Budget Setting When Paid Every 2 Weeks

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Coltrane75
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Joined: Wed Feb 06, 2019 2:32 pm

Budget Setting When Paid Every 2 Weeks

Post by Coltrane75 »

Hi all,
I have a very simple question.

For those of you that get paid every two weeks (10 months with 2 paychecks & 2 months with 3 paychecks):

Do you set your monthly budget based on a monthly average of what you get paid or do you set it against the actual # of paychecks you get in each month?

Thanks!
Rainmaker41
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Re: Budget Setting When Paid Every 2 Weeks

Post by Rainmaker41 »

We use an annual budget, with categories and expected spending for the whole year. Periodically our actual spending is compared to the budget. We have found that this is more useful than monthly budgeting, because many expenses are not really regular monthly items; travel being a notable example.

In terms of cash-flow (payment of rent, bills, paying off credit card balances, making manual investment contributions of surplus cash), we handle everything monthly at the end/start of each calendar month. The checking account only matters at the end of the month with our approach. We are paid semimonthly, not biweekly, but arguably the principle is the same.

To your point about 3rd paycheck months, it is common to act as though you get paid twice a month, with the occasional 3rd paycheck deemed as surplus. You might put any surplus cash at the end of each month toward investments, debt payments, etc. A 3rd paycheck month just means you happen to have more surplus that month.
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zag00
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Re: Budget Setting When Paid Every 2 Weeks

Post by zag00 »

1st paycheck gets used to clear CC statement for the month (all recurring bills and autopayments applied to CC) - excess dispersed to savings/other buckets
2nd paycheck gets used to pay mortgage - excess again dispersed to savings/other buckets
3rd paycheck - when applicable - savings/other buckets, splurge on date night or other activity.
Mike Scott
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Re: Budget Setting When Paid Every 2 Weeks

Post by Mike Scott »

All income is "monthly" if you let it sit until the end of the month. Any extra is moved to savings.
sailaway
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Re: Budget Setting When Paid Every 2 Weeks

Post by sailaway »

zag00 wrote: Wed Sep 21, 2022 2:45 pm 1st paycheck gets used to clear CC statement for the month (all recurring bills and autopayments applied to CC) - excess dispersed to savings/other buckets
2nd paycheck gets used to pay mortgage - excess again dispersed to savings/other buckets
3rd paycheck - when applicable - savings/other buckets, splurge on date night or other activity.
When things were tight, I did my very best to live as if every month only had two paychecks, then every six months I had that extra check to fill in gaps or build savings, just like any other windfall.

We have only in the last month gone back to actually living off biweekly paychecks without ESPP or RSUs or some other boost every few months. We are trying to go back to the principle of living as if we didn't expect that third check, but things have not gone as planned and I know full well we get that extra check in December.
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Beachey
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Re: Budget Setting When Paid Every 2 Weeks

Post by Beachey »

Rainmaker41 wrote: Wed Sep 21, 2022 2:39 pm To your point about 3rd paycheck months, it is common to act as though you get paid twice a month, with the occasional 3rd paycheck deemed as surplus. You might put any surplus cash at the end of each month toward investments, debt payments, etc. A 3rd paycheck month just means you happen to have more surplus that month.
How I handle it, ultimately that third paycheck never feels like a third paycheck but helps to catch up my checkbook balance (i.e. comfortable buffer). I pay myself first (savings) and keep my checkbook balance to a minimum.
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Tim_in_GA
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Re: Budget Setting When Paid Every 2 Weeks

Post by Tim_in_GA »

Coltrane75 wrote: Wed Sep 21, 2022 2:27 pm Do you set your monthly budget based on a monthly average of what you get paid or do you set it against the actual # of paychecks you get in each month?
Monthly average. I total up my base pay for the year and divide by 12.
DoubleComma
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Re: Budget Setting When Paid Every 2 Weeks

Post by DoubleComma »

Budget is established on 2 checks per month.

Months with a 3rd check are put into savings entirely.

We also use YNAB and have been a month ahead for several years. Certainly means I'm holding more cash than necessary in my spending accounts, however its nice to start a month knowing exactly how much money is available and its all there on day 1.
cshell2
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Re: Budget Setting When Paid Every 2 Weeks

Post by cshell2 »

I use the old YNAB and budget off of last month's income, so whatever is in my budget the first of the month whether it be from 1 paycheck or 10 the month before is what I have to work with.

I start with an annual budget, so "fat" months go towards beefing up categories that might have been shorted other months.
nedjames
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Re: Budget Setting When Paid Every 2 Weeks

Post by nedjames »

I like things simple. When I was in this situation, I:

1) Had my paychecks direct deposited to my credit union savings account
2) Calculated the average monthly amount (paycheck amount X26 / 12)
3) Auto transferred the above amount from savings to checking on the 1st of each month

You need to beef up the savings account a bit at first, but that works out if you keep 3 months or so emergency savings in the savings account.

Good luck!
Onlineid3089
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Re: Budget Setting When Paid Every 2 Weeks

Post by Onlineid3089 »

I don't budget in my personal life, I do enough of that at work.

We have automated transactions for our savings totaling about 40% of gross income. Everything else is available for use, but we usually put a little more into investments a time or two a year since we don't really have expensive tastes.
Marseille07
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Re: Budget Setting When Paid Every 2 Weeks

Post by Marseille07 »

Coltrane75 wrote: Wed Sep 21, 2022 2:27 pm Hi all,
I have a very simple question.

