Personal Finance Management on a Biweekly Pay Schedule

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First check by RichieC on Flickr!Many workers in the United States receive their paychecks every two weeks – many federal and state employees are in this group. At the same time, most bills and payments that people make are paid on a monthly basis.

This creates an interesting situation. Over the course of a year, there will be two months where an individual will receive three paychecks – occasionally, when the calendar lines up, there will be three months in a given year where this happens. During every other month, a person receives two paychecks.

I was once in these shoes. My last job paid me every two weeks, and I know quite well some of the traps people can fall into…

Treating that “extra check” as a reward. Like many people who live on biweekly checks, I usually thought about things in a monthly pattern, since that’s when the bills came in. This meant that most months, I paid the bills with two paychecks. Then, when I would have a month where I would get paid, say, on the 2nd, 15th, and 29th, I would treat that third check as some kind of “bonus” – giving me free reign to blow it on frivolous stuff. This “extra” check is where many of my big unnecessary purchases came from – that would often be the source of a new video game console or an iPod. I wouldn’t use it for things like paying down debts because, well, I was “paying” those bills with my normal checks and I had convinced myself that this third check really was a bonus.

Failing to develop a regular bill-paying schedule. Another challenge of the conflict between the biweekly checks and the monthly bills is that it was quite difficult to have a regular bill paying schedule. Usually, I’d pay bills whenever my latest check came in, and this worked fine most of the time. But when irregular bills hit, or a bill came in the day after I paid bills, I’d run into trouble and sometimes rack up some late fees simply because my checking account balance would be waiting for that next infusion of cash in two weeks.

Running “dry” between checks. This leads into my third problem. Quite often, I’d get my check, pay my bills, and find that my checking account balance was really low. That meant that the expenses I needed to pay for for the rest of the period would go on the ol’ plastic and stay there – groceries, gas, and so on would wind up being fodder for pushing my credit card balances to the moon.

How can one get past these problems? Here are four great tactics to use if you’re paid biweekly but struggle to make things work on a monthly schedule. They worked well for me, anyway.

Strongly adopt a two week schedule
Ignore the fact that your regular bills come in on a monthly basis. Instead, adopt a strict two week schedule for paying the bills. When you’re paid, pay whatever bills are outstanding immediately. Do this with every single paycheck.

I adopted a routine of paying the bills every other Monday like clockwork. I’d collect all the bills in a consistent spot as they came in, then I’d sit down on bill paying day and go through them, knocking all of them out. If I had more bills than cash, then I tapped my emergency fund a bit, but with the further tactics below, it wasn’t long before that wasn’t a problem.

Create a healthy emergency fund and fund it every paycheck
One of your regular bills that should come out of every paycheck is a strong allotment to a savings account somewhere – your emergency fund. Your emergency fund is there to handle large irregular bills and to handle true emergencies, like your car breaking down.

Don’t know how much to contribute? Start by contributing 10% of your paycheck to your savings account right off the top each time you get paid. If your paycheck is $1,000, immediately put away $100 for emergencies. You may find later that this isn’t enough, but you’ll almost never find that it’s too much.

Build a sizable buffer in your checking account
Once the bills are paid, it can be awfully tempting to see what’s left as free spending money. The bills are paid, time to go party, right? It sounds good on paper, but if you do that each time, you’ll eventually find that there are two week periods where you don’t have the cash to even cover your ordinary bills. What about those weeks when your mortgage, your car payment, your electric bill, and your cable bill all stack up? That’s more than your paycheck right there.

“Isn’t that what an emergency fund is for?” Normal bills are not an emergency. Normal bills are normal – things you should easily be able to cover with your normal pay. If you’re having difficulty with this, particularly when it’s paired with spending binges, then something has to change.

What you should effectively do is decide that the absolute minimum balance in your checking account at any time should be equal to a paycheck. If you look at your account balance and it’s less than a paycheck’s worth, you don’t have spare money to spend needlessly. That way, even when the bills stack up, you can pay them all with ease, without worrying a bit about it. It also ensures that you won’t be overdrafting.

Budget in a small amount of free spending each paycheck
Many people will think that building up such a buffer will add up to no fun at all. “I’m not going to give up my fun!” is something I hear quite often.

