For those of us that get paid every two weeks, we face an epic battle, that others do not. For us, managing a budget is no easy task. Ten months of the year, things are just fine, but when March and October come around, my whole world turns upside down…I get an extra paycheck.
Although it is definitely a good problem to have, it does make things more difficult than other payment plans. We are really left with two options…
We can break up the two extra paychecks, by twelve, and calculate that in to our online budget app. Say for example you get $2K every two weeks. That means 10 months of the year your income will be $4K, but for two months it will be $6K. You can take the extra $4K (from the two extra paychecks) and divide that by twelve, this gives you $333. For budgeting purposes, you can average your monthly pay to be $4,333. In my opnion this method sucks. It’s a lot of work, a lot of planning, and a waste of time.
I subscribe to the “Booya, extra money” budgeting plan. Instead of breaking up my extra two paychecks over the entire calender year, I simply pretend they don’t exist. If I get $2K every two weeks, then I budget my cash flow around a $4K monthly income. When the time comes for the extra paycheck, I get to do with it what I want. Why? Because I have established spending habits around a $4K income.
If you haven’t noticed…it’s October, which means I’ll have an extra $1,500 coming my way. Perhaps I will buy 1,500 McChickens, maybe I’ll give it away to one of my lucky readers, but most likely I will contribute to my Roth IRA or pay down my student loan. Ah, the life of being a frugal ninja 🙂 I know there are others that get paid every two weeks. What method do you use? Is there a third option I haven’t thought of?