Dividing Up Your Paycheck: Saving and Investing Enough?

Daniel Penzing
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What Does Dividing Up Your Money Mean?

You can divide up your money into a wide variety of categories; it really depends on what priorities you want to focus on, and what kind of lifestyle you want to lead. For example, if you spend your entire paycheck on clothes and entertainment, you are going to struggle if the power, water, and internet gets cut off or your car breaks down. On the other hand, if you save all of your money, you might miss out on meaningful relationships or valuable experiences.

No general rule applies, but the essential first step in dividing up your money is making sure that you know your budget for every aspect of your life, and are able to track it effectively.

This is why most people end up in debt because they can’t get the hang of actually analyzing what they are spending their money on. The next step is allocating your budget to different purposes.

Depending on how you choose to allocate your money, you are either following a “Pay Yourself First” strategy, or a “Live Within Your Means” strategy. Both work, but one is generally more sustainable over the long term.

Where to Start

The best place to start dividing up your paycheck is to look at your budget.

Are you spending less than you earn? If so, you need more disposable income. Is the gap between income and spending getting bigger or smaller over time? Is it getting bigger? If so, you may find your paycheck going further than ever before. If you’re thinking of buying a house, starting a family, or even retiring someday, you may want to take a closer look.

It may be time to cut back on unnecessary expenses and invest more for the future.

If you’re spending more than you earn, you face a challenge. Maybe you’re spending up all your income already and there isn’t money left to invest. Maybe you’re not earning as much as you’d like and you’re struggling to keep up with all the bills.

Step One: Goals

Prioritize and rank your goals. You should have a financial plan to do this, but regardless of when you put it together, you should know what financial goals you’re trying to meet. It’s OK to have multiple goals and prioritize them appropriately.

If you don’t have a financial plan, then we recommend you create one. You can start with the simple free Money Harmony Financial Planner.

Step Two: Saving And Investing

You should know how much money you need for each goal. You can then take this amount and divide it into fourths to know how much to put into saving, investing, paying down debt, and spending/using.

Step Three: Managing The Money

Then you need to identify the best places to save and invest. How much will you need to save to meet each goal? What kinds of accounts will you need? You can read more about the best places to save and invest money here.

We also recommend you sign-up for the free Money Harmony Budgeting Tool to develop a quick estimate of what you need to save and invest for your goals.

If you go to the site and click on the link to sign-up for free, you can use our budgeting tool for 7 days free.

Step Two: Budget

Now, your budget must be broken down and analyzed in more detail. This will help you decide how much money goes where. Let’s find out how you will divide up your paychecks.

  • Rent: First, we have to talk about a big ticket item … rent! If you own a parents apartment, then your parents are probably paying for your rent. In this case, you don’t have a rent budget in your budgeting, but your other living expenses need to come from somewhere!
  • Car and Other Expenses: Other monthly expenses must also be calculated. It is as simple as jotting down how much you spend on car gas and car insurance each month. The same goes for cell phone bills and any other incurred fees. Include food expenses as well. You need to know how much you will spend on food over a period of time so that you can have a plan for groceries, restaurants, and going out.
  • Going Out: You need to account for times when you’re likely to spend a lot of money on the fly. For example, if you’re the party animal or if you like to go to concerts, account for one night a week when you go out with friends or go dancing.

Step Three: Helpful Tools

If you’ve ever had the difficult task of dividing up your paycheck into a variety of bank accounts and payees, you know how time consuming and sometimes frustrating it is to do. You also know how easy it is to slip into procrastination and put off those tasks that are tedious.

We can break down this process into two parts: Budgeting and Tracking. Budgeting is about planning out where your money is and how you will spend it over a period of time, and it is usually done once a month. Tracking occurs each time you are paid and involves divvying up your money into different categories for each payee.


The first step in deciding how you will divide up your paycheck is to create a budget. Budgets will vary depending on your lifestyle and level of income, but the main thing is to set realistic budgets and boundaries for the way you spend money. It’s a good idea to start with the basics and work your way up to more complicated budgeting strategies, as these may be too overwhelming to start with.

Here are some ways you can budget your money:

Keep a spending journal.

Irregular Income

Those who receive a paycheck every week or two sometimes feel like they don’t even need a “second income”. The extra income feels nice, but it’s not always a necessity. Those who have trouble saving often wonder if their savings would be lower or even non-existent if their income was irregular. The answer is probably yes, but the solution is simple: find ways to make saving a priority no matter what your income is and try to find ways to bring in stable second income. These ways include side hustles as mentioned above.