Is this a realistic plan for living on a weekly paycheck?

Question

I recently started a job which pays weekly and I'm not use to it because all my jobs until now were all monthly.

With all my bills predominately coming out as monthly direct debits (though I have a couple of weekly bills such as rent), I have been trying to work out how I will approach this. Previously, I have had two current accounts - a spending and a bills. My salary goes into the bills and a standing order for a weekly sum gives me my spending.

My plan is to switch this - have my salary go into my spending and a standing order go to the bills. I have worked out what this standing order will be using this formula:

(Monthly bills total * 12 Months / 52 weeks) + Weekly bills total = Standing order

Whatever remains is my spending allowance for that week.

I've gone through my commitments with a fine tooth comb and ensured that my absolute basic income will cover my current obligations. In addition, my bills account will build up some funds because I've classed a bi-monthly as a monthly so extra will be going in.

So I believe that this plan will work.

However, I've no idea if this is a practical plan because I have no experience living off a weekly wage so my theory maybe incorrect. I'd rather find out now rather than in a month or two when I'm finding my direct debts bouncing.

So putting the question out there - is my plan realistic or do I need to adjust and if so how?

Answer 1

I have, rarely, gotten paid weekly. However almost all of my jobs paid me every two weeks. But I think my lessons learned will apply.

What I would do is budget as if every month only contained four weeks. In my case, that meant dividing my expenses into two groups: 1) Those that I paid from the first paycheck of the month (usually car payment and utilities) 2) Those that I would pay from the second paycheck of the month (rent and incidentals such as trash). Of course some expenses were paid each paycheck such as gasoline, food, and pocket spending.

As there are 52 weeks in a year I would be paid 26 times a year. Since I budgeted for 24 pay periods a year this means that I would experience a month with three paychecks in it twice a year. I would use those extra paychecks to do things like build up emergency (short term, quick availability) savings or to pay down debt.

If you budget as if each month has only four weeks then four times a year you will experience a month with five paychecks in it instead of four. You can then use that extra paycheck to buildbuild up savings or pay down debt.

Answer 2

The key thing is to figure out what your total regular, recurring bills are for whatever period of time, as compared to your paychecks.

Pick a convenient time period. I usually find a month convenient because most regular bills are monthly: mortgage, electricity, gas, Internet, insurance, etc. Some of them are really every 30 days but that's close enough to monthly. If most of your bills or your biggest bills are on some other schedule, fine. Let's just assume we do it monthly for the sake of argument for the moment.

The convert any bills that are not monthly, and your income, to the equivalent monthly amount.

If your pay or a bill comes twice a month, double it. If it is weekly, multiply by 52 to get a yearly amount and then divide by 12. My car insurance is every 6 months so I convert that to monthly by dividing by 6. Etc.

Use these monthly numbers to figure out your budget.

If it's more convenient to use some other time frame to budget -- weekly or quarterly or whatever -- fine. Just do the same sort of calculation, but convert everything to a cost per week.

Note these conversions mean that you may never get a bill for the amount you actually budget for. I mean, take my car insurance: It's $1620 every 6 months. So I divide by 6 and get $270 per month. They don't actually send me monthly bills for $270. I have to save it up over the course of 6 months and then pay all at once. But for purposes of budgeting, car insurance costs me $270 per month.

If a calculation is awkward -- if you have a bill that's every 29 1/2 days or doesn't come on a regular schedule -- err on the side of UNDERSTATING income and OVERSTATING bills. If you plan carefully and end up with some extra money at the end of the month, I'm sure you can think of something to spend it on. (Gambling, drugs, and wild women are popular ideas.) But if you come up short at the end of the month, you may be in trouble.

These days I get paid twice a month. Whenever I get a paycheck I pay all the bills that have come in since the last paycheck. Twice a month is often enough that that means I'm not paying late. (I'm a little extra cautious with credit cards: I often pay something on those even if I haven't got the next bill yet, an amount that I know will be more than the minimum payment so if the timing is bad, I don't get a late fee.)

Answer 3

The simplest way to deal with being paid weekly with monthly bills, if you can do it, is to get one month worth of salary saved up and live one month behind your salary yourself.

1. Pay all your bills for the month
2. Get one month salary in an account (not your main account)
3. Money is paid into the account weekly
4. One a set date every month you go into the account, subtract one months salary from the balance and transfer it to your "spending" account (and ideally some to a savings account). Ideally this date should be a few days after your bills go out

Your "salary" account acts as a buffer between your weekly wage and your monthly bills. Whatever you remove is your "after bills" money to spend or save however you like.

Answer 4

One consideration that is different from monthly to weekly: timing of bills.

You'll be better off if your bills don't all come due at once. Rent of course is likely your major bill, and that likely takes up more than one week's bills portion of your paycheck; but hopefully not more than two. The other bills - cable, internet, electricity, gas, whatnot - plus your credit card (if you have one) should be timed to be due opposite the rent if possible. So if rent is due the 5th of the month, get your other bills to be due the 20th (or around that). At least in the US, most large companies are willing to set your due date to any specific day of the month at your request.

This protects you from several problems, most significantly if your employer were to fail to pay you one week on time. Staggering your bills means you're more likely to have time to fix it.

Beyond that, I agree that a standing order as you state is a reasonable idea. Some companies (such as all of those that I've worked for the last 15 years) will be willing even to split your paycheck into two accounts; that may help in addition.

And - finally - try to have a month's excess in the bills account if at all possible. Even if you're mostly paycheck to paycheck, having an extra month of bills means you don't get NSF charges and such if you mess something up with the transfers.