If you earn a weekly or bi-weekly paycheck, chances are you feel like you suck at budgeting.
It’s hard to understand how to make a monthly budget when you get paid every two weeks or even weekly.
I’m not surprised.
Trying to budget monthly when you get paid bi-weekly is like trying to throw a car in a basketball hoop. I’m not a sports fan by any means but even I know that’s not right.
It doesn’t fit.
But you keep trying because you want to take control of your finances and build the life of your dreams.Let’s dive in and see how that works in action. I’ll walk you through how to set up a budget that finally makes sense!
Even after all the tears and frustration. And the pile of failed budgets gathering dust in a dark corner of your closet.
You’re wondering why you can’t stick to a budget and why you don’t get it.
You spend hours in Facebook groups looking for some budgeting hacks that will make it easier. But you still can’t make it work.
Sound familiar? Then you’ve come to the right place. There’s no sorcery at play here.
The answer is simple: create a separate budget for every paycheck you receive instead of one for the entire month.
In this post, we’ll explore:
- What budgeting by paycheck looks like and who it's for;
- How to budget by paycheck, especially if you’re paid bi-weekly;
- What to do when you earn an extra paycheck in the month;
- The benefits of budgeting by paycheck;
- What can go wrong when you budget by paycheck.
I’m going to take you through a real life example of how to budget bi-weekly paychecks. Be sure to get your free paycheck budget spreadsheet to follow along.
Your budget will be done by the time you finish this post. Awesome, right?!
What is budgeting by paycheck?
The idea behind budgeting by paycheck is pretty simple. Instead of making a budget for the month, you’re making a brand new shiny budget for every paycheck you get.
So, if you earn two paychecks in November, you’ll have two budgets for November instead of just one. One for each paycheck instead of one for the entire month.
This is pretty different from what most people out there will tell you to do.
When you browse Facebook budgeting groups, you’re going to hear a lot about monthly budgets. Especially from people who follow the Dave Ramsey percentage budget.
But it doesn’t work when you’re paid bi-weekly.
The way you spend money changes based on the way you earn money. And your budget should reflect that. When it doesn’t, you start to run into problems.
It’s the same lesson I keep teaching my students - the wrong budget is like walking a mile in the wrong pair of shoes.
No wonder you’re tired and frustrated and your feet hurt! You’re trying to wear flats and 4-inch stilettos at the same time!
Read more: 6 Reasons Why You Can't Stick to a Budget
Can you budget by paycheck if you get paid weekly or monthly?
Of course! I recommend a paycheck budget for all my students who earn more than one paycheck per month.
I also recommend it to my students who want total control over their money and the ability to make their dreams come true.
In my mind every other budgeting method is just a warm up until you can level up to a paycheck budget.
It’s my favourite budgeting method. I get paid monthly but I love the benefits of budgeting by paycheck (which you can read all about below).
It’s the budget that works the best for my life now and the life I’m trying to create.
Budgeting by paycheck is also a great solution if there are two or more sources of income in your household.
It's a matter of experimenting to find the budgeting method that works best for you and your life.
Can you budget by paycheck if you earn an irregular income?
Yep! You can still budget by paycheck if your income is irregular like earning commission. The difference would be how you budget for your income.
I always recommend budgeting with the lowest income you’re guaranteed to receive. The same rule applies if your income is irregular.
This changes the amount of income you budget with, but you can still budget by paycheck if it works for you.
How to budget bi-weekly paychecks
Step 1: List out your income & bills
The first step is going to be a pretty easy one. Grab a piece of paper and a pen.
List out all your paychecks & bills for the next two months. You need to note down the:
- payday (for income)
- due date (for bills).
Go through your past bank statements to make sure you don’t miss anything. This is what Sofia's list looks like:
Then, note down your bills. Here is what Sofia's one looks like:
Credit card payment
Add up the total amount for your income and your bills. This shows you how much you’ll earn and how much you’ll need for your bills.
