In this installment of the podcast series about maximizing your paycheck I am talking about extra income on payday. Overtime, bonuses, and side hustles are a great way to make additional money, but how should you account for this income in your budget?
I want you to be thoughtful, purposeful, and intentional about how you’re paid so you can better manage your money. Properly allocating extra income is crucial to breaking the paycheck-to-paycheck cycle.
The most important thing to remember about extra income is that it is not guaranteed. Bonuses can change, and overtime can be limited, so relying on that money in your budget can throw off your financial plans if you’re not intentional. Learn what money goals to assign to your extra income and why these potential earnings don’t need to be a part of your monthly budget.
Every dollar you make has a job, so listen to how to make the most of your additional income. Stay tuned for insights on these topics:
- [02:00] Examples of extra income
- [03:25] Why you shouldn’t count extra income in your budget
- [06:00] Using extra income to hit discreet goals
- [07:17] Why budgeting and a spending plan is important
Tune into this episode of Money Files to learn how to leverage extra income on your paycheck and why you shouldn’t use it when creating a budget.
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
IF YOU LOVED THIS CONVERSATION ON, OPTIMIZE YOUR EARNINGS: WHAT TO DO WHEN YOU HAVE EXTRA MONEY IN YOUR PAYCHECK, CHECK OUT MY EPISODE ON HOW TO CREATE CONSISTENCY WITH FLUCTUATING CASH FLOW!
Transcript for “Optimize Your Earnings: What To Do When You Have Extra Money in Your Paycheck”
Intro: Hi and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work everyday with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello and welcome back to another episode of Money Files. So I am in the middle of a series called the Paycheck series, and I really want to help you think strategically about your paycheck. You know that I do not believe a list of bills to be a budget and I really want you to not only know the numbers on your paycheck, but I want you to be really thoughtful, purposeful and intentional about how you’re paid or when you’re paid. Last week I talked to you about whether you’re paid biweekly or twice monthly. I just feel like there can be so many thoughts that you have about how you’re paid that impact you and your ability to actually manage your money intentionally. My goal for you is to manage any amount of money intentionally and for you to be able to spend drama free. I want you to be in control.
I actually don’t really care about your bills. I say that like in a eye roll type of way, I do care about your bills, but what I see, especially from W2 employees is that your feelings about money don’t really shift even though you’re making more money. You can go from making $50,000 a year to making $120,000 a year, but yet you still feel like you have anxiety around money. And that anxiety has to be unraveled by shifting the way you think about your finances. And as a W2 employee, one of the things that I see the most from people that I work with is the ability to earn extra money. And so that extra money can come in a number of different forms. Maybe you have the ability to earn overtime at your job or maybe you get paid back for mileage at your job.
Or maybe you’re someone who you even have gone and you’ve gotten a second job. So you get two W2 statements at the end of the year and you are doubly employed. And you got this side hustle or this part-time job because you wanted it to create some type of lifestyle for you. Or you started working the extra hours because you wanted it to create a certain lifestyle for you. But you are at a point where you’re like, dang, I’m working these extra hours and I’m doing all these extra things, but yet I still don’t feel like I have enough. If that is you, this podcast episode is for you. And my best kept secret when I am working with clients and they tell me like, hey Keina, I can earn extra money working at my job, or I have mileage that I get paid out for my job or I have a part-time job in addition to my full-time gig.
Do you know what my best kept secret is? I say, great, we’re not going to count that money. And you might be clutching your pearls right now, but that’s okay because I’m going to tell you why we don’t count the money and I want you to build a spending plan or a budget based off of what you know you can count on each month. And I tell all my clients like, I want us to be able to create a level of consistency with your numbers. And so if we know that you consistently bring home $3,000 on the 15th and the 30th, that’s what we’re going to plan on. Now, if you have the ability to make an extra $500 or an extra $200 or an extra $2,000, that is perfect and I love it, but I am not including it in the plan that we create for you.
And the reason being is that sometimes how you earn extra money, it may not always be there. And if it’s not always there for you, how will you make sure that you have your own back? I’m going to say that again. If the extra money isn’t always there, how will you make sure that you have your own back? Because at this point in time you’ve been making extra money and you don’t know where that money is going. Like, yes, I’m listening to you Alexa, I know what’s going on, you don’t know where the money is going. And I’m not saying this out of a place of shame, but I like to pull back from using that money in your spending plan because I want that money to go to very discreet goals. I want it to help you accelerate goals. So if you take your baseline pay that you know you can count on, so in the example I gave. You make $3,000 on the 15th, you make $3,000 on the 30th, we are going to build your spending plan off of $6,000.
We are going to incorporate your goals of Keina, I want to make sure I’m paying off debt. I want to make sure that I’m saving for my international trip, that I want to take it once a year. I want to make sure that when I need tires that I can pay for those tires without thinking about it. Like that’s how we’re going to build your plan. Then what we come in and do and what you should come in and do with your extra money is if you know that you have the ability to earn extra income, my next question is how does that extra income support your goals? What goals can that extra income support?