You don’t have to. You just need to put some constraints on it, like putting a bridle on a horse. You can still go for a nice, fast gallop, but you’re not in danger of things going completely out of control.

Just set yourself a free spending budget each paycheck – your allowance, if you will. I suggest withdrawing it into cash. Then, when you’ve spent it, you’re done – no hitting the ATM for more. If you want something big, save up that money over a few pay periods and buy it. Use this budget for all of your unnecessary expenses – eating out, buying gadgets and extra clothes, golfing, and so on.

The danger comes when you don’t set any limits and drain your account thanks to frivolous spending. Putting yourself on an allowance keeps this in check but allows you to still enjoy life.

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65 thoughts on “Personal Finance Management on a Biweekly Pay Schedule

  1. Luckily I get paid on the 1st and 15th of each month, so I try to divvy up my bill payments evenly between the two halves of the month so I have around the same left-over cash each month. If you work a slaried job and don’t have this kind of pay schedule, see if you can negotiate it. Hourly folks probably don’t have much choice.

  2. Trent,

    Interesting post. I am paid every 2 weeks. But I schedule my bills for payment (online) whenever they arrive. Do you see any downside to that? I think it gives me a greater sense of control, rather than letting them pile up – even for a week.

    I am contributing the maximum allowable amount to my 401k, and put over 10% of my take home pay in an emergency fund each month. Plus my wife substitute teaches, and we throw whatever she makes into the emergency fund. Our situation may be a bit different from that of many of your readers, however.

    We track whatever we spend, day in and day out, on an Excel spreadsheet, so we have a pretty good sense of where our money goes.

    As you suggest, we have a “free spending” amount that we each have available per week for “want to haves” – clothing, music, and the like. Some weeks we don’t use it, some weeks we use all of it, but having that yardstick keeps us in line.

    Keep up the good work!

  3. I really like the bill-pay system my bank uses because it shows you “upcoming transactions” and subtracts those transactions from your current total, thereby showing you when your account will run dry. It’s the best bill-paying system I’ve used.

  4. October is our “3 paycheck month”. My wife and I are putting both of our checks towards our new home fund. In the past, we’ve effectively used this for our vacation fund since the timing was usually around when we took a trip. However, we decided not to do anything that large this year, so we’ll save it instead.

    How do we pay bills? Most are charged to our credit card, which we pay in full each month. We budget that payment for one of our paycheck cycles with the 2nd paycheck each month paying our mortgage, gas & electric bills, and car insurance.

  5. Another great post Trent! I really like the practical ones – that a lot of people can apply to their lives immediately! I have gotten into the pay right away habit – it does bring peace of mind – and no late fees, etc.

  6. I’ll probably use the 3rd check this year to buy Christmas gifts. I’d save it, but we are already on the border of being oversavers.

  7. These are good tips, sometimes the paychecks fell at such inconvenient times relative to due dates of big bills. At my current job, we get paid monthly on the last weekday of the month. At first I thought I’d dislike it but it’s actually great, since the money is always there when I need it for the mortgage. It also takes quite a bit of budgeting though to get through a month with only one paycheck!

  8. I get paid biweekly and what I’ve done that seems to work out well for me is to set an automatic pay plan to where half of my bills are paid on one check and the other half is paid on the other. This effectively creates an extra month’s worth of a payment within a single calendar year. Also, depending on the type of interest charged on the credit card or loan, the principal is being paid down quicker by applying the payments toward the debt this way.

  9. This doesn’t make much sense to me, but I think that’s because “sitting down and paying bills” is a totally foreign concept for me. Almost every bill I pay is set up for auto-payment one way or another a few days before the due date (I’d rather keep collecting interest on the money until then).

    I record all our spending in Excel and keep recurring payments there too so that I know what’s coming up and how much we’ll need. I keep a buffer for everyday expenses and a just-in-case buffer.

    Recently we’ve been doing most of our everyday spending on our Discover cash back card. This means our ING checking account swells through the month, so we gain more interest and don’t have to worry about where we are in the paycheck cycle. It requires a certain level of discipline, though.

    Third paychecks go straight to savings.

