How to budget when you get paid biweekly
Stop budgeting by the month and fund each bill a share at a time out of all 26 paychecks. Biweekly pay arrives every fourteen days, which does not line up with a calendar month, so "two paychecks a month" is wrong twice a year. Divide a bill's annual total by 26 rather than by 24: a $1,450 rent is $17,400 a year, which is $669.24 out of every paycheck instead of $725 out of two a month.
Fourteen days does not fit inside a month
Semi-monthly pay lands on dates. Biweekly pay lands on a cycle, and a cycle of fourteen days drifts against months of 28 to 31. Ten months of the year that drift is invisible because two paydays still fall inside the month. Twice a year it is not, and a third one shows up.
Any plan built on "my two paychecks cover the month" is therefore right ten times and wrong twice, and the two times it is wrong are the two times there is extra money sitting unclaimed.
Divide the year, not the month
Take each recurring bill, multiply it by twelve, and divide by 26. Rent at $1,450 is $17,400 across the year, so $669.24 leaves every paycheck. Car insurance at $128 is $1,536, so $59.08 goes. Do that for the whole fixed list and each payday funds a slice of everything rather than the whole of one thing.
The per-paycheck figure comes out lower than the two-a-month version — $669.24 against $725 on rent — because you are spreading the same money over 26 collections instead of 24. That gap is not a saving. It is the two paychecks you were previously spending in advance.
What the third payday is actually for
Once every bill is funded from all 26, the two months with a third payday arrive with nothing already claiming that money. It is the only slack a biweekly year produces on its own, and it produces it whether or not you notice.
People who budget monthly meet the same two paychecks as a windfall and spend them. The arithmetic is identical either way; the only difference is whether the money had a job before it landed.
The week where bills cluster
Drift also moves which bills fall between two paydays. A month where rent, the car payment and the utility bill all land in the same nine-day stretch is normal on this schedule and looks like a crisis if the money for them was not already set aside.
Funding by share removes the question entirely: by the time a bill is due, its money has been accumulating out of every paycheck since the last one was paid.
Written by Larder, makers of an envelope budgeting app for iPhone. Last reviewed .