The bonus of bi-weekly pay

This guest post from Corinne is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income.

At my previous job, I was paid on a monthly basis. I loved it. I got all my money for the month upfront, so it didn't matter when I scheduled automatic savings or investment transfers.

When I moved to a job that was on a bi-weekly payroll schedule, I had to make sure the transfers were split across the month so I didn't inadvertently empty my checking account! I was grumpy about it at first, but I've come to discover a wonderful secret about getting paid bi-weekly: If you're on a biweekly payroll schedule, you're getting a couple of “bonus” pay checks every year! Yes, that's right. Bonus checks. Let me explain.

The Bonus of Bi-Weekly Pay

If you're like me, your budget is constructed around a month's worth of expenses. Most bills are monthly, rent or mortgage payments are monthly, and I'm betting you plan your grocery spending by how much to spend in a month. Maybe someone budgets by quarter or even by year, but not many people do.

So in any given month, you can expect to bring home two paychecks. Let's say you take home $1000 with each check. Your budget allocates how to spend $2000 every month.

But wait a minute. Are you paid bi-weekly? If you look at a calendar, you'll find that in some months, you actually receive three paychecks. Don't believe me? Have a look at March. Say you get paid every two weeks on Friday. If your first check came on the 2nd, your next came on the 16th, and the third was on the 30th. All your expenses have been entirely covered by the first two checks; this is the amount of money you planned on receiving. The third is pure gravy!

Assuming you're not living paycheck to paycheck and have enough of a buffer in your primary savings account, this is a huge opportunity to hit your some of your financial goals hard.

Putting the Bonus to Work

What might you do with this “bonus” money? The possibilities are endless, of course. Here are just a few suggestions:

  • Fund a holiday account. I don't have any consumer debt and I invest regularly anyway, so this is my personal favorite. With my first “bonus” check, I grab $500 and stick it in a ING savings account called “Christmas Fund.” When the most wonderful time of the year comes around, I can enjoy it and not worry about all the money I'm spending; it was allocated for that purpose long ago.
  • Pay off high interest debt. If you're carrying credit card debt, you can use your bonus check to make a serious dent in it (or perhaps pay it off entirely!). This is a brilliant way to spend your bonus money; you get an automatic return of whatever interest rate you're paying.
  • Make an extra mortgage payment. I'm a renter in Brooklyn, so I know very little about mortgages! However, I have read that making one extra mortgage payment a year is supposed have a great impact on the overall amount you spend to pay off your mortgage. Maybe you've thought about doing this before, but wondered how to find the extra money to do it. Using your “bonus” check makes it completely painless.
  • Max out your IRA. If you've got extra room in your Roth IRA or traditional IRA, why not max it out with your “bonus” money? Remember, you've got until 4/17/2012 to contribute to your 2011 IRA. The limits are $5,000 if you're younger than 50 and $6,000 if you're older than 50. If you don't have an IRA yet, then start one with your “bonus” money!
  • Start (or contribute to) an emergency fund. If you don't yet have an emergency fund, start one with this “bonus” check. You'll immediately have half a month's expenses covered. In fact, you could build your emergency fund entirely through “bonus” checks. If you get two “bonus” checks a year, in three years time you'll have a three month emergency fund. Not bad for pretty much no effort!
  • Treat yourself! After regularly reading about personal finance for three years, I've become pretty good with money. In fact, I might be frugal to a fault. If you're like me, you might want to use your “bonus” check as an opportunity to enjoy life. Take a spur of the moment trip, go out to that expensive restaurant you've been drooling over for years, or buy thoughtful gifts for your loved ones. I'm thinking about using some “bonus” money to go on a hot air balloon ride for my birthday!

Naturally, you'll want to spend your “bonus” money in the best way possible for you and that depends on your own unique circumstances. So, what are you doing with your “bonus” money?

More about...Planning, Budgeting

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Get Rich Point
Get Rich Point

I will buy gold coins with the bonus money. Gold is a hedge against recession and moreover it is not difficult to liquidate gold when you need money urgently.

