Where are all my bi-weekly paycheck people at? If you pick up a paycheck every other week–or every week–then you know that there are months where you’ll land an “extra” paycheck. For me, one of those months happens to be September this year. While my monthly budget is structured based on two of my husband’s paychecks and two of mine, this particular month will actually net me three checks. Whenever I realize this and the initial excitement settles, the real question always becomes, What should I do with it?
Pay Down Debt
Nothing makes my heart go pitter patter quite like making an extra mortgage payment. Très romantique, non? Currently, we make at least a double payment every month. I also toss much of my side hustle money at our mortgage, though that can fluctuate greatly. Our biggest mortgage payment victory happened during my last triple paycheck month, and it led to us paying 3.5 times our mortgage and an epic happy dance around my laptop. While I know it’s hotly debated, paying down my mortgage early saves me the interest. And when you start with a $200k mortgage, that 3.5% is a heart-stopping number.
Invest It
Alright. I’m wading through the investment waters a bit now. I’m still wearing three life jackets and water wings while nervously eyeing the exit, but I’m in the pool, gosh darn it! We plan to max out our Roth IRAs again this year, so this might be a great opportunity to do so. I could also take some of that money and put it in our taxable Vanguard savings account.
Save It
Our emergency fund is pristine (knocks on wood, pours holy water on the furnace, avoids black cats). If that does take another hit between now and extra paycheck day, I would definitely top it off. There’s nothing quite like the peace of mind that comes from knowing you are ready–at least financially–for most things that life throws at you.
Plan Ahead
Instead of thinking of this as saving, I would categorize this as earmarked spending. Though we’ve worked hard to cut back on gifts, we do still exchange Christmas presents with a handful of family and friends. Plus, there are birthdays and other special occasions on the horizon. While we’re seriously working on cutting back our clutter, we do enjoy being able to treat our folks to a nice dinner or take our nephews out for ice cream. We could also set aside some money in our travel fund actually go see a volcano fund.
Give a Little (or A Lot)
Charitable giving is a line item in our monthly budget. I feel very strongly about giving now and as regularly as we can. If I worked for a company that matched lump sum donations, I would be inclined to donate differently. Still, with the prospect of an extra paycheck on the horizon, I will sign up for bi-weekly deductions from my paychecks to help fund our breakfast program. Talk about reaping the benefits of kindness right away!
Splurge
I know, I know. As the former reigning queen of mindless consumption, what am I thinking putting this on the list? In days gone by, I would spend every extra dollar I made. I would never spend more than I made. I would even pay myself first. But if there was anything leftover in my checking account, you had better believe there were sale racks to scour and shoes to buy. I’ve undone that habit, but I’m still a firm believer in treating yourself on occasion. While I wouldn’t spend my entire paycheck given the five other options I have, I could easily see a sushi dinner in my future. Especially if we use a coupon.
So Tell Me…What do you do with your extra paychecks?
I’m one of those bi-weekly paycheck people and nothing excites me more than a 3-check month! At the beginning of the year I had earmarked these two extra checks for paying off debt, but it’s been a weird year financially and I’ve had to change plans. As of right now, I think most of my next extra check will go towards Christmas and braces for my boys (*sigh*). I’m sure I’ll throw in a little bit of debt repayment but not nearly as much as I had hoped.
Oh, braces. My husband and I were just discussing this. Mostly because he still teases me about a retainer. I know what these teeth cost! I’ll be wearing that thing until I’m wearing dentures 😉
For a long time it was debt payoff for our extra pay. Now we get paid once monthly, which was a bit of an adjustment. We do need to divert our next bonus to a car savings fund, though. I think one of our vehicles will soon meet its end through rust.
That’s really smart. I’m so bad at creating separate funds. I kind of mentally earmark money but it all gets lumped in the same pot.
We are paid bimonthly now, but I just got an email it will switch to every two weeks at the beginning of 2017. This will mess with my bill paying schedule, but I’m excited for the extra paycheck now and then.
