Managing your finances on a biweekly pay schedule can be challenging, especially when many bills and expenses are set to monthly cycles. With the right strategies, however, budgeting your biweekly paycheques can help you stay on top of your finances and even save more effectively. In this article, we share a simple guide to help you when it comes to how to budget biweekly paycheques effectively if you’re paid every two weeks.
What does it mean to budget biweekly paycheques?
When you budget biweekly paycheques, you plan your expenses around each time you’re paid every two weeks, as opposed to creating a monthly budget. You assign certain bills and expenses to each of your biweekly paycheques to ensure you’re able to cover them sufficiently. Budgeting biweekly paycheques can be particularly beneficial in the following scenarios:
- You aren’t paid each month
- You live paycheque to paycheque
- You have an allocated payday
- It’s your first time receiving a salary
- You often face overdraft fees
- You’re still learning how to budget
- You have a modest income to work with
In this article, we’ll cover how to budget biweekly paycheques to ensure you’re covering your essential bills each month.
How to budget biweekly paycheques
Follow these steps to begin budgeting your biweekly paycheques successfully.
Begin with your monthly expenses
Since most bills, such as rent or utilities, are due monthly, begin by listing all of your fixed monthly expenses. Fixed expenses are those that you need to pay on a fixed date each month, and are often essentials. These typically include:
- Rent or mortgage
- Utilities (electricity, water, gas, etc.)
- Internet and phone bills
- Insurance (health, car, home)
- Loan payments (credit cards, personal loans, etc.)
- Transport or car costs
- Childcare
- Subscription payments
Once you have a clear understanding of these, divide the total by two. This will give you a clear target of how much to set aside from each biweekly paycheque to cover your monthly obligations. You might also want to map out on a calendar the dates your income is due, as well as the dates of any expenses or bills. This exercise will also help you to identify how much money you have left over from your bills for variable expenses like groceries, socializing, and entertainment.
Create a biweekly budget for your variable expenses
Once you’ve figured out when your fixed payments are due, you’ll need to work out your variable expenses. These include groceries, entertainment, and other spending that might vary from month to month. For these expenses, allocate a specific amount for each paycheque. You can base this on previous spending or create spending limits to avoid going over budget. By adjusting your budget to a biweekly format, you can ensure you’re putting away enough from each cheque to cover your expenses before they’re due. Any remaining funds left over from your biweekly paycheque once bills and essentials have been accounted for is essentially disposable income. This can be used for covering the cost of anything that isn’t bill or payment-rated, but that still contributes to your overall cost of living. This includes things like:
- Groceries
- Entertainment
- Dining out
- Gas
- Clothes
- Toiletries and personal care
- Beauty and haircare
You’ll need to budget for these around how much disposable income you have on each biweekly paycheque. If, for instance, the majority of your bills need to be paid in the first half of the month, you might choose to use your second paycheque to pay for things like groceries and going out. It’s important to note that bills and expenses aren’t the only things you might want to factor in – savings are important to help you prepare for any unexpected costs, as well as your financial future.
Remember to save
Even when you’re trying to budget biweekly paycheques, it’s still incredibly important to try and save some money each month. Also known as an emergency fund, money reserved to cover emergencies like job loss or unexpected medical bills is key. Other expenses like home maintenance or car repairs should also be anticipated for. Depending on your circumstances, you may want to consider your financial future too. A tax-free savings account (TFSA) or a registered retirement savings plan (RRSP) are great ways to save for the future. Of course, the amount you save each paycheque depends on how much money is required to cover your bills and expenses. Generally speaking, a good rule to follow is the 50/30/20 rule which means allocating 50% of your paycheque to essentials (or fixed expenses), 30% to wants (or variable expenses), and 20% to savings.
Take advantage of “extra” paycheques
One advantage of a biweekly payment schedule is that you receive 26 paycheques per year instead of the typical 24 paycheques for those who are paid twice monthly. This means that twice a year, you’ll receive an “extra” paycheque. Use these bonus pay periods wisely, perhaps by:
- Building an emergency fund
- Paying down debt
- Contributing to savings or retirement accounts
These extra pay periods can significantly boost your financial well-being if handled carefully.
Automate your savings and bill payments
Automation can make managing biweekly paycheques much simpler. Set up automatic transfers to your savings account and automatic payments for bills. This ensures that you’re consistently saving and paying bills on time without needing to think about it every two weeks.
Here are some tips for automation:
- Transfer a portion of each paycheque to a high-interest savings account.
- Automate debt payments to avoid late fees and to reduce debt faster.
- Set up alerts or reminders for variable expenses to keep track of when and how much is due.
Track and adjust your spending
An important part of budgeting biweekly paycheques is to regularly monitor your budget and spending habits. Apps like Mint, YNAB, or even a simple spreadsheet can help you track where your money is going. You might also wish to compare your bank statements to your budget at the end of each month to ensure you’re sticking to your plan as well as you can. Keeping a close eye on your budget can help you to see any issues you might be facing in your budget, or areas where you may need to save more or adjust. By reviewing your finances biweekly, you can adjust your spending and saving patterns to stay on track with your financial goals. Once you’ve created your budget, if you’re still finding you’re struggling to make your money last between paycheques, you may want to consider taking on an additional stream of income.
How might a sample biweekly budget look?
Let’s look at a simple example of how you might budget biweekly paycheques:
- Income per paycheque: $1,500
Fixed expenses (per paycheque):
- Rent: $700
- Utilities: $150
- Insurance: $75
- Loan payment: $100
Variable expenses (per paycheque):
- Groceries: $200
- Transportation: $75
- Entertainment: $50
Savings:
- Emergency Fund: $50
- Retirement: $100
Total expenses per paycheque: $1,500
By keeping a portion of your paycheque designated for savings, you ensure you’re working toward your long-term financial goals while covering essential expenses.
Budgeting on a biweekly paycheque schedule may seem tricky at first, but with a well-organized plan, it can actually help you manage your finances better and give you more control over your spending and savings. Start by understanding your monthly expenses, plan ahead for irregular costs, and make the most of your extra paycheques. With these strategies in place, you’ll be well on your way to financial stability and success.
At Spergel, we’re here to help you manage your debt and finances effectively. If you need further guidance or are worried about the amount of debt that you owe, feel free to contact one of our Licensed Insolvency Trustees for advice. At Spergel, the ‘get rid of debt’ people, we offer free, no obligation consultations to review your unique financial circumstances and provide guidance on the best form of debt relief for you. Book your free consultation today.