Nicole
Nicole

Nothing like buying when gold is at all-time highs and there’s lots of stories about new gold mines getting started. (And unemployment is easing up and the stock market is at a nice clip.) I suppose if Obama gets elected to another term there will still be excess demand for it, but you also might as well invest in bullets if that’s your reasoning. p.s. It’s much easier to liquidate stocks/bonds/CDs/etc. if you’re concerned about getting full value for your money. You have to shop around if you don’t want to get ripped off with gold coins. (Hint: That place… Read more »

Evan
Evan

Ad hominem, straw man, juvenile.

…and you really don’t understand gold or economics!

victoria
victoria

How on earth was this an ad hominem or a straw man?

Matt at Healthy N' Wealthy
Matt at Healthy N' Wealthy

Gold is at an all-time high against the dollar, but the dollar is near its all-time low. The government prints money and artificially lowers interest rates. That devalues the dollar, while gold holds its value (its value lies in its nature as the quintessential medium of exchange for the fruits of production).

I got paid 3 times in March, so I bought a bunch of silver, as I already own physical gold and GLD. I also bought some concert tickets, which are more fun than metal.

Evan
Evan

Ad hominem:

“Gold is foolish, as are you being a gun-toting Obama opponent who follows Rush Limbaugh, who is implicitly evil”. All irrelevant.

Straw man:

“Buying at an all time high is stupid and ‘there are new mines opening up'”

Besides the price claim being inaccurate, this argument ignores the basic investment thesis of gold (weakening currency). It does so by citing anecdotal evidence of ‘new mines’, perhaps true, but 2000+ years of history shows gold supply grows at 1-2% per annum.

Not even a convincing straw man.

Think.

Tracy
Tracy

“Gold is foolish, as are you being a gun-toting Obama opponent who follows Rush Limbaugh, who is implicitly evil”. All irrelevant.

Also, none of which was actually SAID in the post you are replying to. I don’t think quote marks mean what you think they mean.

Katarzyna
Katarzyna

Some great ideas here. I like to split anything extra between credit cards and savings account. It’s always nice to see one balance decrease while the other increases.

Joman
Joman

I have not seem calender yet, but month after your “bonus” you will find “work for free” days. How to manage it?

Lindsay
Lindsay

If you get paid biweekly, there are no months when you will receive less than two checks. This is because you get 26 biweekly checks a year, but you only need 24 checks per year to get two checks per month. So there are no “work for free” days following the months when you get three pay checks. It is just an artifact of the way we divide our months up. If our months actually made sense, there would be 13 months per year with 4 weeks in each month. 🙂

Marsha
Marsha

I’ve lived with monthly pay and with biweekly pay, and I have to say I liked monthly better. It was just much easier to budget. I’d pay all bills for the month a few days after payday, put money into savings, and make sure I’d budgeted enough for all essential categories for the month. My money handling was done for the month and I could concentrate on the rest of my life.

Nicole
Nicole

This. And for the year I had biweekly I still did the bills monthly because the bills come in monthly. Generally about the time for a 3 paycheck month we needed the third paycheck. I suppose if you don’t start out monthly it’s a good way to trick yourself into thinking you make less money, but if you’re used to making the same amount with a monthly payment it can be just annoying to readjust. Especially when you have the bulk of your savings on auto-pilot– if we’d started on biweekly instead of monthly we’d probably have put less away… Read more »

Stacy
Stacy

This is what happens with us. That third paycheck of the month goes to pay the expenses for the beginning of the next month, and to catch up a bit if necessary.

What really trips us up is that I am not only paid biweekly but that my paychecks fluctuate by several hundred dollars since I have a mileage reimbursement that is paid out on the second paycheck of the month. Right now with the way our pay cycle is, the second (larger) paycheck of the month doesn’t come until well over halfway through the month (the 20th or later).

Audrey
Audrey

This is what my former co-worker would always say to me, “there is no extra paycheck because one is for rent, the next is for bills and play”. And he’s right if you don’t stick to a rigid budget. However, if you have a budget of two paychecks per month, you should end up with a little bit of “extra” in you bank account at the end of the month. You can put that into savings, or you can let it sit there knowing you’re not allowed to touch it. (For me, it was about $200.) That will build up,… Read more »

Chris
Chris

For me, the 3rd paycheck was never as big a bonus as the author seems to think. The problem is when you get paid at the very end of the month, the first paycheck of the next month comes in the 12th or 13th. If I had some bills due the 6th or 9th that would have to be covered by the 3rd “Bonus” check. Would it help ease thnigs? Yes. Maybe it is because I was living close to paycheck-to-paycheck, or because I budget for food and gasoline biweekly (not half-monthly). For me it seemed only about a 1/3… Read more »

Rosa
Rosa

I think the biweekly paycheck makes it easy to see if your needs/wants/savings balance is on track – when my budget was tight I always tried to keep it so my first paycheck covered all the important stuff like rent, and then the second one was savings & anything else.

