It's the 7th, payday is the 10th, and the balance is below zero again. You've done the maths before and the month should add up, so why does it keep happening?
In short: running short before payday is one of two different problems, and they have different fixes. Either more goes out than comes in over the month (a total problem, fixed with a budget), or the month adds up but the bills land before the money does (a timing problem, fixed with dates or a buffer). Two numbers tell you which one is yours: the month's total, and the lowest balance in the month.
- Money in minus money out for the month
- Below zero? A total problem: make a budget
- Above zero? Find the lowest balance in the month
- Below zero there? A timing problem: move dates or build a buffer
A worked example: two people, same income
Made-up but realistic. Both take home €2,400, paid on the 10th. Rent (€700) is due on the 1st, the car loan and insurance (€200) on the 5th.
| Person A | Person B | |
|---|---|---|
| Money in this month | €2,400 | €2,400 |
| Money out this month | €2,520 | €2,250 |
| Month total | −€120 | +€150 |
| Left in the account on the 31st | less each month | €200 |
| Lowest balance, on the 9th | below zero and sinking | −€820 |
| What fixes it | a budget: spend less or earn more | moving money in time |
−€820
Person A has a total problem. No calendar trick helps: every month is €120 worse than the one before. The fix is in the monthly budget.
Person B has a timing problem. On the 31st there's €200 left, and then rent (€700), the car loan and insurance (€200) and nine days of groceries and transport (€120) all go out before the salary arrives: 200 − 1,020 = −€820. The month isn't the problem. The order is. And because the €150 left over goes to savings each month, the current account starts every month at the same €200, so the dip comes back every month.
How to find your two numbers
1. The month's total
Take last month's bank statement and add up everything that came in and everything that went out. Leave out transfers between your own accounts. If out is bigger than in, you have a total problem, whatever else is going on. Expense tracking shows how to sort the payments.
2. The lowest balance
Look at the statement day by day and find the lowest balance of the month. It's almost always in the last few days before payday. If it's below zero (or below the point where you start to feel anxious), you have a timing problem.
3. Both? Fix the total first
If the month doesn't add up, timing fixes only move the shortfall around. Budget first, then come back to the dates.
Fixing a timing problem
- Know what's already spoken for. On the 25th the balance looks generous, but part of it is next month's rent. Paycheck vs spendable shows how to work out what's really free.
- Move the dates you can. Many lenders and utilities let you change a due date. Bills paid just after payday don't need to be carried across it (paycheck timing).
- Get a month ahead. Enough in the account to cover what's due before payday ends the problem for good (the 30-day cash buffer).
What this check doesn't show
- Irregular bills. A yearly insurance bill makes one month look like a total problem. Divide yearly bills by 12 and count them every month.
- Irregular income. If your income varies, use the lowest month of the last six, not the average.
- Cards. A credit card moves the shortfall to next month's statement. Count card spending on the day you spend, not the day you repay.
Run the numbers
The free 50/30/20 budget calculator shows whether your month adds up once essentials and savings are counted. If it does and you still run short, it's the timing.
One thing to do today
Open last month's statement and write down two numbers: in minus out for the month, and the lowest balance. That's the whole diagnosis.
Volora can warn you before you get there: set a low-balance alert on a wallet at the amount you never want to go below.