Next, subtract your total bills from your total income. This tells you how much you’ll have leftover after you’ve paid your bills.
It’s how much money you’ll have to cover all your variable expenses, sinking funds and extra debt payments.
This is what Sofia’s looks like:
Less: Total Bills
Amount leftover for variable expenses & goals
Step 2: Complete a budget calendar
Now comes the fun part! Download your free paycheck budget template below. It’s got everything you need to get started budgeting by paycheck.
On your budget calendar write out each of your paychecks just like Sofia has in the example below.
It’s the exact same information you listed out in step 1, except that it’s now shown on a calendar.
I love using budget calendars. They give you a quick glance at when you’re getting paid and when your expenses are due.
Then, take some highlighters and colour each paycheck in a different colour.
Sofia highlighted her paycheck on the 10th in pink, and her paycheck on the 20th in blue.
Playing with stationery and colours makes budgeting so much more fun. But colour-coding is also super helpful.
It’s much easier to visualise what’s going on with your money.
Your budget calendar should look something like this.
Next, add in all the bills you listed out in step 1. This is what Sofia’s budget calendar looks like.
For extra credit and a more in-depth tutorial on how to set up and use a budget calendar, read this blog post.
Step 3: Determine which paycheck to use to pay each bill
Now that you can see all your bills and income on one calendar, you’ll notice a few things:
- Bills that are due before you get your first paycheck
- Bills that are for a large amount
Let’s walk through how to deal with bills that are due before your first paycheck.
Bills that are due before you get your bi-weekly paycheck
I recommend that you maintain a budget calendar for at least two months. Why?
Because bills that are due before your first paycheck of the month need to be paid with the last paycheck you earned the previous month.
For example, Sofia needs to pay her Netflix bill on the 6th with the paycheck she received on the 20th of the previous month.
She hasn’t received her paycheck on the 10th yet. She hasn’t earned any income for the current month at the time her bill is due.
So, she needs to pay it using income earned last month.
To show this on your budget calendar, highlight these bills in a third colour. Sofia is highlighting hers in orange.
This shows you that these bills are not paid with the income you earn this month. You’ll pay them with the income you earned last month.
This is what Sofia’s budget calendar looks like now.
Using the half payment method for larger bills & expenses
The half payment method is an amazing tool when you have large bills and expenses.
The idea is that you take one bill and pay some of it with paycheck #1 and some of it with paycheck #2.
You’re creating a mini sinking fund for your big bills during the month.
This spreads the cost among all your paychecks and reduces the strain you feel between paychecks. It makes it easier to make it to the next payday without running out of money.
It’s like having nothing but a cupcake in your lunchbox all day. You’re hungry now, but you know you’ll be hungry later too.
So, you eat half your cupcake now (and take an extra lick of that rich chocolate buttercream frosting). And save the other half for later when you know you’ll need it again.
Paying for large expenses is much easier when you get paid in one lump sum. But if you’re paid weekly or bi-weekly it’s a lot harder.
Paying a large expense with one bi-weekly paycheck eats up a huge chunk of your paycheck. You end up with less leftover for all your other expenses.
Your budget also becomes less restrictive because all your money isn’t gone all at once.
How does the half payment method work when you budget for bi-weekly paychecks
Here’s an example to see how it works.
Sofia’s rent is $1,600 per month and it’s due on the last day of the month.
She earns a paycheck for $2,300 on the 20th of the month. But she also has other bills that are due as well as all her variable expenses to consider.
Have a look at her budget calendar below which shows when she gets paid and when her rent is due.
She could use the paycheck she earns on the 20th to pay her rent on the 30th.
But if she does that then she doesn’t have much left over to pay for groceries and all her other expenses.
She begins to struggle to make ends meet until her next paycheck. Sofia is living paycheck to paycheck because there isn’t much leftover after she pays her bills.
Sofia should spread the cost of her bill among both her paychecks, not just the one she earns on the 20th.