Rosa
Rosa

I have been paid monthly, semi-monthly, and biweekly, and I strongly prefer biweekly! I have arranged my finances so that I budget this way. You can ask most places to bill you on specific dates. I have half my monthly mortgage payment come off each check, thereby automatically paying extra, as I want to get the mortgage paid early. I arranged other bills so they came in at a schedule that works for me.

leslie
leslie

This is actually how we fund a large part of our Roth’s. We put a smaller regular amount in every month and then put the entire bonus paycheck in too. Makes funding the Roth fairly painless.

Meg
Meg

I use the two extra paychecks to pay the car insurance bill and the rest (after groceries, gas and the dog savings acct) goes into a travel fund.

Frugal Fries
Frugal Fries

Wow, I never really thought about this but maybe that’s because I’ve always been bimonthly. We don’t really plan around the bonus check as a result, but now that I think about it, perhaps it’s been helping us meet some of our savings goals faster than we’ve realized!

Jen
Jen

Bimonthly isn’t the same as bi-weekly –>>

12 months x 2 paychecks a month = 24 paychecks

52 weeks / paycheck every 2 weeks = 26 paychecks

No “bonus” paychecks with bi-monthly. Of course the bi doesn’t really mean the same thing here for the terms, one means every other time and the other means twice in the term.

Leigh
Leigh

That’s not quite correct.

Bimonthly = every other month (so 12/2=6 paychecks)
Semimonthly = twice a month (so 12*2=24 paychecks)

Becka
Becka

The definition is context dependent. “Bimonthly” can mean both.

El Nerdo
El Nerdo

LOL @ the absurdities of the English language.

Meanwhile, the word “fortnightly” gathers dust in a corner.

Thedebtfreebaby
Thedebtfreebaby

I have always liked the bi-weekly, although I only experienced monthly pay for about 3 months. The key is proper budgeting. Breaking down the bills into what is due during the next 2 week period.

Catherine
Catherine

I’ve been bi-weekly for two years, and I never understood this thinking. I value every dollar of my annual salary and budget it all. I expect to receive it, none of it is bonus. If I lost two paychecks a year, I wouldn’t meet my savings goals.

I know that on paper it can look like extra money, but I don’t think it would serve me well to think about it as such. It’s like thinking of your tax refund as extra money. It’s not, it’s the money that you earned and are entitled to.

Jen
Jen

I think the point is that it’s just another way to think of your money differently and by doing so, carve out some extra. A different way of “paying yourself first.”

That is, she knows her salary, but by living on an amount that is a couple of paychecks less than her salary, she frees up 1/13th of her salary for savings.

It’s really not at all like a tax refund — she’s not giving up some of her money for up to a year. She puts it to use when she gets it.

Xenocles
Xenocles

In one sense, it’s not good to fool yourself (as you have suggested). On the other hand, if you normally get two checks a month, why not budget regularly to those two checks and treat the odd extra one like free money? Done properly, it can serve as a valuable means of enforcing spending discipline. Is it optimal? Probably not, but the best solution on paper is worthless if it doesn’t make it to practice.

Meaghan
Meaghan

My biweekly paycheques are worked into our budget – our mortgage payments are in tandem with my paycheques so we make those “extra” payments automatically. That said, as the author points out, the rest of our budget – our expenses, other bills, student loan payments, and savings – is based on our income for a regular 2-paycheque month. So what’s left after our extra mortgage payments is, while accounted for every year, a bit like “extra” money. Over the years we’ve done most of what’s suggested here – usually we put it against our loans, but once in a while… Read more »

Mike Collins
Mike Collins

I used to get paid semi-monthly until I switched jobs and now I’m paid biweekly. Semi-monthly was better for me because I knew my direct deposit would always hit on the 1st and 15th each month while biweekly payments vary each month. It’s not the biggest deal, but a few days can make a big difference when you have automatic payments set up.