  10. This was a great post! There is so much turbulence in the market today, and people need peace of mind more than ever. I wanted to offer your readers a link to another blogger who is doing great work. He writes about our ‘childhood money messages’ and how the best approach to stability in today’s market is to resist letting these emotions control our buying/selling habits. It is really fascinating work, and something you should all check out. His name is Spencer Sherman, and you can view his blog at http://www.curemoneymadness.com/blog.

  11. I don’t think this is optimal either. Not for me at least. I budget monthly (and yearly for irregular stuff, divided by 12), pay my rent monthly, and pay my bills whenever they show up. I only really get a couple bills (all paid online). I treat the extra paychecks as a chance to boost my Efund or other savings.

    This might work well for someone who doesn’t want to deal with a budget and tracking spending.

  12. We have a paper budget that runs monthly, however we have most of our spending (groceries, fuel, mortgage etc) on a fortnightly basis. All of our bills come in either at the end of the month, or quarterly and a couple annually. We have money automatically transferred to a seperate bill paying account every payday. On those two months that we receive three pays, the mortgage receives an extra payment and any extra is either put away or put onto debt.

    As much as possible our pays are automatic, so for the mortgages, debts, and bill accounts we don’t see the money at all in our normal bank account.

    BTW, I worked out that paying the mortgage fortnightly rather than monthly, by dividing the monthly payment into two, will pay off the mortgage approximately 13 years earlier than paying it monthly! If you take the banks fortnightly payment it won’t pay it off any faster, as they use the formula of monthly payment x 12 months, divided by 26 fortnights. That reduces the fortnightly payment however won’t really be of benefit to you.

  13. Why fool yourself? That paycheck isn’t extra…your costs are running daily…you are using up food, car insurance, mortgage daily…every day is an expense.
    Take a fixed bill; tally it up as an annual cost and then divide by the number of paychecks you get…usually 26 or 52. Example: mortgage = 1100 per month x twelve (13200) divided by 26 paychecks per year = 508 per paycheck. Do this with all your bills and you will know what you need to escrow into your bill paying account every paycheck. Keep that account “sacred” for these bills only and you will have neither worry about bills stacking up nor will you be fooling yourself into thinking the payckeck is “extra” windfall.

  14. My husband gets paid every two weeks. Basically we budget as thought he gets paid twice a month, and so twice a year we have that extra check. Since it’s money that’s not budgeted for, we can usually manage to save it, which works well for us.

  15. Advice that we all need to live by. Budgeting has become a big element to the family life of most Americans. Though if you aren’t budgeting and have that “I’ll be ok” attitude you may be in for a big surprise.
    Recently I was looking through my credit card statements and realized that I was paying for something ( about $100 a month) that I didn’t want.
    I could have blamed that company because I didn’t want to pay for it but if I just would have looked at my credit card statement more clearly instead of just paying the balance I could have diverted this whole situation.
    The Lesson here…
    Pay attention to your bills!

  16. Those two “extra” paychecks each year go towards insurance and taxes.

    Something to consider when adopting the 2 week bill paying scenario. Open those statements and check the due dates when they arrive. Some credit cards statements are mailed with precious little time between receiving the bill and the due date, others change the billing cycle with some frequency. I think it is a trick to generate late fees and such, so be aware of such tactics.

  17. This actually sounds like the same idea that I did weeks ago when I started to budget my bills and expenses biweekly. :) You just had to blog about it as I don’t blog much.

    Great idea!

  18. Thanks for such a timely post! The hubs and I are just getting ready to start Dave Ramsay’s Financial Peace University on Sunday. We’ll see….

  19. We use the “third paychecks” as a form of forced savings. We budget based on the net amount of 24 paychecks. The “extra” paychecks go automatically into our emergency fund account, as do any tax refunds or any other “windfall” type income. We are working on paying off some debt, but for security reasons (I’m self employed) need a larger cushion than most people. If you can do it, it’s a great way to beef up your emergency fund.

  20. As an Australian, ‘bi-weekly’ to me means twice a week. The term I would use would be ‘fortnightly’.

    Cultural difference?

