There are certainly worse things in life than getting paid every two weeks. But when you’re trying to set up a month-based budget, having the two-week paycheck situation can throw a little bit of a wrench into things.
This is a big issue that has led to a ton of frustration and confusion for people who want to have a better handle on their money. And it doesn’t help that all the advice out there is geared toward paychecks that come on the same day(s) every month.
Getting paid every other Friday gives you a lot of stability in one sense. There’s steady money coming in. You get to have Friday Paydays! Some months will even have THREE paydays!
And you don’t have to tighten your belts at the end of a 31-day month because the money is running out, because you get paid every 14 days instead of every 28, 30, or 31 days depending on what month it is (plus the rare payday on February 29th).
Most of us have bills that are due monthly instead of every two weeks, and so from the perspective of expenses, it makes sense to do a monthly budget. But with money dripping in at a different rate than the due dates, things can get a little wonky… especially if your budget is tight.
The months that have three paychecks feel awesome. Holy cow, you got paid 50% more this month for doing the same amount of work! It’s like a bonus!
Not so fast, slugger.
The three-payday months will set you up for disaster next month if you aren’t careful… especially if you’re living paycheck to paycheck and/or you treat the third payday like a bonus.
It’s easy to get thrown off because your checks the next month come toward the middle and end of the month. If you’re living paycheck to paycheck and you aren’t careful with your “extra” check at the end of the last month, the next month can really screw you up.
So for example, if you get paid $2,000 every two weeks, you might get a check on the 1st, 15th, and 29th this month. If you live paycheck to paycheck and you use a lot of that third check to pay this month’s bills and maybe have a little fun, you’re in good shape… until the 1st rolls around again, and your rent and car payments are due but you won’t get another paycheck until the 12th.
If you’re struggling with figuring out when to pay what bill and your monthly money situation is weird and/or tight, there’s a solution. It’s a free, bare-bones app called Calendar Budget, and it will help you figure out what to pay and when.
What you do is plug in your bills, your bank balance (the app doesn’t connect to your bank account), your paydays, and any upcoming expenses (like birthday gifts, annual membership fees, or even a date). Calendar Budget then shows you what bill to pay, and when.
You need to update it every time you spend or receive money, because -- as I said before -- it doesn’t connect to your bank account, so it won’t know when money comes in or goes out. But if you’re budgeting, you should be doing this anyway.
Rosemarie Groner, the Busy Budgeter, has a fantastic write-up of how to use Calendar Budget. If this is even remotely interesting to you, go read the tutorial for insight. Getting smart about your spending will change your life, and Calendar Budget can lay it all out for you so you don’t even have to do any thinking.
This is another method I’ve seen, and it looks awesome. I’m actually thinking about using it, myself! It’s great for irregular income, but it’ll also work well in the paid-every-two-weeks situation (which is a less extreme form of irregular income, right?). It might not work for you if you’re living paycheck to paycheck, but use Calendar Budget to set up a savings cushion (aka emergency fund) and then you can “graduate” to this idea.
The gist is this:
You’ll need at least three bank accounts. Stay with me -- it sounds like a lot, but it’s not. Here’s what you need:
● Basic checking
● Basic savings
● Long-term savings (like a high-interest savings account)
See? Not too bad. Now here’s how it works:
First, do your general monthly budget. Figure out how much money you need to live in any given month. (The smaller you can get this number, the more you’ll be able to put in savings and/or put toward early debt payments.) Once you know what that number is, you’re ready to set up the accounts. Let’s say you’re a single young professional with a roommate and your monthly expenditure is $2000.
Have all your income deposited into the basic savings account. This is where your direct deposits will go, along with any extra money you come across that you want to put in the pot.
At the end of the month, yank that budgeted money out (the $2000) and put it in your basic checking. The basic checking is what you’ll use to pay all your bills and run your life next month.
Then, move any leftover money to your long-term savings account. And you’re done! Until next month.
You’re building savings. You’re living on an easy-breezy monthly budget even though your paychecks don’t come on a monthly basis. You’re getting a handle on your money and you’re off to a bright future.
Years ago I heard an interview with a woman who wanted to make one extra payment per year to pay down her mortgage faster and save a boatload on interest payments.
In case you didn’t know, mortgage payments are typically pretty BIG. It’s not like most of us can just cut a check for an extra $1500 whenever we feel like it. But then this lady said she figured out a trick.
Her paycheck was every two weeks. That meant she received 26 paychecks each year. So she set up an automatic payment to come out of each paycheck for one half of her mortgage. Half the mortgage payment x 26 payments = 13 full mortgage payments over the course of a year. This took years off her mortgage and saved her thousands long-term. Use this calculator to see how much time and interest you’d shave off your own mortgage!
If you don’t have a mortgage but you have other debt you want to pay off, like student loans or a car payment, see if you can use this same trick to make extra payments toward those. You could cut years off the life of the loan and free up that money to go toward something else. Who wants to be paying student loans when they’re 40?
No two ways around it -- making extra payments on your debt, including mortgage debt, makes it go away faster and lets you pay less in total over the long run. Even if you only shave off a couple years with your extra payments, that’s two years when you DON’T have to make that payment anymore.
You’ll be doing something awesome that future-you will thank you for.