Changing from monthly paycheck to bi-weekly?

[kdonnel]

Hi all!

I haven't had a bi-weekly paycheck in years, so this is quite an adjustment. I finally worked out the budget of not having a lump sum all at once.

So I budgeted on my take home pay for 24 checks a year (2 x 12 months). So I'm sitting here wondering why my salary isn't adding up to what I'm supposed to make and duh, two months are actually 3 paychecks!

Instead of redoing the entire budget, I'm just going to put those two extra paychecks in savings or something.

How do you guys handle your budget - do you budget for 2 checks every month? Or do you somehow figure in the month with 3 checks into your budget, and if you do that, how?

thanks!

I budget as though I only make the two checks a month. The two extra checks are for vacations.

 

[4kids4karen]

I am glad to see I am not the only one that doesn't have a formal budget plan.

My suggestion would be to still plan all of your bills to be paid early in the month. If you budget to hold over the last paycheck of the previous month to pay your bills on the first, that might help.

I pay all my bills through my bank web bill pay service. Almost all of my bills are paid on the 1st of the month. Only our life insurance premiums are paid the 18-20th but I have been considering having those changed to the 1st. Pretty much, anything my checking account after the 1st is "fun money." LOL. Well not all "fun money" as I have been putting money towards some home projects and snowballing some debts with the extra month after bills are paid.

We tend to be creatures of habit, so we tend to spend the same amount month after month with few variables. For February, we did do a last minute day trip to Magic Kingdom (bought tickets for four three days prior), and we did go see Hamilton (but tickets purchased back in Nov/Dec). We know we are going to meet friends for dinner at a restaurant 2-3 times per month, etc. We are comfortable enough where we don't stress over an unexpected expense such as needing a new car tires, etc.

 

[1st*toright]

For me, a budget is more about knowing where my money is going. I want to know if I'm suddenly spending a bunch more on groceries, or if my trips to the coffee shop are getting out of hand, or if our electric bill suddenly gets higher. I've been using You Need a Budget for about a year now and I love knowing that I am spending money where my priorities are, instead of going "Well, I have $200 extra this week" and then having it all just trickle away.

I also use YNAB - and it has been hugely helpful for us. We've never carried debt, and we live modestly. As our income increased, I wondered why we weren't saving more - fully funded tax-advantaged retirement accounts and HSA, and socking away some additional savings, but I couldn't see why we weren't saving even more, since we were making more money. YNAB helped me see where our "stupid" spending was - way too much on groceries, and random Amazon shopping, and coffee, and random takeout. Lifestyle creep! With YNAB you start with the money you have on hand now, and budget that, then budget each paycheck as it comes in. I get paid 2x per month, DH's is every 2 weeks or so, but it doesn't matter because this month's bills are already covered by last month's paychecks. My paycheck on the 15th of March will be budgeted to cover expenses that will hit in April. That way I have time to adjust if we have an unexpected expense. My budget includes savings for short-term needs/wants (the trip we are taking next month, the car we plan to buy this summer) as well as general savings that are periodically swept into investment vehicles.

I don't have a set "budget" for the year, but I plan out where each dollar we earn is going as it comes in. As many people have said, our spending is generally consistent month to month. But giving each dollar a job really helps me set priorities - both place I want to spend less money (hello groceries!) and places I want to spend more money (the travel budget has actually gotten larger since I started being more mindful of our spending). I'm fine with spending money on things that add to our life (a nice dinner out with my DH, for example) but try to reign in spending that is unnecessary (if I don't feel like cooking, I'll make omelettes for dinner instead of getting takeout).

 

[kathy884]

I have certain bills come out of the first or second paycheck of the month. For larger funds -- future car replacements, property and homeowner's insurance (DH pays for auto insurance), our vacation fund, and personal training for my son, I take the same amount out of every two week paycheck and allocate monies to those funds. These are expenditures that I write a big check for annually (homeowners and property taxes) or in the case of personal training every six months and for the cars every 8-10 years, so are not things I can just write a check for without saving monies for all along. My company moved from bi-monthly to every two weeks about a year ago and for weekly spending, it actually works out pretty well.

 

[leebee]

We don't have a budget, we just know what we can afford to spend. I get paid monthly, DH gets paid every 2 weeks, but it doesn't matter. Checks are auto-deposited with a certain amount going to savings, the balance to checking. I set up all our bill due-dates to fall between the 17th and the 20th of the month, so I sit down on the last day of the month and pay all the upcoming bills. We have a mortgage, HELOC, car loan, a fixed-payment medical bill, and are paying DD's 2 school loans in addition to utilities. MOST of our spending is done on credit cards, for rewards, and are paid off in full each month. We are very good about not over-spending and not carrying a balance. If a bill comes in, it goes in the bill-box to be paid at the end of the month, all at one time. When we have that 3rd check of DH's, it just goes in the account like any other check. It works for us, but we are careful about what spend.

