Managing a biweekly paycheck

I’ve been employed in some form or another off and on for the last ten years. I’ve been paid biweekly, semimonthly, monthly, and with annual and more often than annual bonuses in cash and stock form.

  • mid 2004 through late 2005 – biweekly minimum wage pay
  • early 2006 – salaried monthly
  • late 2006 – biweekly minimum wage combined with salaried semi-monthly
  • mid 2007 – salaried biweekly
  • late 2007 – biweekly minimum wage
  • late 2008 through present – salaried monthly when employed, plus stock and cash bonuses

It took a long time before I started doing much budgeting since I’ve almost always earned far more than I needed and if I didn’t, I had a decent savings account compared to my expenses at the time. In high school, I “budgeted” by giving myself 20% of my net income to spend freely by transferring 80% of my net income to savings on pay day. I remember in late 2006, budgeting by on pay day, leaving the money in checking that I needed to pay any expected expenses until the next pay day and transferring the rest to savings. That’s similar to the system I use now except that I have a whole month between pay days and my expenses are higher, so I keep more money in checking. I’ve used this system for so long that it works pretty well for me now.

I have a job offer (yay! I’ll talk a bit more about it once I’ve accepted a job offer) and they pay biweekly. This has prompted me to re-evaluate my current money management strategy. I thought that biweekly pay would be terribly annoying, but my boyfriend convinced me that it would actually be fine since I live off of so much less than my income and I could just accumulate all of my paychecks in a savings account and transfer the spending money to checking on the 1st of every month. This strategy would allow me to earn interest on my paychecks, rather than my employer, while keeping things otherwise the same as they are now. Plus, the offered base salary is enough for one biweekly paycheck to more than cover my monthly spending, which I was hoping might be the case, but I’m still going to go with this savings account transfer strategy since it’ll help to smooth out my income, especially on the months where I won’t get a paycheck deposited due to contributing to the 401(k). (some foreshadowing for you on my 2015 savings plan!)

I always thought I would hate being paid biweekly, but I’ve mostly come to terms with it happening at this point and I think it will work out just fine :)

Readers, how have you dealt with a biweekly paycheck?

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32 thoughts on “Managing a biweekly paycheck

  1. Congratulations on the new job. I’m not sure it matters much how often you get paid, as long as you DO get paid. Even if it was 3 months between paychecks, with your savings habit it sounds as though you would have everything in hand. :)

    • Yeah I think I’ll be fine :) I plan to max out my 401(k) as early as possible next year, which will result in not getting a paycheck until JUNE (so about six months between paychecks, plus a month off without one just before that). But I’ll be just fine! It’s just an interesting cash flow problem.

      • Make sure that if you do that (max out the 401k early), you still get all the matching by your employer. Also, sometimes employers only will allow a maximum percentage of your paycheck to go to your 401k…

        • Yup I will look into those things. But if I say need to contribute X% every paycheck to get the match, then I will make sure to contribute X% every month and then top it off the first few months so that the 401(k) is mostly maxed out except for that X%. If the match is based on my contribution and not my salary, then I will just max it out at the beginning of the year. Most employers I’ve seen let you put up to 90% of your gross pay to your 401(k).

  2. Congrats!

    My DH is now paid 2x a month. It’s not quite biweekly but also isn’t completely predictable either– it’s never on the same date and I haven’t quite figured out what their rule is for determining what day they pay out. (My 1x/month always comes on the business day before the first of the month… DH’s company seems more random.)

    I deal with it by reconciling accounts sometime before the first of the month when I do bills for the first of the month. Our account balance is theoretically negative for half the month (I’ve written or queued up payments for the next month, but they haven’t been made yet) and then goes positive once DH has been paid both times (though sometimes I need to transfer from savings and my paycheck to make things balance.) I have his paychecks go directly to checking because it helps me to keep track of our spending compared to our income (and they get paid out right away).

    Currently our savings is accumulating way too much but I’m thinking about taking next year off and we’re doing a bunch of home improvement stuff.

    • Thanks! When I was paid twice monthly, I was paid on the last business day of the month and on the business day on or preceding the 15th of the month, which was a reasonable trade-off between the approaches. Your theoretically negative account balance is an interesting take on it – I would use different words to describe that, which is possibly reasonably similar to my own system.

  3. I had a biweekly paycheck in my first “out of college” job for a year and it wasn’t a big deal. Since college, I’ve always had the habit that I keep a checking account buffer of at least $5K, so I just paid bills and at the end of every month transferred everything above and beyond the buffer to savings. Really, same as we do now getting paid semi-monthly. =)

    • Oh that sounds a lot like what I do now, it just so happens that I get it all in one paycheck on the last business day. I think that was my boyfriend’s point about why it doesn’t really matter, since I’m really a month ahead anyway.

  4. I guess it really must be what you’re used to because I like getting paid biweekly or semimonthly. The only annoying scenario for me was when I was paid semi monthly and my husband biweekly because we could never pair pay cycles well. For biweekly we just pay housing out of the first check of the month and the rest of the bills out of the second.