This means she’ll be setting aside money from each of her paychecks to pay for her rent when it’s due.
It doesn’t mean she needs to pay rent every week. It means she needs a sinking fund where she can save up for her rent payment every month.
Every time she gets paid, Sofia should transfer $800 to a savings account.
That’s $1,600 / 2 paychecks = $800 per paycheck.
This is what her budget calendar looks like now.
Sofia is saving the same amount of money for rent from each paycheck but it doesn’t always work out that way. Her rent isn’t the only expense she’ll have to pay.
Take a look at the budget calendar you’ve created. The expenses between each paycheck change depending on when your bills are due.
You might not be able to split your large bills evenly between your paychecks. That’s okay. Split it however you need to so that you can still meet all your expenses.
Now, it’s your turn
You can try contacting your service providers and requesting a new billing date. But that isn’t always possible.
You need to look at where your bills and expenses fall. This will show you when you need more money from your paychecks.
It helps you plan ahead and implement the half payment method.
I like to use a highlighter for colour coding to mark out which expenses will come out of which paycheck. It’s not just because I’m a huge stationery lover.
I’m also a more visual person. It’s much easier to see at a glance what you need to pay with each paycheck when everything is colour coded.
It also helps you visualise when bills will need to be paid with two paychecks.
You’ve done a lot of amazing work up to this point, you should be so proud of yourself! There’s still one last step to go but I promise you, it’s the easy part.
Step 4: Create a budget for each paycheck
The last step now is to create your budget for each paycheck.
Sofia’s going to earn 2 paychecks this month. That means she needs to create two separate budgets - one for each paycheck.
For her first paycheck on the 10th, she’s only going to be using it to budget for the expenses highlighted in pink. Her paycheck on the 20th will be used to pay off for the expenses in blue.
Bills & fixed expenses
Notice how her rent payment will be split between both the paycheck on the 10th and the 20th? That’s because she’s using the half payment method.
She’s paying one bill using income from both paychecks.
You’ll need to create a separate budget for each paycheck as well. Then, start by adding all your bills to your budgets. Here’s what Sofia’s budgets look like:
Credit card payment
Netflix (for next month)
Then, using the money you have leftover, allocate some to your variable expenses, your sinking funds and any extra debt payments.
Make a list of the budget categories you usually spend money on. If you don’t know what they are, you’re going to have to track your expenses for at least a month first.
Here are some ways to track your expenses.
But if you want to get started right away, look through your receipts and account transaction history. Common categories include:
- Eating out / going out
- Fun spending
- Personal expenses
By looking through your receipts you’ll also get an idea of how much you usually spend. Do you spend $200 on groceries every Saturday? Maybe you spend $50 on eating out every other Tuesday?
Sofia goes to the salon in the middle of the month for a massage. She does her groceries on Friday nights on her way home from work.
This is what Sofia’s budget calendar looks like now.
Add these recurring expenses to your budget calendar. See where they fall relative to when you get paid. Then use the same highlighter trick to allocate them to each of your paychecks.
You can then add these expenses to your paycheck budgets. And that’s it! You’ve created your first budget by paycheck!
Sofia now has two complete budgets for the month. This is what her budgets look like.
Christmas sinking fund
Credit card payment
Netflix (for next month)
Christmas sinking fund
Extra credit card payment
What should you do with an extra paycheck?
Sometimes, the calendar can make it look like you’re earning an extra paycheck. This is a common pitfall for people who earn a weekly or bi-weekly paycheck but try to budget monthly.
It only looks like extra income because of when the dates fall. It’s just a timing thing.
Be careful not to fall into the trap of thinking that an extra paycheck means you have extra money to spend.
You’ll still have bills and expenses to consider before allocating extra money for spending, saving or debt
Top 5 benefits of budgeting by paycheck
Budgeting by paycheck can be a fantastic fit for anyone, even if you don’t get paid weekly or bi-weekly.
