Is it better to stay at 19 or 24 paychecks per year?

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Coolstavi
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Is it better to stay at 19 or 24 paychecks per year?

Postby Coolstavi » Thu May 18, 2017 5:01 pm

I currently take my salary in 19 paychecks instead of the 24. Apparently no one at my school does this. But from a DCA standpoint, would it be better to spread out my 403b and 457 contributions over the entire year to catch any dips or does it not really matter in the long run?

knowledge
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby knowledge » Thu May 18, 2017 5:06 pm

I don't have an answer for you (my gut says it doesn't matter) just commenting because I'm curious - why 19? I've never heard of 19 paychecks a year.

fabdog
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby fabdog » Thu May 18, 2017 5:10 pm

guessing an educator... option to get paid twice a month year round... or just during the school year

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marbleous
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby marbleous » Thu May 18, 2017 5:14 pm

The OP is a teacher and doesn't work in the summer. (But likely does and doesn't get paid for it.)

Most school employees get their salary spread out over the whole year for cash flow reasons.

I think it is more prudent to get your money when you earn it, versus lending it back to your employer for two months.

jrbdmb
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby jrbdmb » Thu May 18, 2017 5:54 pm

marbleous wrote:The OP is a teacher and doesn't work in the summer. (But likely does and doesn't get paid for it.)

Most school employees get their salary spread out over the whole year for cash flow reasons.

I think it is more prudent to get your money when you earn it, versus lending it back to your employer for two months.


I think that depends on the individual. Not saying anything about the OP, but I suspect that a surprising percentage of households would have difficulty managing their cash flow in a situation where it stops for 2 to 3 months of the year, even if the sum total is the same.

A scan of some recent news articles estimate that 50% to 75% of American households live paycheck to paycheck.
Last edited by jrbdmb on Thu May 18, 2017 5:56 pm, edited 1 time in total.

Goal33
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby Goal33 » Thu May 18, 2017 5:55 pm

you're giving them a 0% loan if you do 24 paychecks.
A man with one watch always knows what time it is; a man with two watches is never sure.

EdLaFave
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby EdLaFave » Thu May 18, 2017 6:05 pm

It is a mathematical fact that you are better off getting your money as soon as humanly possible.

It is up to you to determine if you have psychological/behavioral traits that would make this less optimal...like spending all of your money simply because it is there :twisted:

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marbleous
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby marbleous » Thu May 18, 2017 6:49 pm

It seems the OP knows how to budget and save enough money for a summer.

The other question asked was pertaining to investments. As far as I know, most studies show lump sums have better returns than periodic investments. Also, if you buy in to the "sell in May and walk away" hypothesis, this pay schedule fits perfectly.

letsgobobby
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby letsgobobby » Thu May 18, 2017 6:58 pm

I prefer 12 paychecks but my employer doesn't offer it.

I have no idea the significance of 19.

avalpert
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby avalpert » Thu May 18, 2017 7:22 pm

You are better off getting the money in hand sooner rather than later - no need to give them a free loan.

Also no need to DCA at all - better to get the money working for you as soon as you can too.

Coolstavi
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby Coolstavi » Thu May 18, 2017 7:43 pm

Ok, was going to keep it 19 paychecks but wanted to see if there was anything I was missing. I have put my whole paycheck evenly into my 403b and 457 for the year so far. I'll adjust when I start to need a bit more cash.

OR I will get one of those 0% APR credit cards and put all my money on there!

Helo80
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby Helo80 » Thu May 18, 2017 7:46 pm

I think the only reason people go 24 paychecks is when they're fiscally irresponsible. In that case, said people are actually doing the fiscally responsible thing.

I would imagine most of us here could be written their entire paycheck on Jan 1 and do okay.... not because everybody is/are millionaires, but purely because most are financially responsible and have financial control.

Coolstavi
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby Coolstavi » Thu May 18, 2017 8:05 pm

Helo80 wrote:I think the only reason people go 24 paychecks is when they're fiscally irresponsible. In that case, said people are actually doing the fiscally responsible thing.

I would imagine most of us here could be written their entire paycheck on Jan 1 and do okay.... not because everybody is/are millionaires, but purely because most are financially responsible and have financial control.


Agreed. When I hear people say 'Today is payday!"...I'm just like "oh.....that's right...."

Lake Living
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby Lake Living » Thu May 18, 2017 8:43 pm

Goal33 wrote:you're giving them a 0% loan if you do 24 paychecks.


I'm making a couple assumptions here, but with 19 paychecks, by August 15 you will have received about 52% of your yearly pay. If you were paid 24 times a year, by August 15 you will have received 62.5% of your yearly pay.

Taking 19 paychecks is giving the interest free loan.

Rainmaker41
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby Rainmaker41 » Thu May 18, 2017 8:52 pm

Lake Living wrote:
Goal33 wrote:you're giving them a 0% loan if you do 24 paychecks.


I'm making a couple assumptions here, but with 19 paychecks, by August 15 you will have received about 52% of your yearly pay. If you were paid 24 times a year, by August 15 you will have received 62.5% of your yearly pay.

Taking 19 paychecks is giving the interest free loan.


If the school uses an academic fiscal year, say from August 16th 2016 to August 15th 2017, then under the 24 paychecks option, (5/24)*(academic year salary) is deferred to the summer, rather than paid by the end of the school year on May 31st 2017.

Being paid all income for contract year August 16th 2016 - May 31st 2017 by May 31st 2017 is preferable to having some of it deferred through August 15th 2017, provided appropriate cash management capacities are present.
My username is not about money, but is my old online gaming username. I can't say that I make a great deal of money; I just hate spending it. Marrying the most loving woman in the world October 2017.