For those of you that get paid every two weeks (10 months with 2 paychecks & 2 months with 3 paychecks):

Do you set your monthly budget based on a monthly average of what you get paid or do you set it against the actual # of paychecks you get in each month?

Thanks!
I just evaluate at the EOM. The frequency of paychecks does not matter to me.

I also don't budget unless I somehow find myself spending too much.
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LawEgr1
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Re: Budget Setting When Paid Every 2 Weeks

Post by LawEgr1 »

I too struggled with this until I saw someone post a simply reply. Someone already mentioned something similar.

You get 26 paychecks per year.
Every month you get 2 paychecks - use that as your budget, since it's constant
The other 2, utilize for other fixed items and just remove from your normal monthly budget.

For me, the other two paychecks go to property taxes, so I don't budget for property taxes at all. I just shunt the additional paycheck over as a placeholder for when it's time to pay.
horste
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Re: Budget Setting When Paid Every 2 Weeks

Post by horste »

As others have said, I found budgeting all 12 months as a 2-paycheck month helped the consistency of meeting my budget. I would not be "borrowing" from a future check that is not yet here.

Then when a 3 paycheck month happens, I treat it as a surplus. I'll use it for savings, filling an emergency account, plan for insurance premiums, or having an experience I've been eyeing but waiting for extra cushion to make happen.
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Coltrane75
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Re: Budget Setting When Paid Every 2 Weeks

Post by Coltrane75 »

nedjames wrote: Wed Sep 21, 2022 3:59 pm I like things simple. When I was in this situation, I:

1) Had my paychecks direct deposited to my credit union savings account
2) Calculated the average monthly amount (paycheck amount X26 / 12)
3) Auto transferred the above amount from savings to checking on the 1st of each month

You need to beef up the savings account a bit at first, but that works out if you keep 3 months or so emergency savings in the savings account.

Good luck!
I like this approach alot. Smooths things out as if you're actually getting paid the average (26/12).

TBF, one of the reasons I find the 2 paycheck monthly budgeting annoying is that I'm trying to figure out large expense capacity; like a mortgage. If I budget a mortgage based on a 2 paycheck month, the amount I can afford is about 7.6% lower than a simply monthly average. In this VHCOL, I need all I can get.
stan1
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Re: Budget Setting When Paid Every 2 Weeks

Post by stan1 »

For many years we used the 3rd pay check that came twice per year to pay down principal on our mortgage.
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cockersx3
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Re: Budget Setting When Paid Every 2 Weeks

Post by cockersx3 »

When I used to be paid every 2 weeks, I set up my monthly budget using only two paychecks per month - one paycheck covering bills/spending due the first half of the month, and the other two paychecks covering bills for the second half of the month.

When done in this way, I always got one of the two "extra paychecks" in the summer, and one in the late fall. Our summer "extra paycheck" went towards summer vacation costs, and the winter "extra paycheck" went towards Christmas gifts. Always seemed to work out well.
mrb09
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Re: Budget Setting When Paid Every 2 Weeks

Post by mrb09 »

cshell2 wrote: Wed Sep 21, 2022 3:39 pm I use the old YNAB and budget off of last month's income, so whatever is in my budget the first of the month whether it be from 1 paycheck or 10 the month before is what I have to work with.

I start with an annual budget, so "fat" months go towards beefing up categories that might have been shorted other months.
That's what I do as well. My twice a month paycheck goes to a "next month's budget" category, and the start of the next month I put it into that month's monthly expense categories. Since I use YNAB, I have monthly savings categories for annual/bi-annual expenses like property taxes that I just consider monthly expenses. Anything left over is savings (my 401k and HSA are auto-deducted).

The trick for me was getting a month ahead, then I can do my monthly expenses and my budget refill separately.
CaptainT
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Re: Budget Setting When Paid Every 2 Weeks

Post by CaptainT »

I use YNAB for my spending. I budget as income comes in but typically run 4 or 5 months ahead in my budget. I save and invest off the top. I highly recommend getting a month or more ahead on your budget so you don't have to stress if it is a 2 or 3 paycheck month
dvvader
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Re: Budget Setting When Paid Every 2 Weeks

Post by dvvader »

Another plug for YNAB. My budget is a month ahead, 6+ month emergency fund in cash/iBonds, money set aside for irregular lumpy expenses, life is good!
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khangaroo
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Re: Budget Setting When Paid Every 2 Weeks

Post by khangaroo »

I have a Google Spreadsheet that has the entire year forecasted and then I just adjust the monthly payments that are varying e.g., credit cards to what the statement balances are. The initial set-up was a little time consuming but not that bad when you work in spreadsheets all day anyways. Now it's literally just copy and paste for the new year and adjust some cells here and there and it's ready to go! Probably 5-15 minutes tops.

It was really simple when my wife and I got paid on the same week but now it's on opposite weeks. Not that big of a deal but just have to be more careful to not overdraw our account - I like to keep as small of a balance in my checking as I can.

But to answer your question, the triple paycheck months don't really matter anymore because we are on a "one week budget" pretty much.
BogleMelon
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Re: Budget Setting When Paid Every 2 Weeks

Post by BogleMelon »

Another vote for YNAB
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old medic
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Re: Budget Setting When Paid Every 2 Weeks

Post by old medic »

When I was getting the extra checks twice a year... and nice ones without the extra withholdings.... Half went to savings, rest was play or pay down something.
Now we get paid twice a month, my pension the 25th, DW last day of the month... Pay the have to bills, split the remaining, half to savings, rest buys food, fun and play... Some times we run short on play cash, and might pull some from savings... but thats what its there for...
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