I thought I had my budget down pat. Every paycheck, I wrote out my take home pay, made a list of every bill that was due between the day I was paid until the day before my next payday, then subtracted each bill amount from my take home pay.
For example, if I got paid March 4th and my next pay day was March 18th, I would pay every bill that was due between March 4th and March 17th. It was working for me. Like I said, I thought I had my budget down pat.
But what I didn’t realize was there was a better way to budget each paycheck – a way that would give me more money each pay period and a bonus check a few times each year. It’s called the Split-Month Payment Method (and yes, I just made that name up because I don’t know if there is an actual name for it). I started doing this back in August, and it has made a huge difference. It may help you too.
What is the Split-Month Payment Method?
The Split-Month Payment Method is just what it sounds like. You split the month in half and assign one paycheck to pay the bills in the first half of the month and one paycheck to pay the bills in the second half. How you assign your checks depends on when you receive your paychecks.
Here is how I assign my paychecks. I get paid every two weeks.
1st check pays bills with due dates from the 16th to the 30th or 31st (depending on the month).
2nd check pays bills with due dates from the 1st to the 15th.
**Remember to always include costs that will be in both halves of the month including groceries, gas, and entertainment.
What are the benefits?
There are a few ways this method benefits me each paycheck.
- My budget is more consistent. Instead of the amount of bills and the kinds of bills changing with each pay period, I am always paying the same bills at around the same cost (utilities do change, but not by tons of money).
- My payments are spread out more evenly. For me, it just worked out that when I split my month in half, the total amount paid in each half was about even. If that isn’t the case for you, see if you can change the due dates of your bills. This will be easier for credit bills, student loan payments, and car payments. Utilities may be a little more difficult.
- I am saving money. Because my budget is more consistent, I know what to expect and can plan better. And because my payments are spread out more evenly, I am not spending more money in one pay period than the other. I am paying less in both pay periods.
But what is the best benefit?
I get a bonus check two or three times a year! There are two halves in a month. Sometimes, there are three pay periods in a month. One check pays for the first two weeks of bills. The other check pays for the last two weeks of bills. So, what does the third paycheck pay for? NOTHING. You have the entire paycheck to use however you want. I put some of it toward paying some of my debt and some of it toward building our emergency fund. I also use some money to pay for groceries, entertainment, gas, etc. for those two weeks.
Anything else to know?
Here are a few things to keep in mind.
- You may have to discontinue automatic payments on some bills, so you can pay them during their allotted half of the month.
- This payment method may not be right for you. It depends on your bill schedules and if you can work around that. It also depends on the structure of your pay periods.
- Part of the split-month payment method requires budgeting, which you should be doing any way to manage your money the best way possible. Make sure you write your budget out at the beginning of each pay period and keep track of it throughout the weeks.
What are some of your favorite budget tricks?