Extra paychecks? What you do with it?

[shanendoah]

ihearyou2: So because I use the term "extra" paycheck, you think I don't know how much I make in a year? Those two "extra" paychecks are very much accounted for in my yearly budget, just not in my monthly.
The funny part is that I use "extra" here, because that's the title of the thread, and therefore the common parlance I thought was being used. At home, I generally refer to 3 paycheck months. When DH asks questions about something where the answer involves the "extra" paycheck, I normally say something along the lines of "well, April is a 3 paycheck month, so things will work like this" or "that's scheduled to be paid in the next 3 paycheck month".
Trust me, I know very well that I worked for those checks and that they are part of my yearly compensation.
I also know that those 3rd paychecks are a little bigger than my regular paychecks because my company takes all of my insurance buy ups (pre and post tax) out of the first two paychecks, since they also operate on the theory that 10 months a year, there's only two paychecks a month. The only things that come out of my 3rd paychecks are taxes and retirement contributions.

[SVT]

Feb 15, 2011 14:11:11 GMT -5 shanendoah said:

ihearyou2: So because I use the term "extra" paycheck, you think I don't know how much I make in a year? Those two "extra" paychecks are very much accounted for in my yearly budget, just not in my monthly.
The funny part is that I use "extra" here, because that's the title of the thread, and therefore the common parlance I thought was being used. At home, I generally refer to 3 paycheck months. When DH asks questions about something where the answer involves the "extra" paycheck, I normally say something along the lines of "well, April is a 3 paycheck month, so things will work like this" or "that's scheduled to be paid in the next 3 paycheck month".
Trust me, I know very well that I worked for those checks and that they are part of my yearly compensation.
I also know that those 3rd paychecks are a little bigger than my regular paychecks because my company takes all of my insurance buy ups (pre and post tax) out of the first two paychecks, since they also operate on the theory that 10 months a year, there's only two paychecks a month. The only things that come out of my 3rd paychecks are taxes and retirement contributions.

That appears to be more than 100 words. ;D

[shanendoah]

SVT: I am only limited to 100 words at a time on my daily blog. Here, I can be as verbose as I want

[SVT]

Feb 15, 2011 14:17:08 GMT -5 shanendoah said:

SVT: I am only limited to 100 words at a time on my daily blog. Here, I can be as verbose as I want

LOL I know that, it was just a joke to lighten things up around here...

[shanendoah]

I have decided, though, to make my Friday post about this thread. So on Friday, you can read what I have to say on this topic in 100 words. (If you're not sick of me already)

[Deleted]

Am I the only one who doesn't realize it has occurred for about a month? If I get paid on the 31st I still have bills that need to be paid on the 1st. It takes about a month for the amount to overlap and put me noticeably ahead on my bills. This is probably a function of how I manage my money though.

Anyway, what happens with me is that I will notice that on the weeks I am supposed to set money aside for whatever, that the money is already there and that bill is fully funded, so then I move that check out of my account and put it toward some goal.

[mak]

I used to budget based on 12 months. Last year I switched to a monthly budget so I could try to be more precise and save more. So, now that I have an "extra" paycheck it goes to savings. It probably ends up being the same about that was going to savings before, but this way we are using each dollar that comes in monthly during that month.

[patchwork150]

ok- so I shall from here out refer to the unaccounted for paychecks as:

The 2 paychecks out of 26 that I recieve on an annual basis that are not accounted for in my 12 month/24 paycheck budget. LOL

As for budgeting, I have an unusual system anyways- two budgets per month, one mine, one DH's.

I do get a bonus at my job, it is offered 2x a year. I don't plan for those at all though, they come as a nice surprise. Usually those go into savings as well, but I think next bonus should go towards doing something with the DH that we don't usually do (maybe go on a mini-vacation).

[Deleted]

Our budget is based on two paychecks a month.
DH gets paid biweekly.

We get two extra paychecks... that we usually spend on something frivolous (like stocks! LOL!), or a weekend trip, etc. We don't have a mortgage, car payment etc... so we can just have fun with the extra money!

[justwhoever]

Every payday I look at what is due from that day til the next payday. I pay those bills. There is no such thing as "extra" here.

I do notice on those months where we are paid 3 times instead of the normal 2, we get a bit a head on our bills.

But in the end we are still living paycheck to paycheck.

I've not quite been able to figure out a "budget" yet because of my job and pay. But everything is paid for.

[sbcalimom]

I get 3 months this year with 3 paychecks so I try to put the majority of those checks into savings since we budget based on 2 checks per month. This works out well for us since it helps prevent the money from being absorbed into the general fund. We are able to make sure that it gets used for targeted things since we don't need it for our monthly expenses. I'm sure as we get older and more established, it will be less important to be so regimented about it but for now this is what works for us.

[Deleted]

In Brazil, apparently a large group of employees gets paid every 4 weeks, so there's a 13th paycheck sometime around the end of the year. When we were there in 2000, I saw ads for companies that would lend you the amount of your 13th paycheck, so you didn't have to wait for it. Wasn't that nice of them? ;D

[kansasflower]

I base my regular budget on two paychecks per month. The "extra" paychecks are then used to boost savings and cover those pesky bills that you pay once per year and should include in the regular budget, but somehow seem to forget.

