Most Americans receive biweekly paychecks (are paid every two weeks) but operate with a monthly budget. If that works for you, that’s awesome—keep doing what you’re doing. But if you’re among those of us that struggle with your budgeting, then maybe it’s time you learn how to budget bi-weekly paychecks instead.
Before we get too deep into this, I always like to remind everyone that the best way to build anything financial for yourself is with a trained financial professional (of which, I am not). That’s because not every system works for everyone, so the tips and tricks that I use will likely need to be modified for you.
Now that that’s out of the way, let’s talk about how to budget bi-weekly paychecks:
Create a Bill Calendar
Paying bills on time is crucial to your financial health and it’s much easier to do if you actually know when your bills are due. It sounds simple, I know, but one of the best ways to do this is by creating a bill calendar.
If you’re like me and you use Google Calendar to run your life, then the easiest way to do this is to create an additional calendar (like, for example, the holiday calendar that Google adds in automatically) that can be toggled on and off. This calendar should hold only financial information. Namely, when your bills are due.
Once you’ve created a new calendar, it’s time to add your bill due dates into your calendar. I do this by making an all-day event (this way you don’t actually block off any time) and name the event the company and amount. For example, if you pay Netflix on the 15th of every month the event would be titled Netflix $9.99.
Make Two Different Biweekly Budgets
Most of us make monthly budgets, which work great if you only have one big paycheck per month. But the truth is, most things are easier if you break them down into smaller steps. So, if you’re getting two deposits into your bank account per month, it’ll be a lot easier if you operate with two different budgets.
Because you’ll want to pay your bills on time, having a bill calendar is the easiest way to see what has to be paid when. I find it easier to pay my bills during the two-week period when they’re due, save for big things like rent, in which case, I tend to put away half each pay period to make my life easier.
Figure out what bills you’re going to assign to which paycheck, and if you have a heavier bill period, you might want to put away extra funds from the lighter bill period to help ease the burden each time. Otherwise, you might be stuck paying only bills and having to shop at the dollar store for groceries for two weeks (which, depending on what you eat, might be idea for you!).
You’ll want to make sure that you add savings amounts to each of your paycheck periods. You can do these evenly, or you can save more from one paycheck than the other if you have more bills that are due the other one. Regardless of how you do it, you need to add savings as a line item on your budget or you might forget to do it!
What About the ‘Extra’ Paycheck?
Many people on biweekly paycheck periods get themselves into trouble when it comes to those months that happen to have three pay periods in them. They view this as an “extra” paycheck and end up blowing it all in one fell swoop.
This is definitely not the way to budget biweekly paychecks. While you definitely want to have your budget handled with the two paychecks because most month’s that’s what you’ll get, when you have a third paycheck dropped into your account, it’s a good time to think bigger picture.
What is bigger picture in this scenario? Saving or paying down debt. It’s important to remember that this third paycheck is still part of your overall salary, meaning when you decided whether or not the pay was suitable to you, you probably used it in your overall calculations.
That means it’s not free money. But since you can handle your finances fine without it, it should be put to good use. You never know when you might need the extra cash for an emergency.
A Few Bonus Tips to Budget Biweekly Paychecks
Pay your mortgage bi-weekly, and where possible, have your mortgage payments line up (or come a few days after, ideally) when your pay is deposited. Mortgages tend to be paid off faster on bi-weekly schedules, which means ultimately you’ll pay less interest. And it will be way easier if you hold onto your mortgage payments for as little time as possible.
Don’t be afraid to pay bills early. You are not restricted to making bill payments on the day that they’re due, you are allowed to pay early. I know it can be a tad bit painful to let go of money before you have to but doing so can be beneficial so you don’t spend money that you don’t have.
Put your excess funds into your savings or pay off debt. When you have bi-weekly payments you might have that third paycheck. Now, if you’re paying bi-weekly mortgage payments, some of that is already dedicated to something, but the rest can be used to further your future financial goals.
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