Reader Q&A | How to Budget with “Extra” Paychecks

Reader Q&AToday’s reader question comes from a reader in Illinois.

In my previous job, I was paid twice a month, which made 24 pay periods in a year. I just started a new job that pays every two weeks, which makes 26 pay periods in a year. I’m trying to figure out how to estimate my monthly income for budgeting purposes. Basically, I think I should plan for the income from two paychecks per month, even though I’ll have a third check twice a year. But what do I do with that third check, in terms of the budget? It seems like a bit of a bonus–which, of course, we would want to spend wisely or save wisely.

Good question. I agree that thinking of the two “extra checks” as a bonus is probably best.

But – as you said – it’s a bonus to spend and/or save wisely, not to blow on impulse purchasing.

Since I don’t know the specifics of your budget – what you are spending, saving and wishing for – I can just tell you how I would probably handle this kind of “found” money.

First, I’d try to identify some kind of annual or biannual expense (like insurance premiums or dayschool tuition) and put this money into a separate account to cover those expenses. If those extra two paychecks are equal to, for example, your 6-month car insurance premium, then just cross that item off your budget list and stick those checks into an ING sub-account.

Other ideas for how to best use this money:

  • Apply it to your emergency fund, if you don’t yet have 3-6 months of expenses saved up
  • Put it into college savings accounts
  • Make extra payments on your mortgage (or add it to your “saving for a house” fund)
  • Create a family gift fund, to cover all birthday, anniversary, Chanukah, etc. presents
  • Set up an account to pay for extra expenses at Rosh/Sukkot/Pesach – especially if you are worried that your regular monthly budget doesn’t have enough wiggle room to cash flow the increased costs
  • If you have kids, create a “summer fun” account to cover anything from day camps to special outings (or if you are planning on having kids, create a “baby fund”)

No matter what you do, do it intentionally.

Remember: This isn’t FOUND money – this is YOUR money. You worked hard for it. And when you intentionally spend or save it, it will continue to work hard for you!

Do you have a question about budgeting, couponing, menu planning, blogging or anything else? Please send me an email – I love hearing from my readers!


  1. thanks, great suggestions!

  2. Rivka H. says

    I use Quicken for budgeting and keeping track of our money. We budget on a cash-flow basis. Those 2 extra paychecks do seem like “extra” money but by looking at the calendar in Quicken, I can see that we will need that money on X date. (We do automatic savings with ING, so that is also built into our budget.)

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