Best Money Tips: Save $200 a Month

Ashley Jacobs — Tue, 23 Apr 2013 09:48:44 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found some awesome articles on saving $200 a month, unexpected wedding venues, and ways to save on jewelry.

How often do you get your paycheck?

Philip Brewer — Tue, 15 Jan 2008 17:37:23 +0000

One of the BlogHer featured posts (Mrs. Micah's Credit Cards: Billing Cycles and Bimonthly Paychecks) talked about a mis-match between pay dates and credit card due dates. It reminded me of just how much I used to agonize over this issue, back before I had my finances under control.

Over the years, I've been paid on just about every paycheck schedule: weekly, biweekly, half-monthly, and monthly.

The schedules

Biweekly seems to be the most common, at least in the United States. I know a lot of people who figure that one check goes for the rent or mortgage and the other check goes for a car payment or some other major expense. The pay dates tend to shift around in the month, though. Someone who counts on, let's say, the second paycheck of the month to pay their next month's rent, can get burned if the check comes unusually early and the money gets spent before the rent check gets written. (It used to be that getting the check unusually late could also be a problem--a check that arrived the last day of the month might well not have cleared before rent was due on the first. Direct deposit and ACH has probably made that a non-issue for most people.)

Half-monthly is almost like biweekly--you still get a first and a second paycheck every month--except that you miss out on the best thing about biweekly paychecks: the two months a year when you get an "extra" paycheck, because a 52-week year means that there are 26 biweekly pay periods but only 24 half-monthly ones. If your finances are under control, there's really no difference between getting 1/24th of your annual salary twice a month or 1/26th of it every two weeks. But for a person who's living paycheck-to-paycheck, those three-paycheck months can cover all manner of careless spending.

Weekly sounds great to someone who's gotten a bit too used to saying, "Wait until we get paid and then we can buy that." In practice, though, it's kind of scary, because there are ordinary monthly expenses that can't be covered by a single paycheck. Where one biweekly paycheck will commonly cover rent or the mortgage, one weekly paycheck probably won't (unless you're living in a very cheap apartment). All of a sudden, that simple budgeting scheme (first paycheck covers the car payment, second paycheck covers next month's rent) doesn't cut it any more. All of a sudden, you're having to save and budget just to get your bills paid.

Monthly has the advantage that it's the same frequency as most of your bills. Times when I've been paid monthly, the payment typically comes a few days before the end of the month--early enough that the check had cleared in time to pay the rent on the first. In my experience, it was actually better than weekly. With monthly you have to budget, but at least you have the whole month's money in one big lump.

Personal history

I got paid biweekly at my first full-time job. Then, my second employer was an old-line industrial firm that ran a weekly payroll for all the factory workers, and found it easier to just include us software types in that payroll.

With a biweekly paycheck, my bill paying was pretty simple. I'd let bills pile up as they came in, and then I'd pay them all when I got paid. It was pretty unusual for two weeks worth of bills to come to more than one paycheck. Once I moved to weekly paychecks, though, that changed. It was perfectly ordinary for one weeks worth of bills to be more than one paycheck--it happened at least twice a month.

I think that experience was what first prompted me to get my finances under control. I cut back a bit on spending, got my credit cards paid off, let some money accumulate in my checking account. When my next job turned out to pay monthly, it was not only no big deal, it was actually kind of a relief--I didn't need to do nearly as much figuring and planning ahead. I got my money, and then I paid my bills over the course of the month. It was easy.

A matter of class

There's some degree of class distinction in pay frequencies. I don't know if it's still true, but as late as the mid-1980s, payrolls in England were strictly divided between the middle-class folks (who got paid monthly by direct deposit to their bank account) and the working-class folks (who got paid weekly by their boss handing them an envelope with actual cash money inside). Even in the US there's a general sense that the working-class folks need to get paid more often (because they can't be expected to budget wisely), with the implication that people who get paid less often must be of a higher class.

Under control

Of course, none of it matters, once your finances are under control. The money flows in whenever it flows in, it flows out when the bills are due--and the surplus goes into whatever savings or investment vehicles you've selected. A large fraction of my income is now paid either annually (mutual funds that pay dividends just once a year) or semi-annual (interest payments on treasury securities). It's all the same to me.

I remember vividly the shifts from biweekly to weekly to monthly, because they made a huge difference in the way I managed my money. Since then, I've had several different payroll schedules--biweekly, half-monthly, back to biweekly--but I scarcely remember, because it never really made a difference after that.

Of course, while you're in the process of getting your finances under control, you're likely to be especially aware of these matters. It's necessary to pay close attention to the flow of money into and out of your life, in order to get a handle on your finances. It may be of some comfort to know that, once you do, it turns out not to matter so much any more.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

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