Andrew
Andrew

And in tomorrow’s lesson, class, we learn our colors! After snack time, of course.

Ely
Ely

No need to be rude. If what you read here doesn’t interest you, please just go away.

sarah
sarah

My office recently switched from biweekly pay to bimonthly. You would not believe the uproar with people saying they won’t possibly be able to budget when they only get paid every 15-16 days instead of every 14 (even though the paychecks will be more). It made me sad about the math and logic abilities of the general population.

Sara
Sara

Yeah, that is sad.

My first thought on reading the title of this post was, “Well, I’m paid semi-monthly and that’s pretty close to bi-weekly. What’s the bonus?” Haha, after readling, obviously that “bonus” is not present for semi-monthly. Darn. On the other hand, semi-monthly is a bonus over monthly since you get paid for your time sooner after you’ve earned the money, compound interest, potential for paying the mortgage in two parts per month, etc.

sarah
sarah

The “bonus” of getting a 3rd paycheck two months out of the year (or 4 months, which was the case for years when my husband and I got paid on alternating Fridays) is a lot like paying more tax than you need to and getting a big refund. It’s an “easy” way to save. We could always count on having an extra $1000+ pop up 4x per year.

Jeremiah Brown
Jeremiah Brown

Great post, I use to get paid every week (which is awesome!) and I wasn’t use to it because I had always been paid bi-weekly in the past. You think you get an extra 2 checks every year with switching to bi-weekly, do the math for weekly pay. It was very nice and some months I would get 2 extra checks in a month (as opposed to 4 checks, I would get 6 checks) only when the dates would play to my favor, many times I would get 5 checks in a month. My budget was set up for 4… Read more »

El
El

This is the sort of good basic how-to that will be useful to readers who are new to budgeting. I have this pay schedule and use it for additional mortgage payments, although I have had other uses in the past.

El
El

edited to add: I should say that although my employer pays me every two weeks, that’s not when I receive money. My pay goes to my ING account, and I send myself a deposit on the 2nd and the 20th to my old brick and mortar bank. I could pay myself weekly if I wanted. The reason is so that all funds are captured in my ING account, which grows since I don’t send myself the full paycheck. I treat myself as an employee. I heard about this from a guest post on GRS years ago; once you have your… Read more »

This Aggie Saves
This Aggie Saves

I haven’t decided yet what I’m going to do with the two extra paychecks. It’s between paying down my car loan and putting some money aside into an IRA. Decisions, decisions!

Tyler Karaszewski
Tyler Karaszewski

If you’re not living paycheck to paycheck, none of this matters. If you think of your checking account (or wherever you keep your cash on hand) as a reservoir, all you really care about is making sure it never gets too close to empty. It makes absolutely no difference whether you receive 26 little rainstorms, or 24 slightly bigger ones, or 12 even bigger ones to fill your reservoir if the total amount of rainfall is the same. It only makes a difference if your reservoir is so low as to risk running dry before the next rainfall.

Nicole
Nicole

It matters if you’re doing a lot of automated saving and you don’t like your reserves to get too low. That’s why I found the biweekly paychecks irritating. With monthly bills and biweekly paychecks the reserves would get lumpy and it was difficult to figure out what was actually going on each month as a spot-check to see if adjustments needed to be made.

I’d prefer smoother income.

Leigh
Leigh

On internships and while working part-time for minimum wage, I was paid biweekly and once, semi-monthly. Now, I’m paid monthly and I way prefer it. My budget is monthly, my savings are monthly. Having money come in less frequently means fewer times to go and move money around and it’s just way smoother. If you can stick to a budget well, monthly is awesome. The two main complaints I hear about monthly are: 1) people running out of money before the end of the month (i.e. they’re not budgeting very well) or 2) people wanting to get their money into… Read more »

Audrey
Audrey

Hm, as I’m working towards getting out of debt, I always consider myself living paycheck to paycheck, even if I’m really not. I have my minimal buffer in my accout, and then I transfer everything left over into savings (as well as automatically saving). I budget for every cent, even if 50% of my income is going towards debt repayment and savings. I guess it’s just one way to view your money, but it makes me be on top of my accounts, and I check them (and my budget) pretty much daily. And adding the little bit of excitment of… Read more »