 

[trubgerg]

No matter how frequently the pay checks come, you're still getting paid the same amount per week / month / year.

 

[Deb & Bill]

Bi-weekly is 26 pay periods per year, not 24.

 

[Farro]

Bi-weekly is 26 pay periods per year, not 24.

Yes, that's exactly what I said in my first post.

 

[Farro]

Thanks for your input everyone!

 

[barkley]

No matter how frequently the pay checks come, you're still getting paid the same amount per week / month / year.

'paid' yes, 'netting' not always. some employers take deductions that are calculated on a monthly basis and only pull them from 24 of the 26 yearly checks so those 2 'extra' paychecks can be higher for some folks (dd's employer does this w/employee healthcare/dental/vision premiums).

 

[tzolkin]

No matter how frequently the pay checks come, you're still getting paid the same amount per week / month / year.

But you're not getting paid the same amount per month. That's what this entire thread is about.

Your total salary may be the same at the end of the year, but those paid bi-weekly do not receive a regular amount per month. It may make no difference for many people how the money comes in because they have extra saved, but for some people it does which is why we are discussing it.

Here's an example: Let's say your total salary for the year is $48,000. If you wanted to create a budget based on 12 months, you would divide by 12 and your budget would be $4000 per month. HOWEVER if you are paid bi-weekly 10 out of those 12 months you will only actually receive $3692. So, unless you had extra money in your accounts to cover your expenses, you would wind up about $300 short every month while waiting for one of the months with the "extra" paycheck to roll around.

For me, a budget is more about knowing where my money is going. I want to know if I'm suddenly spending a bunch more on groceries, or if my trips to the coffee shop are getting out of hand, or if our electric bill suddenly gets higher. I've been using You Need a Budget for about a year now and I love knowing that I am spending money where my priorities are, instead of going "Well, I have $200 extra this week" and then having it all just trickle away.

There was a discussion not too long ago where we quickly realized that many people do not have the same definition of the word "budget". It seemed that there was an underlying belief that a budget is restrictive and something only poor or financially irresponsible people have to do.

Like you, I also like planning and accounting so I would consider myself to have a "budget". I have spreadsheets and do all sorts of calculations in trying to allocate our resources so they can work for us most efficiently. I track every penny that comes in and goes out. That said, on a daily/weekly basis I do not take into consideration what many others refer to as a "budget" (as in, "I'm only allowed to spend $X on groceries this month"). I buy what I want when I want it, but I would still absolutely say I'm a budgeter.

I always find it odd how many people say, "I don't have a budget" and then go on to explain how they handle their finances in detail including when and how they pay their bills and noting that they "watch their spending" or know how much they have to spend. To me, that's a budget (and quite possibly even more restrictive than my budget).

 

[barkley]

I always find it odd how many people say, "I don't have a budget" and then go on to explain how they handle their finances in detail including when and how they pay their bills and noting that they "watch their spending" or know how much they have to spend. To me, that's a budget (and quite possibly even more restrictive than my budget).

yes. i think for some people 'budget' means something restrictive. i look at it as an estimate of income and expenditures for a set period of time. it doesn't restrict or control my spending, if anything it allows me to have more control over where/how i want to spend/save.

 

[Farro]

There was a discussion not too long ago where we quickly realized that many people do not have the same definition of the word "budget". It seemed that there was an underlying belief that a budget is restrictive and something only poor or financially irresponsible people have to do.

Like you, I also like planning and accounting so I would consider myself to have a "budget". I have spreadsheets and do all sorts of calculations in trying to allocate our resources so they can work for us most efficiently. I track every penny that comes in and goes out. That said, on a daily/weekly basis I do not take into consideration what many others refer to as a "budget" (as in, "I'm only allowed to spend $X on groceries this month"). I buy what I want when I want it, but I would still absolutely say I'm a budgeter.

I always find it odd how many people say, "I don't have a budget" and then go on to explain how they handle their finances in detail including when and how they pay their bills and noting that they "watch their spending" or know how much they have to spend. To me, that's a budget (and quite possibly even more restrictive than my budget).

Thanks for posting this! I thought I was crazy. It seemed people on the thread were assuming I was either poor, spent all my money or couldn't control myself with money! I was trying to figure out why it seemed I was almost getting lecture on my finances as if I said I had financial trouble.

 

[tzolkin]

yes. i think for some people 'budget' means something restrictive. i look at it as an estimate of income and expenditures for a set period of time. it doesn't restrict or control my spending, if anything it allows me to have more control over where/how i want to spend/save.

