How to Budget When You Get Paid Biweekly

Are you finding managing your biweekly paycheck with your monthly bills challenging? You’re not alone, but with my 15-Second Spending Plan and automated payday routine, you can take charge of your finances and make it all work smoothly. In this article, I’ll guide you through calculating your monthly income and bills, setting up sinking funds, and creating an automated payday routine to help you stick to your biweekly budget. By following these steps, you’ll be able to manage your money effectively and make sure your biweekly paycheck covers your monthly expenses effortlessly. Let’s get started so you can begin building wealth today.

Table of Contents

• Calculate your monthly income
• Calculate your recurring expenses
• Calculate your sinking funds and debt snowball amounts
• Build your 15-Second Spending Plan in dollars
• Benefits of the 50/30/20 rule framework
• Build your 15-Second Spending Plan in 50/30/20 rule
• Calculate your weekly payday routine amounts
• Conclusion

Calculate Your Total Monthly Income

First, determine how much money you bring home each biweekly payday after taxes and other deductions. This is your net income or take-home pay. If your pay varies biweekly, estimate an average or use the lowest typical amount to avoid overspending.

Next, multiply your biweekly income by 2 to determine your total monthly income. Knowing your monthly income is crucial because it represents the money you have available throughout the month.

Calculate Your Recurring Expenses

Recurring expenses are also known as fixed expenses. I prefer recurring vs. fixed or non-negotiable expenses, as you have some control over the ‘fixed’ amount you pay each month.

Recurring expenses fall into 4 categories:

• Step 3a – Fixed recurring expenses are bills whose amount doesn’t change each month, such as rent or mortgage payments.
• Step 3b – Variable recurring expenses are bills whose amount changes from month to month, such as utilities.
• Step 3c – Periodic recurring expenses are bills that are not paid monthly such as car insurance and professional fees.
• Step 3d – Debt payments, excluding your mortgage or rent included above, are also recurring expenses that must be paid each month such as car and student loan payments.

Calculate Your Short-Term and Long-term Sinking Funds Plus Debt Snowball Amounts

Before you allocate your income to non-essential categories, prioritize your savings and debt repayments. Whether you’re building an emergency fund for irregular expenses, saving for a vacation, or paying off debt, treating these goals like fixed expenses can help you make progress every payday. YNAB refers to these expenses as True Expenses.

Here’s how to approach it:

Step 3e: Plan for Irregular Expenses with short-term sinking funds

Certain expenses like car repairs, medical bills, vet bills, gifts, and personal care don’t happen every month, but you should still plan for them. Estimate the annual cost of these expenses and divide that by 12 (the number of months in a year). This way, you can set aside a little each month to cover them without disrupting your budget later.

Step 3f: Plan for big purchases with long-term sinking funds

A long-term sinking fund sets aside money for large future expenses like vacations, home repairs, a new car, or saving for a home down payment. You can avoid the financial stress of large one-time payments by saving a little each month.

Determine the total cost of each long-term savings goal and the number of months you will need the money in the future. Divide the total cost by the months between now and your goal date.

For example:

• If you want to take a $2,400 vacation in one year, divide $2,400 by 12 months, equaling $200 per month to set aside for your vacation.

Step 3g: Debt Snowball amounts for debt repayment

If you have a credit card or loan debt, create a plan to pay down the balance faster by contributing a set amount each month. Keep your debt snowball amount reasonable to ensure you have enough money to spend freely each month.

Build Your 15-Second Spending Plan in Dollars

With your income, recurring expenses, sinking funds, and debt snowball repayments identified, it’s time to examine your monthly spending in its entirety.

Step 4: Transfer your monthly amounts to Dashboard#1 for analysis in dollars

To build your 15-Second Spending Plan in dollars, transfer your income, recurring expenses, sinking funds, and debt snowball repayments to the appropriate line on Dashboard #1. Complete line 11 on Dashboard #1 to see how much you have to spend freely on wants each month.

Step 5: Build and analyze your 15-Second Spending Plan in dollars

Transfer the amounts on dashboard #1 to step #5 to arrive at your 15-Second Spending Plan in dollars. How does the plan look? Do you have a reasonable amount to spend freely now that all your required bills are paid?

The Benefits of Using the 50/30/20 Rule Framework

The 50/30/20 rule is a popular and straightforward budgeting framework that helps you divide your income into three main categories: needs, wants, and savings (or debt repayment). This rule can be an effective guide for structuring your budget. The 50/30/20 rule simplifies the budgeting process by breaking it down into three easy-to-understand categories:

• 50% for Needs: This portion covers essential expenses like housing, utilities, groceries, transportation, and insurance.
• 30% for Wants: This includes discretionary spending such as dining out, entertainment, hobbies, and non-essential purchases.
• 20% for Savings and Debt Repayment: This ensures that you’re setting aside money for financial goals like building an emergency fund, saving for retirement, and paying off debt.

Build Your 15-Second Spending Plans in 50/30/20 Rule Framework

Step 6: Transfer your monthly amounts to Dashboard #2 for analysis in 50/30/20 Rule

Transfer your income, recurring expenses, sinking funds, and debt snowball repayments to the appropriate line on Dashboard #2. Complete line 11 on Dashboard #2 to see how much you have to spend freely on wants each month.

Step 7: Build and analyze your 15-Second Spending Plan in 50/30/20 rule percentages

Transfer the amounts on dashboard #2 to step #7 to arrive at your 15-Second Spending Plan in 50/30/20 rule percentages. How do your percentages compare to the 50/30/20 standard? You can adjust these percentages to fit your financial situation better, but ensure that your essential needs and savings are prioritized.

Calculate Your Biweekly Payday Routine Amounts

Automating your budget is one of the most effective ways to ensure you stay on track with your financial goals. It takes the guesswork out of managing money and reduces the risk of missing payments or overspending. The trick is to set up a payday routine with two checking accounts and one savings account!

Step 8: Transfer your monthly amounts to Payday Routine Worksheet

Transfer your recurring expenses, sinking funds, and debt snowball repayments to the appropriate line on the Payday Routine Worksheet and divide each row by 2 to determine your amount to fund per biweekly payday for each line item.

Step 9: Build your Weekly Payday Routine

Determine the biweekly amounts you will transfer to each checking account to pay your bills and reduce debt, and how much you will transfer to your savings accounts to build your long-term sinking funds.

Per the worksheet below, every other week your pay is directly deposited in your primary checking account, $1,200.00 is transferred to your secondary checking account, $250.00 is transferred to your savings account, and $75.00 is paid for your debt snowball, leaving you $675.00 to spend freely for the week until your next biweekly paycheck.

Closing Advice

Creating a budget when you’re paid biweekly involves careful planning, but once you’ve structured your income and expenses and set up your automated payday routine, it becomes much easier to manage your money. By allocating your income wisely and regularly reviewing your progress, you’ll stay in control of your finances and be on track to achieve your financial goals.