  21. I am paid every two weeks but luckily it has never been a problem for me. On those months where I have 3 payday I pay my bills as usual on the 2 weekly schedule eventually I build up a nice little credit against my utilities which actually makes for a sort of hidden emergency fund.

  22. We are a two income household. I am paid bi-weekly, and my wife bi-monthly. Over the years, I have come up with two methods I use to help monitor my cash flow. I enter every possible income/expense into quicken and as a scheduled transaction. Then I use the account balance graphs to “simulate” my cash flow. I also have a budget spreadsheet where I can see all budgeted income and expense amounts weekly, bi-weekly, bi-monthly, monthly, etc.

  23. Holly, just fyi the word ‘fortnightly’ is a English word and not used in American English.

    And why is two-weekly payment so widespread in the US? Originally from the UK, I have worked in several countries and have always been paid monthly. Just curious…

  24. I use my extra pay check for car and house insurance. It will also go towards paying of credit card debt and a little in to savings for ROTH IRA.

  25. I get paid every 2 weeks and, when I had a mortgage, I paid it weekly. So there were actually 2 times per year that I had to come up with an extra mortgage payment *without* having that 3rd paycheque. It was only about $150, but that was sometimes tricky.

    And my 3 paycheque months usually fall out in synch with Passover and the High Holy Days & Sukkot (October is a 3 cheque month) and that helps with the huge food bills at those times.

    Seriously, the 8 days of Passover usually bring $1,000 in additional costs (because you start from scratch with food and can’t go out in the middle if you’re running low). The good news is that the food that’s left over goes to reduce the costs for the next couple of weeks.

  26. Trent – do you believe it is possible to oversave?
    This year I’ve been super-focused on saving cash with my long-term goal of buying my own home. I know this is at least 2 years away from being realised. I have no debt. But then I get totally slaughtered by the tax man.

  27. Hi – this sounds very similar to the four rules Jesse recommends and which are built in to his software YNAB – see this link for details of the rules:

    http://www.youneedabudget.com/methodology/

    You don’t have to have the software to follow the rules (but it does make it a bit easier). My husband and I switched to this method recently and it’s made a huge difference to the way we use our money (mainly by realising we were actually overspending our income and eating into our savings on a regular basis!)

    Have you ever looked at his software and reviewed it, Trent?

  28. I am an American and I will now say that I get paid fortnightly. I Like some British terms better than American English.

    Anyway, this month I am getting that third paycheck. I am using it towards paying down my car which in doing the math will be paid off by December (take that 6 year loan paid off 5 years early!) after that next year’s checks will most likely go towards either student loans or for my house fund.

  29. I heartily agree with Lurker Carl (#13), who recommends keeping close track of the due dates on credit cards because the CC companies are now mailing their statements closer to the due dates. In addition to opening CC statements immediately and inspecting their due dates, I have developed two practices:

    1. I keep a reminder list of which cards charge a fee for telephone or online payment and which do not. Those that impose such a fee get paid immediately by snail mail, to avoid a late fee and allow for slow mail. The others can be paid online, thus saving postage.

    2. I make the online payments ASAP without waiting until a few days before the due date. The earlier payment means that less interest racks up on the credit card (CC interest is always a whole lot more than bank account interest, so there’s no point in waiting to get a few more cents from the bank).

  30. A timely post, Trent! This is my one year anniversary of finally gaining “financial peace” in our home. I have a monthly retirement check, my husband gets paid every two weeks. When I set up the spreadsheet, I put EVERY payment (online bill pay or auto deduction, along with estimated amounts for gasoline and pharmacy–based on past payments) into the spread sheet according to when th paychecks come in. (I haven’t written a check to pay a recurring bill this year.) I also have to “carry over” a certain amount of the dh’s second paycheck to the first of the month to cover what I know will hit the account within the first seven days. What is left is what we have for groceries, etc.

    The minute a credit card bill comes in (or anything else for which I do online banking) the bill is paid and filed, trying to follow the “handle it only once” rule. THAT has been a huge hassle saver for me…and I was the queen of moving a bill around 12 gazillion times before it got paid. I actually LOVE paying bills now because it is easy, quick, and I always know the money is there.

