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Everyone who gets paid bi-weekly gets to enjoy getting paid three times a month twice a year. Many think they can use this extra paycheck for things other than living expenses. But when they do this, they wonder why money is tight a few weeks later.
I’ll walk you through why your third paycheck might not be extra money and the steps you need to take so that it can become extra cash.
A Three Paycheck Month?
When you get paid bi-weekly, you get a paycheck every two weeks or 26 times a year. Usually, this means you get paid twice a month. But because of how the calendar works, there are four months every year with five Fridays instead of four.
And based on your paycheck cycle, two of these months mean you get three paychecks instead of two. Unfortunately, the months this happens change every year. This year, if your first paycheck of 2023 was on January 6, your three paycheck months are March and September.
If your first paycheck of 2023 was not January 6, you will have three paycheck months in June and December.
Now that you know when your three paycheck month is, let’s find out the biggest mistake you are probably making and how to take advantage of your extra paycheck.
The Biggest Mistake People Make With The Extra Paycheck
Getting an extra paycheck in a month sounds fantastic, and many people fall into the trap of thinking they can do anything with this bonus money. Some use it to boost their emergency fund, pay off debt, as an extra mortgage payment, build wealth, or other financial goals.
But here is the problem. Unless you have been budgeting your money, you have to use this money for living expenses. It is not extra money at all. Your monthly bills are still coming in, and you need to pay them.
If you do something else with the check, you will need more money to pay your bills at the end of the month. Here is why.
Let’s say you use the first two paychecks for the month to cover your monthly bills. Now you get the third paycheck. In this case, it comes on the 31st of the month. If you put the entire check into savings, you must make ends meet until your next paycheck on the 14th.
That means you used the income from the 17th to pay your bills, and you have no money to pay bills again until the 14th of the following month, close to 30 days. If you live paycheck to paycheck, odds are you won’t be able to go that long without putting money into your checking account.
During this time, you still need to buy groceries, and gas, pay your mortgage or rent, make car payments, etc.
Ignoring Your Third Paycheck Example
Here is a detailed example to make this clear. To keep things simple, let’s say each of your biweekly paychecks is $1,500 of take-home pay.
During a typical month, your monthly income is $3,000, and you have the following bills:
- Rent: $1,200
- Car payment: $300
- Cable & internet: $150
- Student loan: $250
- Groceries: $100 per week
- Gas: $25 per week
You have $3,000 worth of income and $2,400 worth of expenses. Your paycheck on the 17th will get you through to the end of the month. But if your rent and car payment are due on the 1st of the month, you will run out of money.
You will also have additional bills due before your next paycheck, and you still have no money in your checking account. No amount of cutting back will make the math work.
How To Budget For Three Paychecks
So how do you solve this issue of triple paycheck months? The good news is that you don’t have to toss out your old budget and start a new one. You just have to use this budgeting trick to plan ahead.
The best way is to work to get one month ahead on your bills. When you have one month to cover monthly expenses in your checking account, you can treat this as extra money when your third paycheck comes.
You can safely use it to fund a vacation, make extra payments on your car loan or mortgage, pay for upcoming Christmas gifts, or put it into long-term savings. And since this money will likely be $1,000 or more, you can make significant strides in funding your goals.