Every Other Friday

OK, I just need to warn you from the beginning, this blog is going to be a little bit long, but I really don’t see any way around it. But hang in there, because if you are paid every other week, you are going to love me today. The lightbulb is going to come on and by the end of this blog you will understand how to manage your previously unmanageable finances.

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 June, but your pay cycle is for you to get paid on the 23rd of May and then the 6th of June. You would need to be aware that your mortgage payment was going to need to come out of the paycheck on the 23rd of May. If you waited until the 6th of June, you would already 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 May, the check that you receive on either the 2nd or the 9th 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 16th, 23rd, or 30th would then pay for your beginning of the month bills (any bill with a due date on or after the 1st of the month).

Now as you many notice, May has 5 weeks and that again brings up the issue of the “extra paycheck” that we discussed on Tuesday (under the title, “By the Hour”). On a two week pay cycle, your “extra paycheck” will either fall in February and August, or May and October, depending on which week your company has payday. If for January your paydays were on the 4th and the 18th, your “extra check” would fall in February and August. If your paydays in January were on the 11th and the 25th, your “extra check” will fall in May and October. So if you are on the first cycle (the 4th and the 18th of January), you will only receive two paychecks in May and May will be a normal month with your paycheck on the 9th going to the middle of the month bills, and your paycheck on the 23rd going to the beginning of June bills.

However, if you are on the second cycle (the 11th and 25th of January) then you will be receiving an “extra check” in May. In other words, your paycheck for the 2nd of May will go to pay your middle of the month bills, your paycheck on the 30th will go to pay your beginning of June bills, and your paycheck on the 16th is bonus (your “extra check”).

If you have already used your 2nd of the month check to pay your beginning of May 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 October, 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 now how do you find your budgetable income if you are paid every other week? This is the easy part. If you are on a salary, your bugetable income will be your “net” (after taxes and withholdings) paycheck amount. If you are paid hourly it will be your average –to-lowest net 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). So, for example if your net paycheck amount is $1600, you will have $1600 in budgetable income to plug into your budget for the beginning of the month and $1600 for the middle of the month.

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.