Every so often, I’ll get a question like this one, from Gina:
I am a federal employee and I get my paycheck every two weeks but all of my bills are monthly. What’s an easy budgeting system?
This is a pretty consistent problem, actually. Many employees receive their pay on a weekly or biweekly schedule. Meanwhile, most bills come on a monthly basis, some even less frequently.
How do you easily reconcile the two and take on a budgeting plan?
This is a problem I had to deal with in the past. Prior to 2008, I was employed in a situation that paid me every two weeks. It was a bit of a struggle to find a good balance between the paycheck and the monthly bills. My wife was also on a biweekly system, but her paydays were on different days than mine.
Here’s how we handled it. This system works well regardless of how often you’re paid, as long as that pay is consistent.
First of all, we mostly just used a very straightforward monthly budgeting system. We didn’t do anything strange or unusual in terms of our budgeting. We actually used something very similar to the budgeting templates found in The Total Money Makeover or Your Money or Your Life to get us started. Similar budget templates are found in many other personal finance books.
We made a few adjustments in accordance with the specific needs of our lives, as everyone does when they try to take on a ready-made budgeting scheme. We had to figure out how much we needed to save each month for our irregular bills, for example.
Still, that straightforward kind of budgeting system really worked well for us. So, where did the biweekly (or weekly) checks come in?
Our total amount that we budgeted with each month was the total of just two of each of our checks. Since we were each paid on a biweekly basis, we used two of my paychecks and two of her paychecks as the basis for our budgeting. Our monthly spending and saving plans were all based on that amount.
Of course, over the course of a year, we received more checks than that. A person who is paid biweekly receives 26 checks per year, whereas a person who is just budgeting using two of those checks every month only accounts for 24 checks. That leaves two left over. Similarly, a person who is paid weekly receives 52 checks per year, whereas a person who is budgeting using four checks per month is only accounting for 48 checks, leaving four left over.
Those “left over” checks were used strictly to push us ahead financially. At first, we used them entirely for debt repayment. Four times a year – twice due to my “extra” check and twice due to her “extra” check – we made a giant extra payment on a debt. This did not affect our normal monthly budget except for how it paid off debts, because we accounted for a certain amount each month as our “debt snowball.”
This system works regardless of how frequently you’re paid as long as you’re paid a consistent amount. What if your pay is inconsistent? I’d suggest reading a book that focuses on that specific challenge, because it can be really tricky, especially at first.