    I recently turned down a job that paid on the last payday of the month. That wasn’t the reason I turned it down but I was convinced that method wouldn’t sit well with me.

    • In practice since I have direct deposit, my paycheck comes on the last business day of the month (paper checks come on the first day). I had never thought about it that way– I think of it as coming on the first day of the next month. But really it always comes a day to three days earlier.

    • Why wouldn’t the last business day of the month pay work for you? I like it because it means I’m always living off of last month’s income, not worrying about when money comes in or paying things out of the first paycheck or the second and I’m only transferring money around once a month.

  5. I used to get paid biweekly and my husband monthly. We kept a buffer in our checking account and then transfered the excess one time per month.

    I like getting those two extra paychecks! It’s fun to feel like I’m saving a lot. (Though you must feel this way all the time?)

    • I think the two extra paychecks will be pretty cool, since I’d be saving two of them and spending less than one of them! That’s cool that you both had different systems, a good balance. Some people complain that they run out of money before pay day with monthly, but I’ve never had that problem and I found less frequent pay meant I was fidgeting with my money less often, which is a good thing really.

  6. For the most part, I’ve always had bi-weekly paycheques. For awhile I was paid monthly and it was HARD. I burned through my cash by the end of the month (this was when I was paying off my student loans, so I always over-estimated how much I could comfortably put towards them from my pay, and 3 weeks later I’d be scrounging for pennies to go out to dinner. worst.)

    I think putting them in savings and transferring to chequing as needed is perfected. The nice thing about managing your money is you can construct whatever kind of pay schedule you want. DO IT UP.

    • Ugh that sounds super stressful! I guess that’s the downside of paying yourself first :/

      Yeah I’m really loving the idea of getting direct deposit to savings and then transferring to checking once a month. It’ll smooth things out a bit and then I’m always living on last month’s income!

  7. I have semi monthly, but I use fidelity for my spending and CIT for my savings account (which you could call an emergency fund though I don’t think of it that way). I keep at least 3 months average spending in fidelity and set up direct deposit of my paycheck so the account I use for spending (Fidelity) gets my average semi-monthly spending and the balance goes to my CIT. I used to also have a fixed amount go to Vanguard (so a 3 way split) but temporarily stopped that.

    If your employer allows you to have multiple accounts for direct deposit so different amounts go to different accounts I think this is a non-issue for a saver.

    • That’s what I was doing for a while. I love doing manual transfers to savings too much for that approach to last too long though… My checking account pays a decent rate on the first $10k so I try to keep about that much in there, which is a nice buffer.

      After writing this post and reading all these comments, I now realize that the method of payment doesn’t really matter at all for a saver. It’s just logistics at that point.

  8. I always had bi-weekly prior to this job. Via direct deposit, half my rent went into a money market account with check writing, 1/26th of my yearly Roth savings went into my Roth IRA, and the rest went to savings/checking… With that taken care of, I didn’t really have any “monthly” bills that were meaningful. I typically paid my credit card to zero after each paycheck, just because.

    Then my “extra” paychecks would result in boosted savings! I preferred it, but monthly seems to work fine too.

    • Yeah I think the “extra” paycheck months will be cool, but it’ll just be even more savings. I couldn’t do the 1/26 thing for the Roth IRA – I love doing one thing at a time too much. I prefer concentrating on only one goal at a time.

  9. Mr. Frugalwoods and I are both paid bi-weekly and actually always have been. We have both of our paychecks direct deposited into the same checking account and we then periodically move money out of the checking account into our taxable investments account. We aim to keep around 3 months of living expenses in our checking account so that we wouldn’t have to liquidate our taxable investments in the event of an emergency.

    • That sounds like a good system too! I think that’s what I’ll suggest when I combine finances with someone some day. I keep about six months of expenses in an online savings account as a buffer. Three months makes sense when you have two jobs. I budget more closely than you guys do and that is the amount I keep in checking.

  10. I get paid by-weekly and before that it was weekly. There was some complaining from co-workers when we switched to bi-weekly (which is obviously cheaper for the company), but I think they got over it. I feel like the frequency of pay is irrelevant because I have my spending in check. I think we would love to switch to monthly paychecks to save payroll costs, but there would be too much complaining from employees who aren’t high earners.

    Does your job offer give you the opportunity to relocate and put an exciting wrinkle in your housing plan, or are you pretty much staying put?

  11. Oddly enough, I only generally remember having been paid two times a month, whether that’s the biweekly check that comes with the bonus check every so often or just two times on set days of the month. I might have been paid monthly before, but can’t recall.

    It’s not mattered since I killed off the last of the debt because as soon as I could, I’ve kept at least one, sometimes two, months’ worth of cash in the checking account, and everything else goes to savings. So if my paycheck were to be late by a day or a month, I’d still have cash on hand to pay the bills while we sorted out the pay situation. Considering how stressed I was living from paycheck to paycheck, this seemed the best solution and works pretty well for us.

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