Nicole
Nicole

@Audrey I think the question is, do you need to trick yourself that you’re making less money than you actually are or don’t you. If you do, then this is great– that extra check can be directly put towards some goal like debt repayment or an IRA. It keeps you from buying lattes or whatever you’d spend small sums on if your regular paychecks were larger. (Btw, you could trick yourself the same way by automatically taking money out of each paycheck for your debt repayment goals.) If you don’t, then having paychecks set up like this can actually keep… Read more »

MikeTheRed
MikeTheRed

I’ve bounced back and forth between bi-weekly and bi-monthly pay (but have never been paid monthly) over the last 10 years, and I have to say I like the bi-weekly model more. Yes, I’m getting a bit less per paycheck when I’m getting 26 vs 24 a year, but I’ve budgeted down to that smaller check. My household monthly budget is targeted to two paychecks per month with the first check going into rent, utilities, car payment etc. The second check goes to credit card (if we have anything on them to pay off), entertainment services (netflix etc.), then the… Read more »

PB @ Economically Humble
PB @ Economically Humble

Interesting idea…. since I use direct deposit and direct transfer to savings, it does not matter which check I receive… all immediately go to a purpose, be it savings, rent (and in the future, my home) food or student loan payments. I was really surprised how much I was able to save in one year on a student income.

SP
SP

A couple things. First, I found that while I’m paid bi-weekly, my expense are usually either monthly (rent, bills) or weekly (groceries/food, entertainment), etc. While the “3 paycheck” month provides a bonus, a “5 weekend month” (assuming I do grocery shopping on Saturdays, or whatever) drives up certain categories for a month.

It’s not a big deal unless your budget is that tight, but it is worth noting.

Second, when I look at my yearly budget, I count those paychecks in everything. Logistically, it is easiest to put most of the net cash into savings.

Amy
Amy

This phenomenon, while I’ve always known about it intellectually, has only recently become something we’re being proactive about. We set up our mortgage on biweekly payments to be deducted on the same day as my paycheck is deposited (every other Thursday). So when that extra paycheck appears, a third of it goes toward an extra mortgage payment that I don’t even have to think about. (Yay for automation!) Right now, the rest of it covers community college classes and textbooks for my husband, and whatever’s remaining just adds to our savings buffer.

Alex
Alex

I don’t quite understand what you mean by pure gravy. Is the phenomenon you are referring to the fact that since biweekly paychecks are smaller, you budget less so your third check on some months can just go to savings? This would be the exact same if you had monthly checks and budgeted less: you would have the same amount of extra “gravy” on top so it doesn’t look that special to me (although I’m not working in a full-time context so I don’t know if this is quite common for most people).

Lea
Lea

Agreed. I thought this article was going to be about how getting your paychecks more often means you can start earning interest on your money more quickly than if you’re just paid once a month. However often you’re getting paid, it doesn’t affect your salary. It’s not like you get two bonus paychecks every year, you just get your paychecks on a different schedule than I get mine. What’s the big deal?

krantcents
krantcents

Biweekly paychecks are definitely better than a monthly paycheck. Better cash flow. I remember years (about 40 years ago), when I was paid currently on a semi monthly basis. If I was paid on the 15th, I was paid through that date. If I left on that day, I was only owed vacation time. Great cash flow.

Dom
Dom

I get paid bi-weekly (as mentioned earlier, “fortnightly”…I actually had someone ask me that this week when I was having a problem signing up for a stock savings plan..but that’s another topic!) and I don’t see the ‘third’ paycheck as a bonus check. Since it occurs at the end of the month, it means that in the next month, the check isn’t until the middle & end again. It can make planning a bit more difficult..but I use Quicken for all that – budgeting every penny. The things that makes it even more confusing is that my employer only takes… Read more »

stellamarina
stellamarina

When I was working, we got paid every two weeks. The medical insurance was taken out of the first two pay checks, so the third pay check in the month that come by twice a year was an extra big paycheck….and very nice too.

Andy
Andy

My 2 bonus checks fortunately (or unfortunately?) come at the same time as my 6 month car insurance bill, rental insurance renewal, malpractice insurance renewal, and property taxes. So those usually get eaten right up.

