Pay Day Super Saving

Have you ever looked at the calendar and been excited to see five Fridays or perhaps even five Wednesdays in a month? For many of us, that excitement comes from knowing we’re going to receive an “extra” paycheck. Those who get paid bi-weekly (depending on which day of the week you get paid) may end up with two extra pay periods each year. If you get paid weekly, there are on average four months during the year that you will have five paychecks.

If you’re used to paying all your monthly bills with what you make in two or four paychecks, those additional pay periods will likely result in you having extra money in your account. But before we get to spending the extra, let’s discuss how to manage money in a normal month.

Budget & Plan Ahead

By budgeting and planning ahead, you can spread your bills out by your “normal” pay periods. For example, I get paid bi-weekly, so I designate all my bills to be paid on certain pay periods each month.  If you budget for those “normal” pay periods, the extra pay periods are just that, extra.  I like to use a planner with daily spreads to list my bi-weekly bills on my pay days.

Follow the steps below to plan out your budget:

1. Calculate your average income per pay period, not per month. This helps to utilize those extra paychecks.
2. Take your mortgage or rent amount and split it between your normal pay periods. Just make sure you have the entire amount before it is due.
3. Create a bill checklist complete with the average due date for each obligation that you have.
   • List those bills that have due dates: utilities, loan and credit card payments, childcare.
   • Next, if you do not have funds set aside for periodic expenses, list any extras that you know will happen that month. (Auto registration renewals, oil changes, etc.)
   • List your living necessities like gas and groceries.
   • Set aside what’s left for savings, family activities, paying off debt, etc.
4. Fit those bills and other obligations that have a due date into your pay period list evenly, making sure that they are due after your pay day. After those are down, add the periodic expenses, then your living expenses, and finally all of those extras.

Budgeting allows you to make sure that your bills are paid first. This helps you stay current on your bills and avoid extra fees, like late charges and overdraft fees, thus saving you money.

Spending the Extra

Having that extra paycheck sounds like the perfect way to spend the day shopping, right? Okay, not so fast! Let’s look at some ways that you can better utilize those extra pay checks.

• Start an Emergency Fund. If you do not have three to six months worth of expenses saved, use this money to start your fund.
• Reduce or Pay Off Debt. Start with your highest interest rate or lowest balance due. Whether it is a car loan, student loan debt, or medical bills, you can save interest by making an extra principle payment.

*Super Saver Tip: Did you know that paying one extra mortgage payment each year can reduce your mortgage by a little over six years? That’s a lot of interest saved!

• Save for a Home Purchase. Do you pay rent? Use that extra cash to start saving for a down payment on a home.
• Make Needed Home or Car Repairs. Making repairs can save you money in the end, before the issue turns into a bigger problem.

If you have all those things covered then feel free to spend that extra paycheck shopping, or use it for something else fun like saving for a vacation, Christmas presents, or a family day.