Feb 01 2008

Paycheck frequency and spending habits

My husband gets paid once per month, at the end of the month. The first month of his job (last June) was tough for us. We were living off wedding gift money, credit cards, and my smaller bi-weekly check. Until we got his first paycheck, we didn’t really have much money.

Since then, we’ve adjusted to the monthly paychecks–and I’m thinking it might help us stay on target with our spending and saving in the long run.

(BTW, With my freelance work, I get a (much smaller than his) check each week.)

How can your paycheck frequency affect your spending and saving habits?

For us, it has been a little tricky to get our emergency fund established and growing. Our rent is due on the first of the month (though rent received by the fifth of the month is not considered late).

For us to use auto-pay, we have to have that rent money ($750) in our bank account several days before the due date, so the bank will draft a check and send it in on time. That means, the money needs to be there by oh, the 25th of the month or so for it to auto withdraw.

In one way, one of his paychecks has to cover TWO months rent. He got paid on Jan. 30. Money from that will be used to pay our February rent, and it will also need to be in the account so we can use auto-pay to send in our March rent check. Kind of a pain.

That means, we need an extra $750 cushion in our checking account to cover the rent payment.

With the rest of the money, we pay our bills at the beginning of the month (phone, car insurance, etc.). Most things auto withdraw, such as our electric bill and car payment near the middle to end of the month.

Once the money is allocated, that’s it. Gotta wait another month for a big paycheck.

With my smaller paychecks, they trickle in each week. The money is used to fill our emergency fund, primarily. It’s also nice to have a little bit coming in during the month.

Even if my husband were paid bi-weekly, it would be the same amount of money each month total (duh). So, in that sense, we would still need that $750 rent cushion.

But, I think that since he gets paid less often, we have to be more vigilant with the money. If we overspend, our rent check could be late.

Do you get paid weekly? Bi-weekly? Monthly? How do you think that affects your spending and saving? Does it even matter?



16 Responses to “Paycheck frequency and spending habits”

  1. DH gets paid 2x per month. It doesn’t matter to us really though. From the very beginning of our marriage we made the decision to stock up one month’s money for the next month. Wedding money helped get this started a little, but it would take much to make it happen. So, really, as of today (February 1st) rent and all our bills are due. We didn’t spend any of the money DH made in January because we were spending December’s pay checks then. Now, as of today, we are spending January’s money.

    It is a nice cusion of sorts too… it allows for a little graciousness in our budget if something unexpected comes up. We also put everything we can on a credit card and pay it off every month… this helps us keep everything together and our money in the bank earning interest a few extra weeks! :)

  2. This was a great adjustment for us when we moved to PA. The first one to get job was DH and it was hard to get adjusted to it. But afterwards we found that it actually made budgeting easier. The money hits the account once all bills get deducted then the rest was for flexible expenses. I find budgeting for getting paid every two weeks harder now.

  3. I have the choice to be paid monthly or bi-weekly. I get paid bi-weekly and I still have to set aside half that money or I’ll spend the whole chunk in the first week. I’m terrible! Ha. But I’ve got procedures in place well enough now that I could get paid once a month and we’d be okay.

    I love the idea of being a month ahead that Babychaser had – that would be nice!

  4. I get paid monthly, DH gets paid every two weeks. But like Babychaser, it doesn’t matter a whit in our budgeting. We live this month off of last month’s pay. I get paid the day before the last day of the month for that month’s work, and so all my money is ready to go by the first (when the mortgage and home loan auto-draft). It definitely does make it easier — I stress enough about money and details without having to worry about juggling things. We were lucky that we have been at that point for a while.

  5. Monthly. Since I’ve always been a once a month grocery shopper, we simply pay everything at once at the beginning of the month.

    We do not, however, have an autodraft situation such as you describe. If I were in your shoes, I’d want to ask for an extension on the grace period to avoid the double coverage. Then again, you seem to have adapted to it quite nicely. :) Congratulations!

  6. Wow! That’s tight, nice management :)

    I don’t get paid until I finish my projects and customers pay me (either for a project or a product), so it’s really tough sometimes. Whenever I start earning money, I just remember all the time I had to work to get a few bucks, so I won’t really misspend it in .

  7. You really need Loral Langemeier’s book: “The Millionaire Maker”

    I’m in the process of working thru the things she has her case-study people do and I’m looking forward to never having these kinds of issues ever again.

    Please help your family and get this book!

    No one should have to live like that.

    Pam Hoffman
    http://seminarlist.blogspot.com

  8. When I first started working I got paid a salary in 10 installments (Aug-May, it was a tiny school and they didn’t run pay roll in June or July). That was TOUGH. I would put aside what I needed to save each month to make ends meet in the summer, then deduct all the monthly fixed expenses at once, and then knew what was left for the rest of the month. Very tricky, and no wiggle room.

    Now hubby and I are both on 26 pays a year, alternating weeks, so we have a constant income stream, which is really nice. We auto-draft/direct debit all of our fixed expenses out of one bank account just for that.

  9. I could have been paid by my employer biweekly or monthly and over the span of 10 or 12 months.

    I went with biweekly, over the 12 months. It just helps to keep things budgeted and it’s easier to get the cushion for the next month built up. With all my payments set on autopilot, biweekly also keeps the balance in my checking account from ever getting too low.

    When I full trust my financial habits, I’ll switch over to monthly payments on the 10 month schedule. Then I can be earning interest on my money, not my employer.

  10. Building an emergency fund is a good thing indeed. It helps one avoid financial troubles. But yes, if you are into saving your money in a fund or into your savings account in the bank or go for flexible pending or retirement plan, you need to cut down the expenses. That was what i asked my wife to do, she had been a shopping freak but i somehow turned her into a savings freak :)

  11. We have the same problem. We actually pay one month ahead on our house payment in order to use automatic fund withdrawal because of when we get paid versus the due date of our payment.

  12. Do you make any money off this blog or on the internet?
    I tagged you with the game “Viral Links” it suppose to make your technorati’s go up and mine have been going up crazy, so it really works…give it a try, I added you onto the list.

  13. Most of my income comes from scholarships that are paid once a semester. Since I didn’t get this semester’s housing, grocery, and utility money until January 30, I had to pay both January and February’s rent before I received the money that was supposed to cover them. Having some extra money to draw on is pretty important in that situation. Even though I could have easily moved money out of my savings account to cover these expenses and then replenished it when I got paid, I found myself looking at my dwindling checking account balance and trying to find ways to cut costs.

  14. I get paid every two weeks. I prefer it to my first seven years of work life when I was paid weekly.

    I have a calender set up with pay day dates and labeled with which payday is the “rent” payday. It takes around 4/5 of my biweekly check to keep a roof over our heads.

    The “non-rent” payday is where we pay the other bills – car insurance and cable that gives us web, TV and phone.

    Sometimes it is very tight even though it is just my husband and I, plus the cats, on one income, but we have made it work.

    For the last few months, things are looking up because my husband and I are both earning a modest income from our blogs. These various paydays get logged in the calender so we know when money is coming. It has taken the pressure off our budget.

  15. After 12 years of getting paid 2x a month (15th and last day of the month), I now get paid every 2 weeks.

    I kept my old budget so twice a year I get an “extra” check. I usually try to save some of it and pay extra on the balance of my car or personal loan.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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