K-ro
K-ro

Biweekly is a nightmare for us because my husband and I both get paid biweekly and on different schedules. So I have to have THREE budgets – one for two-paycheck months, a second for MY three-paycheck months, and the final budget for HIS three-paycheck months. I hate it. It also is NOT a financial benefit to employees, which is why employers choose it do it. For years my salary was paid bimonthly (twice a month). Then this year my company went to biweekly. I was familiar with biweekly because my husband has always been paid this way. But I had… Read more »

James
James

K-Ro, have you considered direct-depositing your and your husband’s paychecks into a savings account, and then doing a scheduled transfer from that account to your primary checking account on a weekly basis? You end up with a fixed amount of income each week coming into your checking account, which makes budgeting very easy. Yes, the savings account balance will rise and fall quite a bit over the year, but I think it would solve a lot of your headaches. I sat down with a spreadsheet and worked out how bi-weekly, semi-monthly, and monthly payments fall for 2012, with the first… Read more »

K-ro
K-ro

James, I appreciate your suggestion on how to manage with 2 biweekly paychecks. It is intriguing idea and I’m already itching to start a spreadsheet so I can analyze it. But I think you need to take a closer look at the monthly vs. biweekly payment schedule using a spreadsheet. The employee actually is paid a lesser hourly wage under biweekly than monthly or bimonthly (I have proof by comparing my paychecks from last year and this year!). Also although there may be a “float benefit” for the company in monthly vs. biweekly, there would be little float for the… Read more »

James
James

K-Ro, You bring up an interesting point about hourly rates that is worth exploring further. Fortunately, I saved the spreadsheet I was using yesterday to compute payments. When I created the spreadsheet, I assumed an annual salary of $60,000 since the numbers worked out nicely for the semi-monthly and monthly pay schedules. Note that I’m assuming salaried pay rather than an hourly rate. Checks from salaried pay should all be equal throughout the year, while checks from hourly pay will vary with the number of hours worked in a given pay period. So, if one is paid monthly, one receives… Read more »

Matthew Doyle
Matthew Doyle

My wife and I are extremely fortunate because we are paid biweekly but we are paid on opposite weeks and the checks are near the same amount. This makes creating a budget much easier and saving easier. The only problem is that we don’t pay attention to the bonus check because is part of our every week budget, which includes putting plenty into savings. Great post and some great suggestions.

Kate
Kate

As an employer I much prefer bi-weekly. It makes for a more even routine and I don’t have to worry about Monday holidays or payday falling on a Sunday.

However, my employees complained about about the bi-weekly I did change to semi-monthly out of pity for their bad budgeting skills.

K-ro’s point about PTO was not even a consideration.

Diane
Diane

This post gets my award for dumbest headline ever. There is no bonus and the emperor is not wearing any clothes! This is just like calling an overwithholding of taxes a refund. There are many ways to manage money and how often you get paid matters very little in the big scheme of things. Sorry to sound like such a crankypants, but this post is just silly. I agree with Andrew #16 so much that hitting “like” just wasn’t enough.

Audrey
Audrey

Where’s the dislike button? Yes, you could put the “savings” of budgeting for two checks a month away every month and it wouldn’t impact anything. But, I would get excited when I’d get a bonus paycheck. And the excitment of getting it was enough to feed the need I had for monitary excitement. It made me feel good to write a huge check to my student loans. It kept me going. It made me want to save as much as I could. For some people, we need the mind games and to trick ourselves to keep us going. Wish I… Read more »

Earin
Earin

Honestly, this is just a mind trick you’re describing. It’s not really more money you make.

If you get paid monthly, bi-weekly, weekly, whatever, at the end your annual revenu stays the same.
It’s the same like if you would be working on a 100% place or 75% or 50% – it’s all calculated on your annual income and a standard set of hours/days which are set by law (so no playing with leap-year etc.).

At least that’s the way it’s done where I live…

Jeremiah
Jeremiah

I see what you are saying, however, the post is more of an explanition of another way of thinking and managing your budget to make it easier for those who get paid on this schedule. What I get from the post is that the witer (as well as many other people who get paid in this fashion) sets their budget on 2 paychecks a month because with this pay schedule, if you devide your annual income into 12 months, it will not be accurate for most months. If you were to budget annually (deviding your annual income by 12 months)… Read more »

Earin
Earin

Yes you’re right and I understand that.
As I said, it’s a mind trick.