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jimb_fromATL
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby jimb_fromATL » Thu May 18, 2017 9:07 pm

Coolstavi wrote:I currently take my salary in 19 paychecks instead of the 24. Apparently no one at my school does this. But from a DCA standpoint, would it be better to spread out my 403b and 457 contributions over the entire year to catch any dips or does it not really matter in the long run?

I'm with others who say to invest as much as you can as soon as you can each year.

This is similar to the question of whether to invest a lump sum in the market when you have it available, or to spread it out with dollar-cost-averaging with equal sums over a period of months. There have been a number of studies that show that investing the lump sum as soon as you can will give a better return than spreading it out over a year about 2/3 of the time.

I modified a spreadsheet algorithm I already had for comparing DCA to lump sum investing to use the same total in either 9 months or 12 months. From some samples it appears that putting as much as possible into the market as soon as possible still does better than spreading it out ... at least 2/3 of the time.

A few samples:

    For DIA [DIA Dow Jones Industrial Average] for 19. years from 02/1998 through 02/2017 for 217 rolling 12 month periods, lump sum contributions did better than DCA about 70.5% of the time. Making the entire year's contributions in the first 9 months instead of 12 did better 74.2% of the time.

    For VTSMX [Vanguard Total Stock Mkt Idx Inv] for 24.77 years from 04/1992 through 02/2017 for 287 rolling 12 month periods, lump sum contributions did better than DCA about 76.7% of the time. Making the entire year's contributions in the first 9 months instead of 12 did better 76.3% of the time.

    For VFINX [VG S&P 500 Index] for 36.91 years from 01/1980 through 12/2016 for 432 rolling 12 month periods, lump sum contributions did better than DCA about 76.4% of the time. Making the entire year's contributions in the first 9 months instead of 12 did better 77.5% of the time.

    For VGSTX [VG Star fund] for 20.68 years from 04/1996 through 01/2017 for 238 rolling 12 month periods, lump sum contributions did better than DCA about 64.7% of the time. Making the entire year's contributions in the first 9 months instead of 12 did better 66.4% of the time.

    For VBMFX [VG Total Bond] for 29.97 years from 12/1986 through 12/2016 for 349 rolling 12 month periods, lump sum contributions did better than DCA about 89.1% of the time. Making the entire year's contributions in the first 9 months instead of 12 did better 90.8% of the time.

    For FFNOX [Fidelity 4in1] for 17.76 years from 06/1999 through 04/2017 for 203 rolling 12 month periods, lump sum contributions did better than DCA about 69.% of the time. Making the entire year's contributions in the first 9 months instead of 12 did better 69.5% of the time.

jimb

teen persuasion
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby teen persuasion » Thu May 18, 2017 10:09 pm

Rainmaker41 wrote:
Lake Living wrote:
Goal33 wrote:you're giving them a 0% loan if you do 24 paychecks.


I'm making a couple assumptions here, but with 19 paychecks, by August 15 you will have received about 52% of your yearly pay. If you were paid 24 times a year, by August 15 you will have received 62.5% of your yearly pay.

Taking 19 paychecks is giving the interest free loan.


If the school uses an academic fiscal year, say from August 16th 2016 to August 15th 2017, then under the 24 paychecks option, (5/24)*(academic year salary) is deferred to the summer, rather than paid by the end of the school year on May 31st 2017.

Being paid all income for contract year August 16th 2016 - May 31st 2017 by May 31st 2017 is preferable to having some of it deferred through August 15th 2017, provided appropriate cash management capacities are present.


When DH was a teacher, he was paid 21 times a year (biweekly, with generally 10 weeks off in the summer). The fiscal year began July 1.

We had trouble one year when he had maxed his 401k (no pension system), but the CFO said he had overcontributed. After some research I discovered the issue was the July 1 fiscal year and an increase in the legal 401k max - we were essentially straddling tax years, so the old limit applied to the fiscal year contributions carrying over into the new calendar year. Also, the spring vs fall portions of the year aren't even (Jan thru June was 13 pay periods, vs Sept thru Dec at 8), so increasing contributions in one portion makes things uneven when viewed from a fiscal year POV vs fed calendar year. Tricky stuff.

Of course, since the first paycheck only came after 2 weeks work plus 1 week delay, it always felt wrong when there was no corresponding last check 1 week after his last day in June. Somehow the last paycheck landed roughly during the last week of school, or earlier.

With the July 1 start to the fiscal year, and no summer break pay, I was never clear when health insurance benefits began/ended for new/leaving teachers.

spectec
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby spectec » Fri May 19, 2017 6:57 am

During my wife's career as a public school teacher and later as an administrator, we decided early on to take her salary over 10 months rather than 12. We would calculate what the net pay would be over 12 months, and then set up an automatic deposit to a savings account or MMA for the difference. This meant that she was receiving the same amount each paycheck that she would have been receiving on the 12-month plan.

By the end of the 10 months, we had the equivalent of 2 months of net pay in the savings account to draw upon during the summer. Over time, as our household income increased, it became a bit of a game to make it through the summer without drawing down the full amount which had been moved into the savings account over the past 10 months. Over the years we eventually got to the point that we would hardly touch it, and would have a nice amount of money to move into a longer-term investment before the next year began.

So my advice it to take the salary over the shorter term, but buffer yourself by diverting the excess into a savings or MMA account each pay period via an automatic withdrawal. You maintain control over the funds without losing any flexibility.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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midareff
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Re: Is it better to stay at 19 or 24 paychecks per year?

Postby midareff » Fri May 19, 2017 7:35 am

Goal33 wrote:you're giving them a 0% loan if you do 24 paychecks.


Exactly. I'd take the 19 and escrow the difference so as to be able to auto-pay yourself the 24 times and make a few bucks on the interest.. see Spectec post above.


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