I get paid monthly and I budget by paycheck. Budgeting was difficult and didn’t make a ton of sense to me any other way.
Budgeting by paycheck gives me tons of insight into how I spend my money. And keeps me on track for my financial goals.
It also makes it a lot easier to cut spending and stick to my budget. It’s my #1 recommended budgeting method if you want to take control of your money.
Here’s some guidance to help you decide whether budgeting by paycheck is the right fit for you.
1. Shorter tracking period
Tracking expenses at the end of the month can be pretty overwhelming. There are receipts and transactions flying about.
I recommend tracking your expenses at least every couple of days if not every day.
When you budget by paycheck for a bi-weekly income, you only need to track your expenses for two weeks at a time.
This makes it easier to add up all your spending at the end of the budget period.
2. Most detailed and accurate budgeting method
A paycheck budget is going to be the most detailed budget you create, which means it’s also the most accurate.
Yes, it takes time to set it up especially when you’re new to it. But it gets easier with every budget you make.
It's more accurate than other popular methods like the 50/30/20 or percentage based method.
Instead of using percentages to estimate your costs, you’re actually using receipts.
Your budget is more realistic because you’re basing it on your past spending habits. It's not on a guide dictated by someone who doesn’t know you.
A realistic budget is one that reflects how you actually live your life and spend your money. Not what someone else tells you your budget should be.
The more realistic your budget is, the easier it will be to stick to. That also means that it makes your goals and your dream life more achievable.
3. Helps you manage your cashflow
When you budget by paycheck, you’re creating a whole new budget for every paycheck you receive. If you’re paid bi-weekly, you’ll have 2 budgets per month most of the time.
If you try to budget monthly, however, you’re budgeting for both paychecks at the same time.
Budgeting by paycheck means you’re controlling your spending and managing cashflow.
Now, I know online a lot of personal finance ‘gurus’ talk about cashflow being using cash and not credit cards.
But that’s not what cashflow means. Cashflow is money coming in and money going out, that’s all.
Think of it as a tap. When water is gushing out, your cashflow is healthy. When it’s drip, drip, dripping, cashflow is poor.
When you budget by paycheck it’s easier to manage your cashflow because you’re creating a separate budget for each paycheck.
You’re matching money coming in with money going out.
4. Best way to break the paycheck to paycheck cycle
Budgeting by paycheck means that you’re only ever budgeting with money that you have.
As long as you’re not budgeting to spend more than you earn, you’ll begin to break the paycheck to paycheck cycle.
One of the reasons people end up in this cycle is because they spend their money too fast. And end up struggling until the next paycheck. They’re spending money before they have it.
And this isn’t surprising.
When you budget your income in one lump sum, you’re assuming you earn it all at once. If you earn bi-weekly paychecks, this is wrong. That’s why a monthly budget doesn’t make sense to you.
When this happens you often have no choice but to turn to credit cards to make ends meet. This means more debt and more future interest payments which eat up more of your paycheck in the future.
Budgeting by paycheck is budgeting with income you’ll have at that moment, instead of all the income you’ll earn during the month. It helps you pace out your spending so that it doesn’t outrun your income.
5. It’s easier to plan ahead for larger expenses
When you budget by month you’re budgeting with all your income at the same time. This makes it harder to plan ahead for large expenses which eat up a big chunk of your income.
The large expense gets paid when it’s due. But your variable expenses become harder to manage because you’ve already spent so much of your money.
When you budget by paycheck you plan ahead for larger expenses. You’re setting money aside from each paycheck. This lets you still meet your variable expenses without as much of a struggle because you’re not paying for it all in one go.
Disadvantages of budgeting by paycheck
1. Take more time and effort to create
I love my budget so I enjoy spending time going over it, updating it and putting stickers on it. But I know you’d rather be doing something else.
One of the biggest roadblocks to budgeting by paycheck is that it takes more time and effort to create. Especially when compared to the Dave Ramsey percentage based budget.
