mortgage from the 2nd check of the month (around 4th week of the month), and then make the payment by the 1st.

Instead though (I'll use March\April as an example), we are doing it in reverse..taking half our mortgage payment from the 2nd check of March, and then the other half of the payment from the 1st check of April. and making the payment by the grace period date (April 15th). So essentially we are using the grace period as our sort of "unofficial" due date.

[Flamingo]

It appears all you have is a cash flow problem due to the differences in your pay periods. There are ways around that and you can either pay things early prior to due dates or, as in your situation, pay during the grace period. However, watch that because your due date is really your "due" date and after it is late maybe 10 or so days it could end up as being "late" on your credit reports. Check your information in your paperwork as to your "grace" period and what that entails as to your payment during that period of time. Usually there is a penalty that needs to be paid if the payment is not received by the last day of the "grace" period.

It is your "unplanned" expenses they are hurting you along with the cash flow issue. You need to somehow clear up that deficit because it will get larger if you cannot stop any more "unplanned" expenses for a few months. You can attempt to reduce the deficit to free up cash by cutting bare bones for several weeks to get back on track or find a way to cover the deficit with funds from selling some items on eBay, garage sale, etc., part time job one day a week, overtime at work, etc. I don't know if you have any credit cards available but stay away from taking any cash advances and using cards for any expenses and try to cover that deficit by other means.

It will just take a little planning and work.

[laurannm]

Thanks, I think you hit the nail right on the head.

We do have credit available but as far as we are concerned, that is not an option