How to manage expenditure when billing cycles and paycheck cycles are not aligned?

Question

I get paid on the 15th and the last of the month and my husband will be getting paid weekly when he starts a new job after the one he has been working at for 25 years will be closing soon.

How does one work the bills when one person gets paid twice a month and the other will be weekly. I usually make more money then he does currently and so we pay the bigger of the bills when I get paid and the other bills which are usually smaller on his, but when he goes weekly; how does that work?

I would like some advice on who are in a similar situation or who can give some advice on how to how to this. Thank you.

Answer 1

It sounds like the problem is that when your husband got paid twice a month, his paycheck was large enough to cover the bills in full so you were able to pay them right away, then you could use the rest of the money for optional expenses like entertainment, or you could cut back on variable expenses like groceries. Now that he's being paid weekly, a single paycheck is no longer large enough to cover all the bills, even though he's being paid the same amount (I assume your question would be different if he'd taken a significant paycut). So you're worried that you may spend too much on groceries/entertainment/etc then not have enough left to pay the bill when he receives his next paycheck.

If that's your concern, then when your husband gets paid you need to set aside money specifically for the bills that are coming due later. If you have a $400 bill due at the end of the month, set aside $100 from each of his paychecks to pay the bill. You might want physically separate the money, for example by transferring it to another account until you're ready to pay the bill. When your husband gets his final paycheck for the month, transfer the $300 you saved earlier in the month back to your primary account and pay the bill.

As others have noted, tracking your spending and using a budget will be important tools for making this approach work. Make a list of all the bills you paid last month and when they were due. Also list out your paychecks and their dates. You'll be able to see which bills can be paid with a single paycheck, and which ones will need to be split across multiple paychecks. Don't forget about bills that come less frequently (like every three months), and plan for those in the same way.

Answer 2

The ideal state is one in which it doesn't matter when either of you get paid. Where you use last month's income to pay this month's expenses. The starting place is a simple budget. You know when money is coming in, and you know when your fixed expenses are due, so just map it out on paper/spreadsheet to know how much of each paycheck needs to go to which expenses. Once you are a month ahead, you just have to worry about the total expense pile rather than the timing of the paychecks and payment due dates.

It's probably also a good time to review spending, if things are tight, figure out where the money has gone and where you can cut spending, with the goal being to get a month ahead first, then to have a healthy emergency fund, retirement saving, etc.

I suggest researching zero-based budgets, these are characterized by deciding ahead of time where every dollar will go, that means you budget for vacations, car maintenance, going out to eat, etc. It may sound rigid, but it's a tool that will greatly help. There are plenty of budgeting applications and spreadsheet templates you can use as a starting point.

Answer 3

We are in a similar situation, but one of us is paid monthly and the other is paid semi-monthly. Here's some things we do that might help you as well:

• As much as possible, stagger large bills so they don't all hit at once. Our mortgage hits on the first, so we try to schedule as many other payments as we can on the 16th so the first paycheck is not overloaded.
• See if your bank/landlord will allow you to pay the mortgage/rent in half-payments bi-weekly. This will smooth out the payments and as a bonus you pay one extra monthly payment per year, since there are roughly 26 bi-weekly periods in a year. But don't pay extra for this - at worst you can just send two payments manually.
• Plan a month out. Save enough from the first paycheck(s) to cover any bills that come out in the second half of the month.

• Use separate bank accounts for "regular" monthly bills and for discretionary/ periodic spending. We deposit our paychecks into one account and transfer all but what is needed for that period into a second account. That way we always know how much money we have for groceries/dining out/etc., and when it's gone, it's gone. IT may take a few months to get used to this, but once you learn to stay within that budget it helps control "impulse" spending.

• Make sure you have enough "cushion" in your cash to handle any bumps. For us that's $500 per month (meaning we try to keep the "discretionary" account above that at a minimum). You didn't mention debt but the last thing you want to do is use credit cards to cover these bumps since it can become a habit that leads to a snowball of credit card debt.

Above all of this is to make sure you have a decent "emergency fund" to cover any large unexpected expenses, and to plan for other irregular expenses like car and home repairs, etc. We use a separate savings account as an "escrow" account to save up for these bills as well as holidays, property taxes and insurance that don't occur monthly.

Good luck!

Answer 4

You should not be paying bills from paycheck money.

Note that the following can have some hiccups at first if you have some long-term bills, such as large yearly tax bills, as you won't have been following the pattern a whole year yet. Make sure to save extra the first year to accommodate.

Step 0: Set money aside

It doesn't matter what you call this "aside money." Savings, buffer, The Pile Of Dough... call it what you want, but just set some money aside. For the purposes of this answer, I'll usually call it "savings" or "budget savings".

This can be in the form of a bank savings account, or anything else... it could literally be a pile of money sitting in an envelope in a safe place. Whatever you do, just start it somehow.

