This blog is so revolutionary if you are paid every two weeks, that I know you will want to read it again. I have laid out the new dates for 2009 for your “extra check” which I know will be helpful. If you have never read this information, I guarantee you that this plan for regulating your paycheck in order to pay your bills on time is going to change your life!
Being paid every other week is a very common practice, but it can be very difficult to set a budget because your bills come on a certain day… your paychecks do not. The date that you are paid floats all over the month and it can be very challenging to determine exactly what bills are being paid by what check.
The key to succeeding on a budget if you are paid every other week is that you constantly need to be thinking forward with your paycheck. There will rarely be a paycheck that is for right now. Instead you will be paid ahead of your need. For example, let’s say your mortgage payment is due on the 1st of the April, but your pay cycle is for you to get paid on Friday the 27th of March and then the 10th of April. You would need to be aware that your mortgage payment was going to need to come out of the paycheck on the 27th of March. If you waited until the 10th of April, you might be late on your payment.
So here is the rule for succeeding on a set budget with a floating pay date: Any paycheck received after the 15th of the month is going to go towards paying your first of the month bills. Any paycheck received after the 1st of the month is going to go toward paying your middle of the month bills. This will eliminate so much stress and guarantee that you will never be waiting on a paycheck in order to pay an overdue bill. If you can get your budget onto this system, you will never have to stress about if the money is going to be there. You will never again be in a panic because you thought you had a lot of money in the bank and so you spent it and now you don’t get paid for another week and your mortgage is due.
So for March, the check that you receive on either the 6th of the month or the 13th of the month would pay for the middle of the month bills (any bill with a due date on or after the 15th of the month), and the check that you receive on either the 20th or the 27th would then pay for your beginning of the month bills for April (any bill with a due date on or after the 1st of the month).
Now as you may have noticed, January had five weeks and that again brings up the issue of the “extra paycheck” that we discussed yesterday (under the title, “By the Hour”). On a two week pay cycle, your “extra paycheck” will either fall in January and July, or May and October of 2009, depending on which week your company has payday. If for January your paydays were on the 9th and the 23rd, your “extra check” would fall in May and October. If your paydays in January were on the 2nd, the 16th , and the 30th, your “extra check” will fall in January and July. So if you are on the first cycle (the 9th and the 23rd of January), you would only have received two paychecks in January and your next month with three paychecks would be May and then October. If you received three paychecks in January, then your next month with three would be July.
In other words, your paycheck for the 3rd of July will go to pay your middle of the month bills, your paycheck on the 31st will go to pay your beginning of August bills, and your paycheck on the 17th is bonus (your “extra check”).
If in the past you have used your 3rd of July (on months with three checks) to pay your beginning of July bills, this “extra check” will be a lot more fuzzy for you. You will feel like you have more money, but will not be able to pull the entire check out because without a budget in place you have probably already used it. A budget is going to be such a blessing to you, because instead of just having a “good month” twice a year, you will be able to be purposeful with that money and actually put it toward your dreams, like taking a vacation, or a new computer, or a fence around your backyard, or paying off debt. Without a budget in place, you will live up to your income… your entire income, no matter what it is. So even if you don’t get to do it this month, if you will begin to set your finances to the plan that I have laid out today, you will bring stability to your finances and come May or July, you will be able to actually save and be purposeful with your “extra check”.
Again, if your budget has little flexibility you may need this check to live on the rest of the year to supplement your income. If this is the case for you, the way to do that is to take the “extra check” and put it into a savings account. Divide that check by 6 and then draw out that amount each month to supplement your income.
So if you are on a two week pay cycle, your budgetable income that you will plug into your budget will be your net paycheck amount if you are on salary. If you are paid hourly it will be your average –to-lowest paycheck amount (please see details on how to reach this amount in “By the Hour”.. all of the info is the same except that you will divide by 26 instead of 52 to find your average paycheck).
I hope this has all been clear to you and that you can finally begin to see a way for you to succeed on a budget. I know that many of you may already have a plan in place, or you may have ideas on how you can make this plan work better for you, and that is wonderful. This is not the “only” plan, but it is “a” plan and it will work, and if you will use it, it will help you to finally understand where your money is coming from, and to finally have purpose in where it is going.