Monthly to Bi-Weekly Checks

Submitted by LaceMeUpp t3_ygmt7r in personalfinance

I just accepted a job that I’ll start on Jan. 2, which pays bi-weekly and will be a pretty decent salary increase. In my current job, I’m paid monthly which can be a pain but makes budgeting from month to month relatively easy. Any tips on how to make a smooth transition and/or how bi-weekly folks create and stick to a budget? Do you budget for every two weeks or by the month?

I’m excited to receive a paycheck every two weeks but all of my bills are set to be paid at the beginning/end of the month. Not really sure where to start.

Thanks!

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AdditionalAttorney t1_iu9anmz wrote

Pull one paycheck from savings (one time thing), so that you have a full months worth (2 paychecks) available for first of the month for your monthly budget.

Then during the month you set the two paychecks aside for next month.

Since the increase is significant, I assume 2 paychecks >= one month salary from before

Use your 2 extra paychecks a year to fund sinking funds like vacation, or maintenance funds or emergency

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LaceMeUpp OP t1_iu9bhub wrote

This is a good tip. My current job will pay me out one month after I leave so at the end of January, I’ll receive my last paycheck for my current job in addition to a paycheck for my new job. Do you think that could work?

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AdditionalAttorney t1_iu9bxzd wrote

That’s even better! Use this extra paycheck to be the “next months” pay

I use YNAB for budgeting but your system can probably support this.

I have a category/bucket called “next month”. So during say October, my two paychecks went into that bucket.

Then on Nov 1… I take everything from “next month” and I assign it to the spending I will do in November

The two paychecks in November go onto the “next month” bucket

Repeat

Also, look at your pay calendar so that you can figure out which months will have the 3rd paycheck so that you don’t forget and spend it

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sleepyguy22 t1_iu9evgs wrote

Question - why put in a 'next month' category instead of immediately budget for "next month" when you get your paycheck? I use YNAB and sometimes budget up to two months in advance, e.g. with my paycheck that came in today I budgeted for December 1st's mortgage payment (among other things in Oct and November)

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AdditionalAttorney t1_iuaichk wrote

W YNAB I never budget more than one month into the future bc there’s way too much risk that the budget gets out of whack. Ppl always post abt that on the sub.

If I needed to do what you described I create a temporary category called “December mortgage”.

It just keeps things simpler for me to have an easier overview of what “jobs” my money has. Vs having to toggle into the future to see

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cap_blueberry t1_iu9bcfl wrote

Make a second checking for bills only...put a full month worth of bills in it on the last day of the month. Now each payday put a flat amount back into it to build that out back up. Basically you're paying for the next month bills every month and you'll never worry about when what bills come out when ever again.

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lellololes t1_iu9gg84 wrote

If you have enough money on hand, the frequency of being paid is irrelevant. I would recommend trying to have at least 3 months of expenses in the bank at all times.

You don't need to change your budget structure at all based on your payment frequency as long as you have enough money in the bank. The fact that your paychecks and bills will sync up less is not important so long as you have enough money.

If you move to a 2 week pay cycle, there will be a bit more variance month to month due to longer and shorter months. The "3 paycheck" month is literally irrelevant. It doesn't matter if you're paid on the 30th of one month or the first of another month. Your income is the same and the long term effect of being paid more frequently is that you get your money earlier. Some people treat the "3 paycheck" month like a bonus, but in reality, they are getting their first paycheck in the following month on the 12th or 13th instead of any earlier day, so treating it like a bonus is going to lead you to treat it unlike all of your other income.

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Morninglarke t1_iubwfzd wrote

Your goal is try to get at least one month expenses ahead so you won't be living paycheck to paycheck. That can take time, so since you are used to budgeting for month, use the first biweekly paycheck of the month to pay the end of month bills and the second paycheck to pay the first of the month bills.

Now most months will have two paychecks. If these two paychecks cover all your expenses then you have the opportunity to build up savings. Twice a year, you will receive three paychecks a month instead of two. This is because there are 52 weeks in a year not 48. If you can pay all your expenses with two paychecks a month, you can put these two "extra" checks into a savings account and start an emergency fund. The problem will occur if two paychecks a month doesn't cover your expenses and you need the money of the extra paychecks. If that is the case, then try to arrange payment of semi-annual bills, like car and renters insurance for the months you will have three paychecks. Ideally though, budget on a two paycheck a month basis and save the third checks.

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micha8st t1_iu9gori wrote

never been paid monthly. Since I started my big-boy salaried job, I've been:

  • paid weekly
  • paid semi-monthly
  • paid bi-weekly.

My favorite was semi-monthly - for the same reason you like monthly.

Simplest, especially since you're getting a pretty good raise, is to ignore the occasional third check of the month. It all goes into savings or is invested or however you handle unbudgeted cash.

For a few years when I got paid bi-weekly, that third check of the month was different -- benefits like health insurance were NOT taken out of it. Now for me, they are taken out of all 26.

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