Budgeting getting paid every 2 weeks

iVillage Member
Registered: 03-27-2003
Budgeting getting paid every 2 weeks
7
Tue, 05-16-2006 - 5:46pm

Does anyone have any suggestions for this? Dave Ramsey always talks in terms of "months" when it comes to budgeting, and that doesn't necessarily work out the same as getting paid every other Friday.

For example, take an annual income of $50,000. And say 20% is taken out for taxes. If ther employee is paid on the 1st and 15th, this ends up being two checks of $1666 each, for a total of $3333 per month, take home. On the other hand, if that employee is paid every 2 weeks, she would get a check on May 5th for $1538 and another on May 19 for the same amount, for a total of $3077 in April. A $250 difference.

I get paid every other week, am new to budgeting, and this is totally frustrating me. I paid my mortgage out of the 5/5 check. 5/19 check will be everything else. And the next one I will pay the mortgage out of is 6/2. Then what? NOT pay it out of the 6/30 check and just let it go to the 7/14 check (pushing it, since that is the last day before I incur fees) and then let it start working back again? (8/12, 9/10, 10/9, etc. or however it comes out).

Any suggestions would be appreciated. It is really hard to make things work on the "every 2 weeks" schedule.

Avatar for 2locachicas
iVillage Member
Registered: 05-14-2003
Tue, 05-16-2006 - 6:28pm

It does get frusterating, especiallly when you are new to budgeting. my husbands last 2 positions have paid 1st & 15th but before that we were every other week. What I would do is do 2 different budgets. One for your first paycheck of the month and one for the second. So you are on a 2 paycheck cycle. It will look a lot like getting paid on the 1st & 15th.

So you get paid june 2nd, the 16th & the 30th, I would treat the 30th as your '1st" paycheck of July and pay things out of that fund. Then when you get paid on the 14th it will be your 2nd paycheck cycle.

I hope that makes sense...

iVillage Member
Registered: 01-25-2006
Tue, 05-16-2006 - 7:00pm

Do you have Money or Quicken? This will allow you to schedule payments and deposits over the year and see how things are going to sort out. I generally pay bills 2x per month and I set them up on the 1st and 13th of the month in Quicken. I don't always pay them right on those dates but then you get the sense of how the money will flow. There are graphs of projected balances and you can see if you are going to be in the hole. The 2 extra paychecks a year just get absorbed into the spending plan (for example, I take so much spending money every paycheck, not 2x per month but other bills get paid 1x per month). I got the basic Quicken package for about $15 so it really isn't all that expensive if you seek out some cheaper routes.

In your example, I would (and will actually because I'm on your same schedule) pay the mortgage out of the 6/30 check. That way you are really sort of getting ahead of the game. I definitely wouldn't push the envelope on deadlines.

I should say that I am NOT trying to do a 0 based budget where I budget for every penny. I try to keep about $300 of float in my budget (which will be higher for a while after 3 paychecks in June). If you are trying to do 0 based, this is definitely more of a challenge.

HTH!

Peg

iVillage Member
Registered: 08-08-2003
Tue, 05-16-2006 - 7:03pm

I get paid every other week. I budget as if I got paid twice a month, and when one of those extra paychecks come around, I get to put that in savings or towards my debt if I have any. I have a total amount that I budget for bills, and half of that comes out of paycheck number one earlier in the month, and the other half comes out of paycheck number two later in the month. Bills are always paid by the first of the month. So if I get paid, say, on the 3rd, then that's for the next month's bills.

Those two extra paychecks a year are like getting a nice bonus. :)



Avatar for endomagazine
iVillage Member
Registered: 11-09-2004
Wed, 05-17-2006 - 12:17am

Hello,


My DH and I are paid bi-weekly (every other Friday) like you are. I have our mortgage payment divided in half and automatically debited from our checking account every payday, so that we don't have one paycheck "eaten" by that large bill. This means I can budget food money, gas money, etc. for the two-week period. The reason Dave Ramsey speaks of "months" so often is that many of our regular fixed bills are due monthly, not bi-weekly. In the past, I have scheduled bi-weekly payments toward our target credit card, sending 50% of the minimum payment on one payday, then paying the rest on the next payday before the due date. If you budget in two-week "slices" based on what's due between paychecks, this will make life easier. =)


Sincerely,
Lindsey Schocke

Geeks on Tap: Mission Accomplished

iVillage Member
Registered: 03-27-2003
Wed, 05-17-2006 - 10:24am

Thank you all for your advice. I would love to have half of my mortgage taken out of each check - that would make things a lot easier. Right now my mortgage payment is made out of that "first" paycheck of the month and it does eat a lot of my check. Also, if I were on auto pay I would end up making 13 payments a year that way instead of 12, lowering my principal a bit further each year. My mortgage company wants a $350 processing fee to set me up on that system though, which is why I haven't done it.

Like I said, I'm new to this whole thing, so in April and May so far I have been doing a zero based budget per paycheck, not per month. I get paid on May 19, and I already know exactly where each dollar is going. Mortgage and car payment came out of the last one, everything else comes out of this one.

At some point, maybe July, I should end up with kind of a "bonus" check. Probably just as well since we go on vacation for a week then. Just a 4 hour drive away and splitting cabin costs with another family, so it ends up costing only gas, $330 for lodging for a week, plus spending money and groceries.

Again, thank you all for your tips!

Heather

Avatar for endomagazine
iVillage Member
Registered: 11-09-2004
Wed, 05-17-2006 - 8:24pm

Hello Heather,


I can understand if you don't want to pay the processing fee to set it up. In my case, there is a surcharge of about $2 for every bi-weekly payment, rather than a specific processing fee. So I pay an average of $50 per year for the "convenience" of having it automatically withdrawn on payday. It's worth it to me, since I too make an extra principal payment on those months that we receive 3 paychecks.


Anyway, you can set up your *own* bi-weekly payment plan. Do it this way: Send a check for half your payment every payday. If you have an online billpayment system available to you, or your mortgage company offers an "online payment" scheduler, you can schedule the payments to be made when you get paid and divide it up however you like. The mortgage company could really care less how many payments it takes you to get to the "full payment" each month, as long as it arrives by the due date.


Sincerely,
Lindsey Schocke

Geeks on Tap: Mission Accomplished

Avatar for skthurber
iVillage Member
Registered: 03-27-2003
Wed, 05-17-2006 - 9:46pm

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Unfortunately, some mortgage companies do care. Mine was totally freaked out when I tried to make partial payments, and I also would have some sort of $400 processing fee if I wanted biweekly payments. If I can ever juggle things around and get a little ahead, I will put 1/2 of the mortgage in savings in the first 1/2 of the month and then transfer the amount back to checking and pay the mortgage at the end of the month. Then it wouldn't be such a big bite all at once.

-Sarah

Sarah


Mom to Gina & Tony