Did you know if you are paid bi-weekly, you receive two extra paychecks per year?
Typically employees on a bi-weekly payment schedule receive two paychecks per month. If you’re like a lot of us, you use one for rent and bills, and the other for groceries, fun, and non-necessities. But if you are on this bi-weekly cycle, you’re receiving 26 paychecks per year. This means that on two separate occasions this year, next year – any year – you’ll be paid three times in one month.
To easily figure out what month your extra paycheck falls on, mark your paydays on a calendar. In 2017, your “extra” paychecks will be in either March & September or June & December.
Why is this paycheck considered “extra”?
We use the term extra paycheck, because a typically employee on a bi-weekly schedule is used to only receiving two paychecks per month. One toward the end of the month (which you probably use on rent, bills, etc.) and one in the beginning part of the month (this is probably the pay period when you feel less broke, because you don’t have to use it on rent). But let’s say you receive paychecks, June 2nd, June 16th and June 30th. You have one paycheck allotted to rent for the following month (the June 30th check), and you have your June 16th check for groceries, some smaller bills, fun and entertainment, etc. But on top of that you now have an additional check on June 2nd, that isn’t needed for your usual monthly expenses.
What should I use my extra paycheck for?
As I mentioned above, when you have three paydays in one month, there should be one check that you don’t need. Therefore, you should take this into consideration when planning out your finances. If you’re living paycheck-to-paycheck, this check will help you break out of that rut. If you have your emergency savings and plenty of financial cushion, you may consider using part of that check for a vacation. It’s up to you to decide how to use your extra checks, but remember that this only happens twice a year, and this check could solve your financial woes, if you have them. Here are my top recommendations for how to put your extra paycheck to good use.
- Break the paycheck-to-paycheck cycle by setting up a “buffer fund”
- Use it to start, or fund, your emergency savings
- Pay down credit card debt
- Save half in your emergency savings, and use the other half to start a vacation savings account
- Invest it