Most traditional employees get paid once every two weeks, or what most people refer to as bi-weekly. If you are one of these kinds of employees, the best budgeting strategy is to assume you get paid biweekly, even if you don't. That way, you can free up extra cash later to spend on things that you may not have been able to afford otherwise.
Many workers (especially those who work in sales, including real estate agents) receive a standard biweekly paycheck. However, some months, these employees wind up with three paychecks. That's because they receive a bonus check based on commission, or because there are three pay periods ending that month. If you fall into this category, you potentially receive a bonus check either on a regular basis or sporadically.
Either way, the bonus check constitutes a huge windfall, and you need to take advantage of that. You can use the extra cash to pay off debt, save for retirement, save for that condo you want or beef up your emergency fund. You can also save for major purchases such as a new dishwasher, your next car or a family vacation to Europe.
Whether or not you are paid biweekly, you can budget your money as if you do. This will allow you to more closely manage your cash and stash more into savings over time.
Below are some things you should know that can help you reach your desired savings goal if your budget like a biweekly employee.
Create a Budget That Assumes You Get Paid Biweekly
Your first step in living this way is to make a budget framework that is based on a biweekly payment schedule, even if this isn't how you're actually paid. This makes sense because you need to take care of essential bills first. These budgeting worksheets will help you figure out how to budget biweekly, whether you get a paycheck once, twice, three or four times a month.
Make sure you include every single purchase and expense within your ongoing budget. Be sure to include your regular savings amount, which traditionally is 20 percent of your monthly income. View that savings goal as though it were a necessary bill like your utility bill, rent payment or mortgage payment.
Assuming that you get two paychecks a month (and many months you really will get only two paychecks), create a budget that covers the following essentials, in addition to any others you might identify:
- Your rent/mortgage
- Health insurance, life insurance and car insurance
- Money set aside for car repairs and home repairs
- Money set aside for retirement savings
- Savings for your kids' college education
- Savings for holidays
- Savings for medical bills and copayments
- Savings for replacing your laptop and other digital devices
- Emergency fund money
You get the idea. Use the budgeting worksheets to go through all of your expenses so you don't forget anything. Try to include irregular expenses (e.g., your annual gym membership) as well as your normal ones.
Don't leave off the occasional "splurges" that you're used to handling. For instance, if you go to the movies every Saturday night, make sure you include that in the budget if you plan to continue doing that. If you know you take a beach vacation once a year, divide the average amount you spend by 12 and include that amount in your monthly budget as well so you aren't surprised by anything down the road.
Put Your Savings Away
Once you know what regular expenses and savings you need to include in your budget, you won't feel like you "need" that extra third paycheck. Because there aren’t any bills you need to catch up on, you can put the entire bonus check toward another goal. Put it into your retirement account, build your emergency fund or put it into a sub-savings account that’s labeled for a particular goal like replacing your appliances.
This is one of the best ways people who get paid biweekly can amp up additional savings and still stay within a budget. If you follow the biweekly way of budgeting, you won't feel deprived and you'll soon be able to afford extra, nonessential things that you've always wanted to save to purchase.