How to Eat an Elephant: Achieving Financial Success One Bite at a Time

Chapter 4

Income and Debt Management

The man who never has money enough to pay his debts has too much of something else.

—James Lendall Basford

NOW THAT YOU KNOW WHERE your money is being spent, we need to track down where you are getting the money to pay for everything.

The most obvious source is a paycheque. But to truly understand how much we bring home, we need to identify a few things. First of all, how often do you get paid? Some people are paid weekly, others are paid biweekly. Some people are paid twice a month and many more are paid monthly. There are a few who are paid quarterly, but they are the exception rather than the rule.

If you are paid weekly or biweekly, you need to understand that you don't receive four paycheques a month (weekly) or two paycheques a month (biweekly). You actually get paid 4.33 or 2.16 times a month. Why is this significant? When you are preparing a budget, you need to know that every third or sixth month you will end up with an extra paycheque! This can make an enormous difference in your ability to meet your budget or accomplish your goals. Most often, people don't realize that they are actually missing out on 8% of their income. In many cases, if you took this 8% and put it away for retirement, you could meet your retirement goals.

Let's look at the example of Marianna, who earns $52,000 a year (or $1,000 per week). If she budgets only $4,000 a month in income, she will have an extra $4,000 left over at the end of the year:

$52,000 − ($4,000 ...