Years ago, when people got paid every week, I imagine that budgeting was easier. For 52 weeks of the year, you knew that paycheck was coming every Friday.
Now, people are paid bi-monthly, or once a month, or every 1st and 15th of the month. If you like to set up a monthly budget, budgeting can become more challenging on a bi-monthly or monthly pay check scheme.
For years I’ve struggled with budgeting, in part because my husband is paid every two weeks. I’d much prefer if he were paid twice a month on the 1st and 15th or every week. The-every-two-week cycle causes me issues because as the year goes on, sometimes the first paycheck doesn’t come until the 10th or later in the month. If there are bills due earlier in the month, how should those get paid when the first paycheck doesn’t even come until the 10th or 11th on a given month, depending on where you are in the pay cycle?
Ideally, I’d have a nice buffer in our account so that we’re using last month’s money to pay for this month’s expenses, but thanks to many medical expenses, that is not currently a possibility. We’re not quite living paycheck-to-paycheck, but we’re close.
The Three Paycheck Month Conundrum
Just to compound the problem, there are those two months a year when a month has three paychecks instead of two.
I know some people who bank that third paycheck to pay for their vacation or to invest, but we’re not there. We literally need all of my husband’s take home pay to make ends meet, whether that money comes in twice a month or three times a month once in a while.
Failed Budgeting Strategies
I’ve tried a variety of strategies to make our budget work with this paycheck scheme.
One strategy involved taking all of our expenses and dividing them by 26 paychecks. So, if our house payment is $1,000 a month, I multiply that by 12 months to get $12,000, and then I divide that by 26 to come up with $461.54 I have to set aside every paycheck for a house payment. But when I first set up the budget this way, I run into problems because at the end of a two-paycheck month, I only have $923.08, and the house payment is $1,000.
Another strategy I tried was to budget just for two weeks, but I like to look ahead at the whole month’s expenses and see what’s been paid and what I still need to pay, so this method didn’t work for me.
The Budgeting Strategy That Works For Us
Finally, just a few weeks ago, I came up with the perfect solution! One of our medical bills is $400 a month, approximately. When I take that out of the budget, I have no problem budgeting two paychecks a month. So, I decided that twice a year, when my husband gets three paychecks in a month, the third paycheck will go entirely into the medical category. Then, the category is fully funded for six months, and I can use the two paychecks a month to pay our other bills. This works like a charm.
If you’re living paycheck to paycheck, are paid bi-monthly, and have one large expense you have to pay every month, see if this strategy will work for you.
I imagine this strategy would also work if you have bi-yearly payments like car insurance or yearly payments like car registration. When you get the third paycheck, fund those accounts with the additional check and then forget about them when budgeting the other months.
If you’re paid bi-monthly and living paycheck to paycheck, which strategies do you use to make budgeting easier?
This was a nice read, and a great suggestion for people living on bi-weekly paychecks. Unfortunately, I am paid semi-monthly (twice a month) so this does not work for me. You may want to edit your title and the second paragraph under The Budgeting Strategy That Works For Us section to read bi-weekly and not bi-monthly. Bi-monthly you will never see more than 2 paychecks a month.
When I have utilities/electric or car insurance that’s over 100 I split it between checks if possible to make more cushion for food and other expenses!
I no longer get paid every other week. (Its 1st and 15th now.) However, when I did get that check every other week I had the same problems. What I did was get a calendar (I used a small pocket one that I also used as a check book cover) and highlighted every pay day. Then I wrote in all my bill due dates in red ink and if it was variable I picked the earliest date. For example, my electric bill is always between the 15th and 21st so I write it down as the 15th. There has only been one time in 5+ years that it was due the 14th. Next, I look at it and decide which bills to pay with which check and use a pencil to write down those bills on the highlighted day. If the bill is larger than what is in one check then I will write down something like MORTGAGE 350 under 2 pay days. This way, I take the 350 from the previous check and 350 from this check and make a payment for $700. On each pay day, I would call/mail/or online bill pay each bill that was written own for that pay day. (I personally would withdrawal the $350 mortgage allocation because if I leave it in the bank then I will spend it. We use a local bank for our home so when its time to pay I go in and hand them the cash and have them draft the rest from my checking. In the past for other bills I have even withdrawn the money and then deposited it back in later for the payment). Finally, once I physically pay the bill I mark off the “red ink” bill from its due date.
I do the same thing with my checks for the 1st and 15th even though most of them fall under their prospective pay periods any way. It is mostly partial payment allocations I have to hold onto now because we have more end of the month bills that are larger amounts.
I really like the article. I get paid every 2 weeks just like your husband. The solution I have found was to use a weekly calendar and use 4 weeks of pay for the months expenses. Ex. Weeks 1-4, 5-8, 9-12, etc. When that extra paycheck comes that’s when you start to get ahead. At the end of the year I end up with a month of pay free and clear from monthly expenses ( weeks 49-52) and just in time. I call it “Income Harvesting”. That’s 8% of your yearly salary. Talking about return on your “investment”.