But the way the article is written might influence some people that just by getting paided every 2 weeks gives them more money – which is false.

Becky
Becky

Exactly. Because you aren’t actually getting (annual/24)*2 in a month. I was always short before I counted those two checks as “extra”

If you’re salary is $52,000/year and you budget $4,333 but only get $4,000, it gets complicated. It’s a personal choice but I found it much easier. I don’t blow it unless I would blow $333/mo if I got paid semi-monthly or monthly.

Becky
Becky

It’s only the same if you budget based on your annual salary. If you budget based on 2 checks/month, it’s completely different.

I plan out the whole year, but it’s much easier to deal with monthly amounts, so I make note of when those “extra” checks are coming and what I plan to do with those. Basically my working budget is (annual/26)*2 per month

Kaytee
Kaytee

I’ve been on the biweekly schedule for 6 years now. Those “bonus” checks always occur at the same time as a the arrival of a “surprise” bill. I think the last one repaired my exhaust system when the muffler fell off on payday. The timing used to annoy me, but now I’m happy that these expenses space themselves out so I can pay them without tapping my emergency fund.

Kris
Kris

I’ve been paid bi-weekly for several years now, and I find that that third paycheck of the month acts more like the first paycheck of next month, if that makes sense. It’s so late in the month that the next check doesn’t come until almost halfway through the next month. For the past few years, I’ve been simply paying half of each estimated monthly bill each paycheck – say a $95 cable/internet/phone bill gets paid $50 from each paycheck. I always round up slightly, and when I do receive a bill with a credit of more than my regular payment… Read more »

Tom
Tom

I practice this myself. I found it a challenge to budget monthly on two paychecks but I focused on conscious spending and defining my Needs and Wants. The extra paychecks are my vacation fund which is the first time I was able to consciously set aside money for vacations. Totally worth doing if you can meet your budget commitments on two paychecks, it really does feel like gifted money when that third paycheck arrives!

Chris
Chris

Good article, I agree. I also get paid bi-weekly, and love the 2 months of the year I get that third “bonus” check. We budget to live off 2 paychecks a month, so in the two months we get three paychecks, we utilize them to build up our savings, pay for things like car insurance, vacation and Christmas gifts.

Bella
Bella

While this post is in itself mundane – I’m surprised that none of the parents with kids in daycare have mentioned the ‘three paychecks in reverse’ that happened last month. I am finally getting my budget dialed in enough to take over some of the childcare expenses – previously all the childcare expenses were paid by my husband (we have sorta joint and sorta seperate finances – it’s confusing to everyone else – but easy for us) who gets paid bi-weekly. I get paid semimonthly – so in March – I had to cough up an extra week of daycare… Read more »

WWII Kid
WWII Kid

I’ve been paid bi-weekly for most of my adult working life and believe me, it is no bonus. That one week they hold back could be doing something for me rather than earning my employer interest (all 9 cents of it, I know, I know). And our bi-weekly schedule falls on the Friday after Thanksgiving and the Friday of Christmas week, so naturally they won’t give us our checks until the following Monday. This may work for people who budget two paychecks a month, but I hate it.

Thanks – I feel much better now!!!!

Trina
Trina

I’ve never understood why people get so excited by the “third paycheck” phenomena. You still have to live for those two weeks in between pays, right? Maybe it’s more exciting if you live paycheck to paycheck or you have a very strict budget. I guess I tend to take the long view, and think of money more in terms of quarters.

Frugal Chick in Indiana
Frugal Chick in Indiana

I was just thinking the same thing. If you live paycheck to paycheck, this may be exciting. Otherwise, it doesn’t really make much of a difference.

Becky
Becky

I don’t live paycheck-to-paycheck, but employ this method. At the end of the year, it’s the same, but it makes my life easier the rest of the year.

Not counting them as extra is like budgeting those two checks over six months. If you lose your job after three, you’ll be short and will have to move some money from wants to needs.