  31. I really really really don’t understand why people in US don’t pay bills automatically as soon as they are issued… it’s so easy to do it through your bank and you NEVER have to worry about late fees. I pay ALL my bills like that, I only use cash or CC for grocery and other normal stuff, but never for bills. I’m in Canada and I always thought we were more similar to US than other countries, but I guess I was wrong.

    Anyway, I receive bi-weekly, have all my bills and expenses in an Excel spreadsheet (for the whole year) according to each pay date and have never had a problem with it… like Heidi said, I also don’t think your system makes much sense, but I also would never put me through to this “sit down and pay bills” thing.

  32. Interesting post. I’m paid bi-weekly (or fortnightly, or whatever you want to call it ;) ) and I always pay my rent out of the paycheck that falls closest to the 1st of the month, then all my other bills out of the other paycheck. (I schedule the payments online as the bills arrive.) With an “extra” paycheck I usually take $50 or so for myself for fun, make an extra deposit into savings, and as much as possible towards paying off credit cards, which should be done in the next six months.

    I disagree about keeping a large cushion in my checking account. I’d rather see it earning interest in savings. If there’s an emergency where I need more cash than I have on hand, I’ll use a credit card and then transfer money from savings to pay off the card before interest accrues.

  33. I always love your posts! One of the most difficult things for us is determining how much money to set aside for groceries each week. I know that might sound trivial. But as a stay at home mom to a family of four (two adults, two kids under the age of 2) I try to prepare three complete meals a day, and I usually end up running to the store 2-3 times a week even though I do sit down on Sundays to prepare out the meals for the week and make a master list. I ALWAYS forget things and I tend to run out of things before I think I will. It feels like I’m spending over $200 a week on groceries, and I don’t know if that’s normal. But since it seems to vary so much I’m not sure how to budget the right amount — an amount that we can stick to. Do you have any tips for this? How do you handle this with your family? Do you have a set amount that you are allowed to spend each week and make sure that you stick to that?

  34. I do something very similar, but since I pay my mortgage every two weeks, the extra I have from that three paycheck month isn’t really that much. I go one step further with the bills though. I pay my bill account for my insurance (house and car) and taxes every two weeks as well. I average out my heating costs throughout the year (Dec/Jan average temperature is -20C, and my heating bill can be 4x higher than my summer cooling bill) and pay those every two weeks too. In the summer I end up with extra going into the chequeing account, and in the winter I take that extra out.

    I know it keeps my chequing account balance high, but then I don’t have to pay any fees on that account, and I’m able to pay the large bills I know are coming in full when they are due. I figure that the heating company and car insurance have monthly budget options that cost me money, so why not pretend I’m on the budget option and pay myself?

  35. I develop a 2-week budget every biweekly pay period for bills due within those two weeks. It’s a little bit anal, but before that I was blowing monthly budget categories because I had a hard time looking out beyond two or three weeks into the future. Things that I didn’t anticipate (kids’ school supplies, gifts for a birthday party invite, etc.) always had a way of sneaking up and biting me. On a two-week budget it is much easier for us to plan out the next fourteen days’ events and expenses.

  36. i contract and usually get paid every week, so i am always thrown off a little whenever i end up in a place that pays bi-weekly. i always need a one month adjustment period.

  37. I get that ‘extra’ pay this month as well. All my bills are automatic, except my rent which is paid by check and two that I have to initiate myself, but I do those two online as well. I check all my bills at least once a week to make sure everything goes smoothly and around the 3rd or 4th of the month, I enter the previous month’s payment records into an Excel spreadsheet to keep track of how I am doing. (the chart has my goals in it too – keeps everything in one place and easy to review).

    I print a yearly calendar in December for the next year and mark off the paydays (my company nicely provides a pretty one in color). First I mark off which paydays are for rent and circle in blue. Then I mark the ‘extra’ in pink. It helps me plan out what I need to do and when.

    This so-called ‘extra’ isn’t really. Keep in mind you still need to take out your cash expenses – food, gas, etc, – for the following two weeks. Anything left over, which is usually at least half of my take-home, gets plopped into my savings, which is part of my emergency fund system. After a month, if I don’t need it, I’ll either leave it there as part of my EF, or put it on a debt. That works best for me.

