How to Budget on 26 pays: Bi-weekly

Bi-weekly pay periods are great. You have the luxury of knowing that every other Friday (or whichever day is pay day for you) you will be getting paid. That is great for keeping your pockets full, but it presents some real headaches when it comes to setting your budget.

Imagine this, you get paid on say the 13th and your mortgage payment is due on the 15th. Your account is full, you write the check, no problem.

What about next month?

Next month your mortgage is still due on the 15th, but this month you are not getting paid until the 17th. Now you would have another paycheck in between these two, so if you planned ahead and saved up that check you could then afford to pay your mortgage this month as well.

Of course, by doing this, you will have used two paycheck in a row to pay your mortgage. I don’t know about you, but I don’t get paid enough to have much left over for say -FOOD- if I have to pay my mortgage out of two checks in a row. And we are only talking about one bill here, I don’t imagine many of us have only one bill to worry about.

You can create an effective budget paying your bills this way, but I don’t think it is the most efficient. Personally I think it takes too much effort and time to handle your finances on a month by month basis. My whole philosophy is to set up your finances ONCE, automate them ONCE, an then relax.

So how do you do that on bi-weekly pays?

If you have read my other budgeting articles you will recall that I recommend determining the total amount of your bills each for each month, dividing that total in half, and then setting aside that amount from each paycheck and only living on the remainder.

The trouble with this,  is if you set aside half of what you need out of both checks each month, what happens on those months when a major bill is due before you get the second pay check?

Here is where you need some planning. One of the up sides to bi-weekly pay periods is that you get paid 26 times a year. Mostly, this means two pay checks a month. But twice a year, you will get paid three times in that month.

I suggest that the first time, or next time, one of these three pay months comes around set aside an amount equal to one half of your monthly bills. By doing this you will ensure that you always have that extra sitting your your account. Now when your mortgage is due before you get your second pay check that month you will already have an extra amount sitting in your checking. You can pay the bill and then when you do get paid, it will replenish your account.

It does take some discipline to not go out and spend the money from those extra pay periods, but -if you can do it -JUST ONCE- you will be able to sit back and not stress about if you have the money to cover your monthly bills.