How to Budget for a Month with an Extra Paycheck - Archived

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If you’re paid on a bi-weekly basis, there are two seemingly magical months every year when you get an “extra” paycheck. Time to throw a party or go on a shopping spree, right? Nope. 

Notice I put the word extra in quotes. That’s intentional. That free money you have, well, bad news. Some of it is already spoken for. 

A lot of people think of budgeting on a month-by-month basis. And it makes sense to some degree. You have bills like a house payment, car payment, utilities, phone bills, etc. that you pay every month, so you think your budget should revolve around them.  The traditional way of budgeting says take all of the income you make in a month, subtract all of your expenses and see what you have leftover. That’s it. That’s your budget. 

There are several problems with this way of thinking about budgeting, especially when it comes to the month where your income seemingly skyrockets because you have three paychecks instead of two. 

Because here’s the kicker: That extra paycheck is not really an extra paycheck.

Sure you have monthly bills but you also have weekly expenses that aren’t dependant on a certain date on the calendar. When that extra check hits, your week still happens. You still need to buy groceries. You still need to put gas in your car. Your regular weekly expenses don’t magically disappear when this third paycheck appears.

If you approach that third paycheck as completely free money and use it all to pay a debt, shore up your savings, or splurge on something you’ve had your eye on, you’ll likely end up robbing Peter to pay Paul. You won’t have enough funds to cover your regular expenses. 

Think of it this way. You are used to getting paid every two weeks. It’s normal. It’s what feels right. When you take away that “extra” paycheck, suddenly you go from a two-week pay gap to four weeks. I don’t know many people who wouldn’t feel a little financially strapped if suddenly they only got paid once a month. 

A Better Way to Budget

That’s why we teach the Fiscal Fitness Plan Ahead Budget. It doesn’t rely on a monthly calendar. You are not a corporation, so you certainly shouldn’t budget like one. 

Your budget should reflect your life and your payment schedule. So if you get paid every two weeks, you should have a budget that accounts for all of your income and the bills you have coming due during those two weeks. That’s how we create budgets for and with our clients. 

Pay periods vary. Sometimes pay amounts vary. Your budget should be dialed-in in a way that covers those variations. In other words, your budget should work to fit your life, not the other way around. When budgeting is done right, you can have your “extra” paycheck and have it work for you too. 

Want to learn more about the Fiscal Fitness Budgeting Method? Check out our How to Budget guide with step-by-step instructions for how to create a budget that mirrors your life. 


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1 thought on “How to Budget for a Month with an Extra Paycheck”

  1. Great point on the weekly expenses versus the monthly expenses. When I was salaried, I often used my “triple” paycheck months as a means to put extra money towards a debt such as an auto loan or my mortgage. But yes, I still had to account for weekly expenses. This can certainly be a confusing concept for those paid bi-weekly if they blindly burn their “extra” paycheck without taking into consideration their weekly upkeep.

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