I'm the same way. Planning our finances (what I consider "budgeting") has allowed us to spend more money on things we enjoy. When I wasn't keeping track like I do now, we were just always in the mindset of "don't spend" to make sure we could cover everything. Now that I do tons of planning, I'm more inclined to splurge in specific areas.

 

[tzolkin]

Thanks for posting this! I thought I was crazy. It seemed people on the thread were assuming I was either poor, spent all my money or couldn't control myself with money! I was trying to figure out why it seemed I was almost getting lecture on my finances as if I said I had financial trouble.

Yes, on the other thread there was definitely an attitude of "Well, I'm responsible and have plenty of money so I don't NEED a budget like the rest of you ignorant peasants"

Check out the FIRE thread and you will see there are plenty of people who are doing extremely well financially, but still plan where every penny goes. Definitely not just for the poor or irresponsible.

 

[tvguy]

Yes, on the other thread there was definitely an attitude of "Well, I'm responsible and have plenty of money so I don't NEED a budget like the rest of you ignorant peasants"

Check out the FIRE thread and you will see there are plenty of people who are doing extremely well financially, but still plan where every penny goes. Definitely not just for the poor or irresponsible.

Like I said earlier on, I guess it depends on what your definition of "Budget" is. To me it means a conscious effort to limit spending. While those doing financially well may know where every penny goes, I don't think of tracking what you spent is a budget, because to me budget means making sure you have money available for bills. For them, that isn't likely an issue.

 

[Farro]

Like I said earlier on, I guess it depends on what your definition of "Budget" is. To me it means a conscious effort to limit spending. While those doing financially well may know where every penny goes, I don't think of tracking what you spent is a budget, because to me budget means making sure you have money available for bills. For them, that isn't likely an issue.

A budget for me is tracking what comes in versus what goes out each month. I'm not fretting if I can pay or not, nor am I limiting spending. (unless I'm saving for something big)

Normally I had one paycheck a month. The same constant bills (utilities, cable, cell, rent, credit card) got paid each month with the same paycheck amount each month.
Now since I was getting two paychecks a month, I was budgeting how much I was going to get each month and I realized I was I wasn't making as much as I thought. Then I remembered that some months were 3 paycheck months. Since I had already "budgeted" the year's constant bills out based on 24 checks, I realized I had two checks to play with.

And it was an adjustment because with two paychecks, the amount is smaller. So either I had to use my savings for a month to pay the bills so I could save two paychecks and start the next month with "one month's pay" that I was used to - or I had to figure out how much money from each check would go to what bills were due when. My extra money stays in my savings, not checking account.

It makes sense in my head.

 

[tvguy]

A budget for me is tracking what comes in versus what goes out each month. I'm not fretting if I can pay or not, nor am I limiting spending. (unless I'm saving for something big)

Normally I had one paycheck a month. The same constant bills (utilities, cable, cell, rent, credit card) got paid each month with the same paycheck amount each month.
Now since I was getting two paychecks a month, I was budgeting how much I was going to get each month and I realized I was I wasn't making as much as I thought. Then I remembered that some months were 3 paycheck months. Since I had already "budgeted" the year's constant bills out based on 24 checks, I realized I had two checks to play with.

And it was an adjustment because with two paychecks, the amount is smaller. So either I had to use my savings for a month to pay the bills so I could save two paychecks and start the next month with "one month's pay" that I was used to - or I had to figure out how much money from each check would go to what bills were due when. My extra money stays in my savings, not checking account.

It makes sense in my head.

LOL. All in your definition of the word Budget. In the words of a former President....."it depends what your definition of 'is' is"

 

[smiths02]

I get paid monthly, but DH gets paid every 2 weeks. We've had twins in daycare up until recently and that was a weekly rate, so the "extra" checks would sometimes help that (since they usually come in a longer month). We usually get one in Spring/Summer (so that goes towards extra summer camp stuff plus most of our birthday are in June) and then one in late fall/winter (so that goes towards Christmas).

 

[tzolkin]

Like I said earlier on, I guess it depends on what your definition of "Budget" is. To me it means a conscious effort to limit spending. While those doing financially well may know where every penny goes, I don't think of tracking what you spent is a budget, because to me budget means making sure you have money available for bills. For them, that isn't likely an issue.

Exactly. This is what I meant about people having different definitions. I think many think of it like you do: an effort to limit spending.

Technically the definition is much broader: a financial plan of estimated income and expenses based on future plans and objectives. So, those of us who have that definition in mind are often confused when people say they "don't have a budget" (and then go on to explain the details of exactly what we would consider to be a budget).