  38. My wife and I are both paid monthly (as are most of the people where we work), so this is an interesting thing to think about. I keep getting mailings from my mortgage company telling me how much easier budgeting would be if I made bi-weekly (fortnightly) payments. Well…not really for us. For a lot of people, I’m sure this is the case. Now, I realize there are other benefits of paying fortnightly, but for us budgeting isn’t one of them.

    Whenever we tell people that we are paid monthly they are aghast at the idea, and have no idea how we can possibly budget an entire month of expenditures. Honestly, it’s not that big of a deal, because like a lot of people here, all of our bills are automatically deducted from our accounts, and we’re not usually stretched at the end of the month because my wife is in complete control of where the rest of the money is going.

  39. I do the bi-weekly thing as well. Here’s how I do it:
    My pay is direct deposited into my account. From there, as follows:

    Rent: I divide my rent for the month in 1/2. This halved amount is paid to the landlord each time I get paid (FREE online bill pay, Baby!). Landlord loves it; gets 2 checks every month (or 3)and rent is ALWAYS on time (sometimes ahead too).

    Bills: I lucked out here. The due dates on my bills fall at the beginning of the month and the end of the month so I pay the first batch of bills from first check for the month and the 2nd batch of bills from check towards end of the month.(if bills don’t split that well, pay a portion of the bill from 1 check and the rest from your next check–this has helped me when I haven’t been as diligent as I should have been!)

    I set up all my bills through online bill pay as far in advance as the bank will allow me (ok, it’s never been more than 3 months), I do the same for my savings “bill” (builds my cushion savings acct, car savings acct, & incidental savings acct). I check my account once a month on average just to make sure everything moving along smoothly. For me, it’s worry free. I’m building savings, bills paid on time and a few bucks leftover when it’s all said and done.

    I’m not letting any company I do business w/ (cell phone, net connection, utilities, etc) have access to any of my accounts. Did once and was an unmitigated disaster. They suck and do not need to dabble w/ my money.

  40. I worked out a system quite a few years ago that does wonders for us. At the time I was paid monthly, so I lived super-frugally for one month and was able to essentially “get ahead” of my paycheck.

    Now I budget on a monthly basis and we use last months’ paychecks (I’m now paid biweekly and my husband is paid weekly) to pay for expenses this month. So, this month’s paychecks just sit in our account until I budget them in at the end of this month. It creates a buffer that is nice to have and we are never spending or planning to spend money we haven’t gotten yet.

  41. Agatha, it depends on the person. I pay my bills as soon as the new statements are up. Granted, they don’t pull from my bank account until a couple days before the due date but I have it all mapped and scheduled out as to when they will hit.

    I too never had a “sit down and pay bills” time. My parents always did and saw that was too much of a headache. 1 minute on a website a few times a month vs piles of paper several times a month and headaches is an easy choice.

  42. Right there with ya Jeff on the monthly payroll. It’s not fun but it’s nice to know I can pay everything at once when I do receive that paycheck and not sweat if a bill will come unexpectedly. I actually called all my credit cards and other accounts so I would have due dates set for after I got paid. Relieves a lot of stress and I found when I first did it, I was checking accts weekly thinking I missed something cause I wasn’t paying every 2 weeks.

  43. We get paid ‘fortnightly’ so I’ve done the budget and set up automatic payments as if we get paid twice a month. One payday covers the mortgage, student loans, car loan, utilities (on a even 12-month payment play) and some set-aside for irregular bills and gifts; the next payday covers insurance, gym membership, and everything else. “Everything else” piles up on a Chase credit card which we pay once a month (mid month to offset the mortgage). I love this system because the card tracks all my spending and reduced the number of separate bills I have to arrange for. (And I make about $300 a year in cash back.)

    The third paychecks are sacrosanct…they get pulled into savings the second they hit the direct deposit checking account.

    I think it’s not really about the system, but about just deciding whether to spend those extra checks on stuff or put them toward paying down debt or savings.

  44. I guess I’m with the Canadians, although I live in the US. The only bill I have that doesn’t get paid immediately is rent – for that I use money from my second paycheck each month. I could technically cover it out of my EF but it’s just easier to imagine that check being mostly housing expenses.