But that’s what makes it so detailed and accurate. And my question to you is how badly do you want it?
You know that dream life that you keep daydreaming about at work. The one that gets interrupted by Cathy from accounting calling you for the billionth time?
How much do you want it?
If you want it enough, then doing a little bit of hard work to make your dreams come true is worth it.
2. Doesn’t work well with budgeting percentages
Matching money coming in with money going out when you get paid bi-weekly can be a delicate balancing act.
You need your budgeted expenses to be as accurate as possible without adding too much of a buffer.
It’s normal to add buffers to your expense in case you go over. But doing this means that you’re using up more of your paycheck than you need to.
And in trying to stick with that budget, you end up struggling until the next paycheck arrives.
That’s why I recommend doing the hard work of making your budget by referencing your bills and receipts.
This level of accuracy is just not something you get when you use percentages.
Budgeting by percentages is harder because it assumes you spend money at the same rate all month.
You might incur expenses at different times , for example if you go to the salon at the beginning of every month.
The amount you need to budget for might change from paycheck to paycheck.
3. Need to think ahead to the next month
You saw in Sofia’s budget calendar that she has some bills and expenses before her first paycheck of the month. To pay for those without using a credit card, she had to plan ahead.
You need to make sure that your paycheck can cover all costs until you get your next paycheck.
This is crucial to breaking the cycle of living paycheck to paycheck. But it does need planning ahead. You’ll need to know what’s coming and what’s due for at least two months at a time.
This is a lot easier than it sounds. I recommend keeping your budget calendars updated with everything you know at all times.
You only need to do the hard work of setting it up from scratch once.
After that, just update it when things change. This makes it a lot easier when you go to build your budget. All the information is already there, you just need to organise it.
4. More strict than other budgeting methods
It’s more accurate and detailed because it uses actual dollar amounts instead of just percentages. But that also means that it’s more strict.
I know that sounds like a bad thing. Strict budget = life with no fun and a budget you can’t stick to, but hear me out.
I’m always telling you that a budget is too restrictive when it’s the wrong budget for you.
As long as your budget is a true reflection of your spending, it won’t be super strict. But you’ll need to control your overspending.
Because if you overspend now, you might not have enough to cover the large bill later.
I love budgeting by paycheck even though I get one paycheck per month. My budget is super detailed and much more accurate than if I used percentages.
This gives me more control over how much progress I can make on my goals. I’m spending only what I need to and nothing more.
I’m going to guess that you don’t want to use intense percentages like 13.4566% to do your budget.
Even if you’re using a calculator or a spreadsheet, it's easiest to budget with nice whole round numbers.
It’s easier to remember that you can spend $600 on food this month instead of $589.70.
So, you’re going to round up your percentages, right? Doing this builds a buffer into your budget.
I know an extra $10 in your food category might not seem like much. But $10 across all your budget categories could become $100 per month.
And that’s an extra $1,200 per year.
5. Need to keep all your bills and expenses organised
You should be keeping your bills and expenses organised either way. But it’ll become super important when you’re budgeting by paycheck.
You need to keep track of this information and update it as time goes on. Make your budget by referencing the actual amount and timing of your bills and expenses.
It's a lot harder to do when you have paperwork and receipts scattered all over the place. I recommend keeping some envelopes for each of your variable expense categories.
Even if you’re not a cash envelope user, just store your receipts in those envelopes to refer to later.
If you get your bills digitally, keep copies of them in a folder on your computer. For ones that come through snail mail, keep them with your budget.
Trying to budget monthly when you get bi-weekly or weekly paychecks doesn’t work. If you earn bi-weekly paychecks then a monthly budget isn’t the right fit for you.
Your budget will become a lot easier and make a whole lot more sense if you budget each paycheck separately.
It’s called budgeting by paycheck and it’s one of the best ways to break the cycle of living paycheck to paycheck.