My vote is pay down the mortgage and get that sushi! (We have a local restaurant with half price sushi, half price bottle of wine one evening a week and we take advantage of that discount now and then.)
Yes! You sent good sushi vibes my way. I just got an email saying they are doing $40 worth of food for $20. Good through the end of next month!
When I first read this, I totally thought about putting it against the mortgage. Safe and yes, people don’t look at all that interest being paid often enough! But another part of me says splitting it up with some (more weighted than others) may be a better way to bring balance. And the see the volcano fund made me lol… Great line! There are no extra paychecks here anymore, but they were fun when we did get them!
I think the bulk of it will go towards the mortgage. It brings me such joy to see the number go down so quickly.
When I was on that pay schedule, the check usually went to bulk up saving…and an extra e-book or two. I think I’d be a little more careful now.
I’m torn between putting it in savings/retirement or paying down our mortgage. I love that you’d buy an e-book! Books are the best.
Right now I focus on investing and saving whatever I have left at the end of the month. Hoping to boost up both. Thanks for the tips!
Ha! I’m not sure they’re tips for someone who already does them 🙂 I did need a vote in favor of investing, so I’m glad you chimed in.
I only get paid once a month, so this hasn’t been on our radar, but the possibilities are all exciting!
We have vacations in our standard budget, so any windfalls go toward investing for early retirement. It gives us a lot of pleasure to think of that never-ending vacation!
Perfect way to phrase it. Why put it towards next summer’s vacation when it can go to an endless one?!
Debt, debt, debt . . . I really like the visual of you in the investing pool. In comparison, I’m stretching at the edge of the pool, with my foot just touching the surface of the water, while two big lifeguards named DEBT are trying to drag me away from it. But we’re getting there, and the extra paycheck certainly helps. I can’t wait until we have more options when it comes to our money.
Thanks for the reminder of how fortunate we are to have these options, Harmony. You’ll get there! And you’ll probably be swimming away before me 😉
Nooooo, you forgot not to walk under ladders! I’m afraid you’re doomed.
I only get paid once a month, so it’s a special kind of harrowing — trying to plan for a full month with just the one check. But whatcha gonna do?
I love the idea of taking advantage of your bi-weekly payments though. I’d definitely be throwing it at savings and, probably, a bit more of an extra mortgage payment. Man, PF nerds have boring dreams!
I think you meant the best dreams, Abigail! Ha! And I totally forgot the ladder bit…as Hubs just informed me that the last ball bearing in our washer seems to have died. Womp womp.
I get paid semimonthly, so I don’t have any extra pay checks. I do get employee stock a few times a year that I sell right away, credit card rewards, and other misc found money though. I usually just dump it into whatever my current savings goal is. For the longest time, it was the mortgage and right now it is my general savings account.
I would probably put yours into your Roth IRA to get that funded as early in the year as possible.
That’s a great way to look at it, Leigh. The sooner it’s fund, the sooner it can start compounding!
Extra paychecks right now either go to my business or paying down credit card debt. I can’t wait until I get to my future, which should allow for different categories there.
I can’t wait for your future either, ZJ. It’s going to be bright! Great following you on your journey so far.
I love how you mentioned to “Give a Little.” My wife and I find a lot of joy in giving to worthy causes and glad to hear you advocate that as well!
I do! It makes a big difference in how I feel about our money if that makes sense. The personal finance journey can be so me/I-focused that I really value having the resources to do something for someone else.
I just had my three paycheck month in July and my wife had hers in June! I love those months because it slows us to give an extra boost to our investments. Gotta love those months!
Like a lot of people in the UK I get paid monthly so I don’t get to experience an additional pay check. That win said whenever I get a bonus (6 monthly) I tend to invest the extra cash into my stock funds.
That’s so interesting, FrugalFox. I guess that shows how little I know. My husband gets paid on the 15th and the last day of the month, so he misses out on my joy, too. Really smart idea to invest the money!
Great list. Congrats on wading into the investing waters! There’s nothing quite like watching your money go to work for you!