    I do think household size and/or complexity is a big factor. I’m single and don’t have a lot of bills so the pay immediately system isn’t a problem. If I was part of a family with a mortgage, school costs, car payments, larger food bills, more complex insurance payments, etc. I do think a more nuanced system would be required.

  45. I do sort of this same reasoning. I figure out how much I need for my husband and I’s allowance, daycare, gas and food for the week. Then when we get paid (between the two of us it’s every week) I take that money out in cash, and divy it out accordingly…and we don’t use our credit or debit cards. All our bills come out automatically, so the rest of the money just sits in our account ready to pay bills. That extra paycheck, will join it – giving us a nice cushion.

  46. This may work for some, but I have my own system. I get three checks each month. My monthly check and my husband’s two biweekly checks. I have a list of bills that is paid with each check. Any overage goes to our snowball fund. However we do have ONE bill that is paid every two weeks and that is my husband’s lunch and gas fund. So, I still have to take that money out even though we get the “extra” check. Nothing goes unpaid in our house. But, we will be putting the majority of October’s “extra” check toward our debt. I will also make a payment to our annual lump sum fund because it is a little behind this year. (that is the fund we pay our home taxes, car plates, and flood insurance out of as those are annual bills.)

  47. For me, I try to move as much of my automatic billing into biweekly periods to coincide with our paychecks … RRSPs, mortgage, savings, property taxes, and any other fixed expenses.

    For variable expenses, my credit card bills line up on the 4th and 19th so I what I find helpful for budgeting is that by the 1st of each month I pay off all the transactions and amount owing immediately on the credit cards. This way I know that I’m clear and debt-free for the next month.

    The great thing about biweekly pays is that it forces you to live slightly more frugal to fit within the two pays per month. The extra savings can be used for savings, investment, and to help soften the brunt of any unexpected budget items.

  48. Dave Ramsey’s plan works.

    Use it people. Cut up your credit cards and cancel. Stick to envelopes and BUDGET on paper BEFORE the month begins. This works all the time.

    We found money we didn’t know we had. Now, we are closer and closer to being debt free! All of those car/loan payments are going to MAKE us money instead of LOOSE money.

    :-)

  49. I get paid bi-weekly and I have my budgeting system set up so that half of everything gets paid every two weeks. In other words, when I get my paycheque tomorrow, I will put away half for my rent and student loan payments for the month of November. Then I will go through online banking and pay roughly half of my power bill, cable bill and cellphone bill, all of which tend to be about the same amount every month. When my next pay comes in two weeks, I’ll pay off the remaining amounts on the utilities and make up the rest of my rent and loan payments. I’ve been working on this system for about four years now and so far I haven’t missed any bills or had too many cash flow issues.

  50. I had a really good system going when I was with my sons father, which is also good for when you are splitting bills with someone.
    We had a joint checking account with free online bill pay that we used just for our bills. We determined on average how much our monthly bills were. Then we determined what percentage we would each be responsible for. Since I was staying home with our son, and going to school full time while only working part time – we decided to equally share the “extra” money, instead of equally splitting the bills. We then determined how much needed to come out of each paycheck to be able to pay the bills monthly plus an extra 10% for padding (not considering the extra paychecks that come up when your paid bi-weekly), and had that amount automatically transfer into the bill pay account on pay days. Then we figured out the average amount that each bill was monthly, and set up automatic bill pay through the joint checking account. Some months it ws a little more, some months a little less – and we would review the bills when they came in to see where we stood. That way if the electric bill was a bit higher than usual and we owed some money on it, we only had to come up with $20 or so instead of $120. And the extra money that went in from those “bonus” checks helped add some extra padding. This way we didn’t have to worry about missing a payment – and as a matter of fact, we hardly had to think about our bills at all. Our paychecks were direct deposited, and the proper amount automatically went out to pay the bills, and the account built up savings all the while. I even had a few bills get so advnaced that my bills said that they owed ME money. I like getting bills like that in the mail :)

  51. In Trent’s post and in a couple commenters (or at least one) I noticed that they said to put 10% of your income into emergency fund every paycheck. Isn’t that just until you build it up to the amount you want? We have 4-6 months (depending on how desperate the situation would be) of expenses in our emergency fund, so divert our monthly savings to other goals. Are some people really continually stocking the emergency fund (and not just after using some for something)?