Becky
Becky

I have my first “extra” check coming up in May. I’m saving up for a down payment (hopefully a fourplex) so I’ll put it towards that. I do this with my husband’s (actual) bonuses too. He quite a few in a year (property management – so lease renewals, mystery shoppers, etc) but I don’t budget for them so that I am forced to work with a tighter budget.

whoisbiggles
whoisbiggles

If Bimonthly = twice a month how can biweekly = every second week?

It can’t, you are being paid fortnightly!

Brian
Brian

Thanks Corinne! I’m also on a bi-weekly pay schedule and love those months with a “bonus” paycheck. You’re correct that most of us budget our expenses on the two paycheck assumption so although this isn’t really “bonus” money it feels like it is with respect to our budget. I like some of your ideas on how to use the extra cash…I would generally lean towards paying off high interest credit card debt but otherwise making a contribution to your IRA or Roth IRA account is a great suggestion!

Lynn
Lynn

I get paid bi-weekly and use the third checks twice a year as a way to do targeted savings and pay extra on my mortgage. I take out of the third checks what I need for those two weeks for groceries, gas, spending money etc and the rest goes towards a savings goal or my mortgage. I know it is a way to fool myself to save more but it works for me.

Greg
Greg

Several years ago my company switched from paying salary employees semi-monthly (15th & last day of month) to bi-weekly, which matched how the hourly employees were paid. Personally, I preferred the semi-monthly schedule rather than being forced to budget to the two smaller bi-weekly checks each month. What was interesting, at least from the employer’s perspective though, is I was in the Accounting department and had to start booking accruals for the unpaid days each month. Before, the salary payroll was the same every month, but after the change it varied depending on the number of days each month, which… Read more »

James
James

The philosophy is nice, and it works for some things – but the idea that a check on the 30th is a “bonus” is really not true. Likely your mortgage or Rent is due the 1st, so guess where that money is coming from? Additionally, most people grocery shop every week, so that money is coming out too. I just find it to be incredibly annoying. For part of the year you’ll get paid around the beginning and middle of the month, then after that 3 paycheck month you’ll go to middle and end of the month paydays for 6… Read more »

Angel
Angel

I have been paid monthly, bi-monthly, bi-weekly and weekly and the only one I absolutely HATE is bi-weekly. It’s the worst! Those “bonus” checks actually throw your entire pay cycle out of whack until the next “bonus” check rolls around making your budget constantly in flux. What did I do with my March “bonus” check? I am holding it until the end of this month to pay my mortgage because the paycheck that used to come the week before my mortgage is due will now arrive the week AFTER my mortgage is due and will continue to do so until… Read more »

Jason
Jason

I get paid weekly (every Thursday). I’ve been budgeting for years for the first four Thursdays, and the random fifth Thursdays (March, May, August, November of this year) go completely to either savings or my Roth.

Tina
Tina

When you receive that bi weekly extra paycheck, it can throw off your existing time line. Most of the time, we pay the bills that are due before the 2nd paycheck comes because those bills can’t wait. With the extra we have, we split it up into categories. My most favorite thing about bi weekly is that you can split up your mortage, car, credit card payments, etc into bi weekly payments. It lowers the interest rates and you can save a substantial amount of money. Plus you can pay those bills off much sooner than your payoff date! Our… Read more »

Laura
Laura

I love my “bonus” paycheck. I typically save, pay off debt, and am extra generous to my little sisters.

Carl Lassegue
Carl Lassegue

I get paid on a monthly basis and I must admit I miss getting a check every two weeks.

john
john

i dont know how any of you can bare with bi weekly or monthly pay… its fucking torture… EPECIALLY when you first start a job… holy shit. my first job was weekly pay and i made 13/hr at 40hrs a week at an easy ass and super fun job and i was living the high life getting my money every week. did another fun job that got payed less but still weekly and it was still good. now im at a boring and harder job getting payed bi weekly and waiting for my first check and i cant friggin wait!!!!… Read more »

Elisabeth
Elisabeth

I found that treating these checks as a “bonus” caused us to spend them frivolously more often than not. My husband and I are both paid bi-weekly, so the total of the extra paychecks are a fairly significant amount, too much for me to comfortably “waste”. Therefore this year I started putting the entire amount in savings, dividing the annual total by 12, and taking that amount out of savings monthly to add to our regular budget. The smaller monthly increase allows us to budget and spend/save more effectively than the larger bi-annual increases.

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