[8 Bit WWBG]

I too am in the camp of budgeting based on 2 paychecks per month, so months with a third paycheck leave me with un-allocated money. Here is how it goes down:

In the months preceding a triple-check month, I plan to put the entire sum towards debt and/or savings. About 50% of the time, that actually happens.

The other 50% of the time, when the actual month comes, a combination of surprise expenses (pet illness, home/car repair) or just general creep magically eats up most of the surplus. I end up being thankful that these things timed well with the extra paycheck, and manage to save a little bit in the end.

[dividend]

I used to do the fractional budgeting by assuming 1/26 of the annual expense every 2 weeks. So like rent*12/26. That worked ok, but I had to keep a cushion to smooth it out. So there was no "extra" paycheck.

Then I did monthly budgeting for most expenses but tossing everything into a pot and allocating it back out on the 1st, saving or investing the extra. (I allocated my allowance per paycheck, but that's a % of gross, so the total is the same.) So the "extra" paychecks just went into the same pot.

Now I'm back to twice a month, and I like it. I take half the monthly totals from each paycheck, and save/invest the rest. I like being able to save more (and the same amount) from each paycheck instead of a couple times a year where, psychologically, it feels like a windfall. I think people are more likely to spend that money when it comes as a lump instead of spread out over 12 paychecks.

[Politically_Incorrect12]

Feb 15, 2011 12:18:41 GMT -5 SVT said:

Feb 15, 2011 12:15:45 GMT -5 steph08 said:

I base my expenses on two paychecks a month, so when there is a month with three paychecks, I usually plop the extra one right into saving, since it isn't needed for any standard bills that are budgeted out of the two paychecks a month.

Of course, usually some expensive car or house repair comes up and the extra paycheck goes there, but it is nice to have!

In that case, I personally would just multiply my bi-weekly payments by 26 and divide by 12 to get the average monthly amount. But different things work for different people.

That doesn't work very well since if you budgeted that way monthly, you'd be overspending for 10 out of the 12 months. Most people I know like the budget based on what they get every month.

My wife and I try to save what is left in our bonus months after tithing.

[SVT]

Feb 16, 2011 10:31:33 GMT -5 Politically_Incorrect12 said:

Feb 15, 2011 12:18:41 GMT -5 SVT said:

In that case, I personally would just multiply my bi-weekly payments by 26 and divide by 12 to get the average monthly amount. But different things work for different people.

That doesn't work very well since if you budgeted that way monthly, you'd be overspending for 10 out of the 12 months. Most people I know like the budget based on what they get every month.

My wife and I try to save what is left in our bonus months after tithing.

I "mis-posted". I was thinking one thing and posting another. I figure things that way for the expenses, not pay, at least I used to before this year. It allows me to figure out how much I have per pay period extra for savings and spending.

When I was married and had a house, what I did was figured (conservatively) the amount of expenses per pay period. I did that for everything except our gas bill (which would always change drastically from the summer months to the winter months). Whatever was leftover was money we knew that could be used to save to Roth IRA and/or spend on things we wanted or whatever. I used to get paid weekly, she got paid biweekly. Doing it that way allowed us to always know exactly how much we could save and spend; it was just easy that way for us.

All of the bare expenses for us were $725/week. I added up all the monthly expenses and divided by 52 (since I got paid weekly). Most weeks, depending on overtime, I would make at least $725/week. But anyway, it was just easy to say OK, anything that I made over $725/week, was extra money to pay the gas bill of course, as well as save money in Roth, regular savings account and spending and her entire check was the same.

So yeah, I was thinking of when I used to do that for the expense part, not the pay. Sorry for the mixup.

I'll likely be doing something different now that I have a total of like $1600/month in expenses and the new job I'm starting tomorrow will be paying me twice a month: on the 15th and the last day of the month. I might do something like 1 check pays for all the expenses for the month and the other for paying extra on student loans/spending/savings. I'm not sure yet.

[ambellamy]

I get paid every 2 weeks... and budget on 2 paychecks a month.

So twice a year I get an 3rd check for a bit over 1,000.00... and i take that straight to my Roth IRA. Since I can put $5,000.00 a year in there, 2 $1,000.00 paychecks mean I only have to drop $250 a month in their to max it out... and $250 is more doable for me monthly than $416.66 ... especially since I only make around 42-43,000.00 a year.

[phil5185]

It appears that most responders are doing 'cash flow' statements rather than budgets. If you select the lowest denominator as the time period (6 months), then it doesn't matter if you input 6 monthly paychecks, 12 semimonthly checks, 13 biweekly checks, or 26 weekly checks. In all cases it is a half-year's salary.

[sapphire12]

My "monthly" budget is based on 2 paychecks a month. Twice a year, the extra paychecks are used for an extra mortgage payment and savings or a last minute trip.

[blackcard]

<<We are splitting it 50/50 between savings and debt>>
Good plan

We use extra income to pay off our only debt (our mortgage) invest some, add some to the EF, and reward ourselves when we hit a new milestone. A small reward when we finally hit $400K in Net worth last year. We are now up to $450K.
When we hit $500K N.Worth we plan a big celebration.
Another bigger celebration when mortagage is retired also.