  52. Adopt a 4 week (month) schedule. Four weeks to a month,13 months to a year. That’s right, 13 months(4 times 13 is 52). Put what you spend and what you save down on paper. This way you’ll know what money is coming in and where the money is going out. What you don’t know you can’t control.

  53. I get paid every two weeks, but budget a monthly plan, since that is how my bills arrive.

    To bridge the gap and make budgeting easier, I opened an “extra paycheck” account at ING direct and whenever I have a month with 3 paychecks in it, I immediately deposit the extra check into the ING account and setup an automated transfer that moves 1/6′th of the money from the extra check back into my checking account each month.

    The money then arrives evenly just as if I was paid twice a month.

  54. What would you consider a good amount to budget for fun? I budget 10% for an emergency fund and 10% for fun. Obviously this will be different for everyone’s lifestyle. I am just curious what others do.

  55. As for me, I always use the powerful equation of income minus savings equals expense. And then I will invest what I have saved, In this way, I will assure that I will be paid first more than anything else. Hope you can visit my blog too pal as I also share my quest towards financial freedom.

  56. Great post! My husband gets paid every month, and I used to get paid once a month, when I worked. We used my big check for all the big payments (mortgage, car loans, insurance, etc.). However, I got paid on the first, and some stuff is due on or around the 1st, so we basically stayed a month ahead on all bills. Then my husband’s checks were for savings, weekly expenses (groceries, gas), and paying extra on debt. The month ahead was like added emergency fund, in that if there was a large expense coming up or if there had been a true emergency, it would have given us a month buffer to figure out a plan or work some overtime or something.

  57. I get paid twice a month, so sometimes I have a 5 week month to deal with and no paycheck! That is painful when you are living on the edge. I break the month in two and pay the bills due between 1-16 with the first check and 17-31 with the second. The problem is that you spend more in 5 week months, so I try to break the gas/food/daily expenses into yearly/24 rather than 2x a month, strictly.

  58. Trent, my photo is licensed under Creative Commons Attribution-Share Alike 2.0 Generic, which means anyone who uses my photo must attribute it to me. You haven’t attributed my photo to me. Please do so. Thank you.

  59. I get paid monthly and find it extremely convenient. I had a friend, another grad student, who said that in his program, the student were paid once at the beginning of the semester, so they got huge checks three times a year (fall/spring/summer). He said nearly everybody was bad at budgeting under that schedule.

  60. This article seems to assume a certain income level. Save 10% of every paycheck??? LOL Until recently, that would have meant skipping food. Even now, when I’m just starting to have spending money at all, that seems insanely high.

    I’ve frequently used the extra checks for expenses like contacts and car repairs – anything that doesn’t fit into my normal monthly budget.

  61. I get paid bi-weekly and my wife gets paid 1st and 15th (extremely part time wages). It gets tight for us at the 1st of the month because rent, cable and one credit card are due and that takes most of our checks. We can’t put aside any money into savings from that check. The mid month check we seem to have more breathing room… We also have a decent savings account to fall back on if we run into a problem, but we haven’t had to tap it recently.

    Paying off our debts will undoubtedly give us some breathing room all around and we are working to that end, but I think we have somewhat of an income crisis as Dave Ramsey would say. We need to make a bit more money to give us the breathing room that we need.

    At least gas is going down some. Who would have ever thought that we would be happy with gas at $3.16 a gallon!?

  62. My wife is in the military so she gets paid on the first and fifteenth of every month. I get paid every two weeks. We budget according to her schedule which means that we get two of my paychecks a year as “freebies”. She gets 24 checks a year and I get 26. Twice a year we get a few thousand dollars to play with.

    All our bills get paid on the first or fifteenth.

  63. All excellent Ideas. Hopefully your car insurance is paid every 6 months and pretty close to that “extra” pay check. I used to be in that routine and it was great.

    I’m super frugal so if there is extra money it sits in the checking account or is moved into savings.

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