Going from a weekly to a biweekly paycheck every two weeks can be a bit confusing. But once you settle into that new biweekly paycheck routine, you’ll notice something cool: Twice a year, you’ll get what is effectively an extra paycheck. Yet your monthly bills won’t go up, so you’ll have a golden opportunity to make a long-term difference in your financial health. Here are some ideas for managing your money with a biweekly paycheck.
Pay Off Debt
One of the fastest ways to boost your financial profile, and potentially your credit score, is to throw the extra paycheck at your high-interest debt. This will also lower your monthly credit card payments over time, giving you a bit of extra cash each month. There are two schools of thought on how best to do this. Some say you should start with the lowest-balance credit cards, since those are easier to pay off. Others say you should chip away at the cards with the highest balances first, to make success easier and easier as you go along.
Start an Emergency Fund
Financial experts say you should have three to six months of expenses in the bank in case of a financial catastrophe. Yet many Americans say they would be unable to absorb even a $400 setback. You could use your extra paychecks to start building your emergency fund. Consider keeping that money somewhere other than your regular checking or savings account, though, or you may be tempted to spend it. Options include a money market account or a separate high-yield savings account.
Save for a Goal
If you want something big, like a new house, car, or dream vacation, consider putting your extra paychecks toward that goal. At two paychecks per year, it could take awhile to get there, but every bit of progress counts. And seeing the money grow might even encourage you to start saving a little extra out of each paycheck.
Of course, it’s important to find balance in all aspects of life. If you’re generally a hard worker and a good saver, there’s no reason to live an austere lifestyle. Don’t be afraid to spend part of one of those bonus paychecks on something nice you’ve had your eye on, or even blow the whole thing on a getaway. Treating yourself may be just what you need to recharge and reset.
Everyone has a different financial picture and set of goals. There is no single best solution for what to do with your bonus paychecks. Instead, the important thing is to be mindful about where you spend the extra money, rather than letting it slip away unnoticed.
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