Budget Balancing: A Monthly Battle

I recently learned a great tip for solving a common problem:  all of your big bills being due at the same time each month.  For most of us, our largest bills are all due at the beginning of the month.  Rent or mortgage payment, maybe a car payment, often your first paycheck is completely spoken for.  One possible solution is using an allotment to balance your payments.

I’m sure you’re thinking:  An allotment doesn’t give me more money, it just pays people.  How is that going to help?  Well, here’s how…

For active duty military members, an allotment is a payment of a certain amount of money that is paid monthly to a specific company or bank account.  Allotments can be used for a variety of reasons.  They are often used to pay for privatized government housing, to pay for insurance, or to designate certain money for family members.  Much like a privatized housing allotment, you can set up a personal allotment for the amount of your rent or mortgage to be paid to the company, or to be put into the bank account that you use to pay your housing bills.

Here’s how the math would work:  (this is a nice, round example)

Without Allotment:

Base Pay:  $ 2500 per month

Housing allowance:  $1500 per month

Total amount paid per month:  $4000, paid as $2000 twice a month

With Allotment:

Base Pay:  $2500 per month

Housing allowance:  $1500 per month

Total amount paid per month:  $4000, paid as $1500 allotment on the first, plus $1250 twice a month.

If you had $1500 in housing expenses, setting up this allotment would let you have an equal amount of money for other expenses throughout the month.  Without the allotment, you would only have $500 in the first half of the month after you had paid your housing expenses, but you would then have $2000 during the second half of the month.

If you are able to keep your money budgeted throughout the month, then you certainly wouldn’t need to set up an allotment like this.  However, if you struggle because your biggest bills are all due at the same time, then maybe this would work for you.

One serious note to consider:  When you set up an allotment, they will take the money out for one month in advance.  In my example, the pay would be lower for the two paychecks before you received your first allotment payment.  If you are literally living paycheck-to-paycheck, this might be a problem for you.  Check with your financial office or Command Financial Counselor for more information about this.

I hope that some of you will find this helpful – I thought it was so interesting that I’d never heard of this strategy before!

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • SCOTT WASCHER

    I HAVE BEEN DOING THIS FOR MY WHOLE NAVY CAREER. I LEARNED THIS FROM MY MOTHER (WHO WAS IN THE BANKING AND MORTGAGE INDUSTRY FOR MANY YEARS. SHE TAUGHT ME HOW TO MAKE THE BEST BUDGET FOR THE MONTH BY TAKING HALF OF ALL THE BILLS DUE FOR THE WHOLE MONTH (AND ESTIMATING 50 DOLLARS MORE IN CASE OF FLUCTUATION) AND THEN TAKING THAT HALF OUT OF EACH PAYCHECK. BASICALLY, DOING WHAT THIS POST SAYS BUT ALSO ADDING AND FIGURING IN “ALL” BILLS; NOT JUST MAJOR BILLS.

  • That’s great, Scott. You must be really glad that you had such a smart Mom to teach you these things. Thanks for stopping by.

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