When you ground all of your decision making in the money that you actually make, honestly guys, it is so crisp and it is so clean because one, you show yourself that like, I make enough money to actually meet my goals that I set out. Then when I make extra money, I’m able to discreetly talk about what I want to do with that money. So if you make an extra thousand dollars a month, now you can, if your goal is to pay off your credit card debt, you can say, I’m putting all thousand dollars towards my credit card debt. So every time I get a thousand dollars from my extra pay, however that comes, whether it’s overtime or it is you getting a mileage payment, or maybe you have that part-time job, whatever that is, you are going to discreetly be able to say, I am paying an extra a thousand dollars in addition to whatever my spending plan says. I’m putting that extra thousand dollars towards my debt.
And here’s the beauty of it. If there’s a month that you can’t make the thousand dollars or the opportunity to earn extra money isn’t there, your livelihood isn’t tied to you making extra money, it is not going to impact you paying your rent or paying your mortgage.
It’s not going to impact you paying your car payment. But so often what I see is that people that have two streams of income or the ability to make extra income in their W2 job is that they are relying on the extra income and they do not know that they can have their own back if that extra income goes away. And so if the extra income does go away, then they don’t feel safe.
And I want you to create a fail proof safety plan for yourself. So there was a time in my life, like I’ve probably shared this with you before, where I used to tutor for extra money and I tutored just because I loved it and I used to be a math teacher. And when I became a vice principal, I was no longer in the classroom with kids and so still had my math teacher skills. So I used to tutor kids and I want to say I made at least an extra $400 a month like I tutored once a week. And with that money, I accelerated some of my debt payments and then I was also able to save extra money. But I knew very discreetly what I was using that money for. And if there was a week I didn’t tutor, that $400 wasn’t going towards my car payment. That $400 wasn’t dependent on whether or not I got to make my student loan payment.
But that $400 actually felt like extra to be able to enhance some of the financial goals that I had at that time. And so I was able to see how extra money could help me very discreetly as well as how the money I made in my paycheck could actually help me from month to month achieve my goals. So as a W2 employee that has the opportunity to make extra money, I don’t actually want you to include the extra money in your paycheck, I just don’t. And I would say the same is true for if you are someone who at your job, you have the ability to, maybe you earn a really big bonus. I have clients that get $20,000 bonuses, $50,000 bonuses, even a hundred thousand dollars bonuses. And what they end up doing is they account for that money throughout the year. And so by the time the bonus comes, they’ve like double, triple quadrupled spent it because in their head they had factored it into their spending plan.
And I’m like, no, no, no, I want you to make sure that we make a discreet spending plan based off of the money that you are earning. And so in that plan, we will still have your goal of paying off debt or we’ll still have your goal of building a five figure savings account. We’ll still have your goal of taking the international trip, whatever that may be. And then when you get that bonus, we get to talk discreetly about how you want to use those thousands of dollars that dropped into your bank account. But what we’re not going to do is spend that money before you actually get it or we’re not going to make that money have a job in your spending plan before you actually get it. Because if something happens with a company and they’re like, sorry, this year we’re not giving out $10,000 bonuses, we’re only giving out $100 bonuses, your feelings are going to be hurt because you were thinking about how that money was going to help and support you.
So I want you, like I said, to be intentional with what you’re actually making on the 15th and the 30th or if you get paid once a month, whatever that looks like, I don’t want you to consider that extra income in your budget, your spending plan. I’m going back and forth in between those words. I love both of them and the reason I should actually tell you, the reason I use spending plan is because truly a budget is literally just a list of your decisions. So you having a spending plan is you making the plan for how you want to spend your money. I can guarantee you the bills are just like the thing that you have to do with adulting. I want to know about all the other things you want to do. And those things need to be in the plan as well.
So thank you so much for tuning in. And if you are like, girl, ooh, I’ve been having this part-time job for so long and I am not seeing this part-time job, it’s not helping me pay down my debt, it’s really, I don’t even know what’s going on. Or maybe you have that bonus that comes in every single year and you feel like every single year the bonus goes to paying off debt and then you rack it back up, whatever that is, like if you are in that position where you’re like, Keina, I definitely get extra money and I don’t know where it’s going, I want to invite you to apply to work with me. You’ve heard my clients talk to you in various episodes and I want to walk alongside you, provide you with accountability, but also provide you with very detailed feedback on how you want to spend and show you exactly where to make your money go from paycheck to paycheck.
Just today before I recorded this podcast episode, I actually sent a couple clients like, hey, just looking at your spending, I’m looking at where your money should go on your next pay period. And these are my thoughts and I sent them a Loom video. And so we’re able to interact in between coaching calls and not just on the three monthly coaching calls we have in my five month coaching partnership. So if you want to dive into your finances in a way that feels empowering and for you to finally feel like, you know what, like money makes sense to me and I feel like I have my own little personal finance degree, I would invite you to go to the link either in the show notes or you can go to Wealthovernow.com/appointment and you can apply to work with me for five months. And the beautiful part if you apply to work with me right now is we get to finish, which is crazy that I’m going to say this, we get to finish 2024 together and start you off in a strong start for 2025. So I look forward to chatting with you and have a great week.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