If you don't have much extra money that's fine; you can start it right now with a single $1 bill.

Step 1: Pick an amount of time

This will be the amount of time that you consider to be your "bill payment timeframe." This time frame should be at least as large as the amount of time you have between most bills, which for many people is 1 month. It sounds like right now you do things per-month. You can pick 1 month to keep things how you are used to if you would like.

If you would like to be more conservative in your budgeting, choose a larger amount, perhaps 2 months or more.

Whatever amount of time you chose, now double it.

This chosen time is not really important by itself. It is only useful to calculate a number later.

Step 2: Figure out your average money earned and money owed over that time

Do a little bit of arithmetic to calculate some numbers normalized to your chosen time then add up your money in and money out, like so...

Example 1:

1. I chose a time period of 2 months in step 1 (1 month doubled). There are 6 units of "2-months" in a year ("2-months" times 6 = 12 months = 1 year).

2. I make $100/week. $100/week times 52 weeks = $5200/year But I want it per 2 months because of my step #1 choice. $5200/year divided by 6 = $866/2-months

$866/2-months.

Example 2:

1. I'll stick with the 2-month thing (6 units per year).

2. I make $250 semi-monthly. $250 twice per month is $1000/2-months.

$1000/2-months

Example 3:

1. I pay $100/month for gas, a $200/month bill, $150 every 3 months for another bill, and a $1000/year property tax bill. (Apparently I never eat)

   2a. $100/month times 12 months = $1200/year, divided by 6 = $200/2-months

   2b. $200/month times 12 months = $2400/year, divided by 6 = $400/2-months

   2c. $150/3-months times 4 = $600/year, divided by 6 = $100/2-months

   2d. $1000/year divided by 6 = $166.66/2-months

   2e. $200 + $400 + $100 + $166.66 = $866.66

$866.66/2-months

In your case you have 2 separate sources of income, so add these together. Keep these numbers handy for later use, including any long term planning you want to do.

The number representing your expenses (bills, food, gas, taxes, etc.) is the more important number. This is your target number for the next step.

If your total expenses are greater than your total income, then there is no special budget method that will help you: you are doomed to fail if you keep that up long term. You need to increase your income (not as easy) or decrease your expenses (comparatively easy) - there is no way around this.

Pay all these expenses out of your budget savings, and put all of your income (or at least as much as your target number per time period) into your budget savings.

Step 3: Save

Whatever number you calculated for your "expenses over time" in step 2, consider that your target number.

As long as your money you have set aside (Step 0) is less than your target number, do not spend a penny on anything unnecessary. You must put all of your income, every penny, into your budget savings.

This is the step that nobody wants to be in but which might be necessary from time to time.

Pay your bills from this budget savings money. Even if you cash a paycheck and take the money straight to pay a bill, don't look at it as paying the bill from the paycheck. Look at it as money going into the budget savings then coming immediately back out.

If you have any bills or other expenditures that you accounted for in step 2 that are payed out less frequently than your arbitrary unit of time (eg: 2 months), then you still need to keep "paying" those bills. You may want to have a separate "pile of money" (savings account, envelope, literal pile, or whatever) to keep track of these virtual bills that you impose on yourself.

Example: Step 2's example 3 had a $150/3-month bill and a $1000/year property tax. Normalized to the 2-month period that is $100/2-months and $166.66/2-months. This means that every 2 months you need to set aside that $266.66 toward those bills. This is money you cannot touch for your vacation - you must consider the money spent even though you are still holding onto it.

Do not proceed to step 4 until your budget savings is greater than your step 2 target number.

Step 4: You're getting ahead, now what?

Now you can start spending money on things you want again. Whatever you do, do not put your budget savings amount lower than your step 2 target number.

As long as you keep your savings higher than your target number, you can spend the rest.

If you want to save up for long-term expensive thing like vacations, then set aside some of your extra money whenever you are willing. If you keep setting aside money for what you want, eventually you'll have enough for it. Alternatively, you could go back to step 2 and add "vacation: $100/month" as an expense as if it were a bill to pay.

Step 5: Keep referring back to step 3

Don't spend money you don't have. If your money is less than your calculated target number, then don't spend any extra.

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My commentary...

If you do this, then it doesn't matter what your income schedule or your bill schedule is like. You simply have a pool of money that has an input (paycheck) and an output (bills, etc.). As long as this pool is large enough and kept full then the bills get paid and you can spend the extra.

Speaking of "keeping the pool full," keep in mind that the larger this pool is the easier it is to stop caring about when money arrives or gets paid. If your saving has exceeded your target number for a while and you want to be safer, then increase your step 1 chosen time period, which increases your step 2 calculated amounts and increases your target number. This might put you back into "Step 3: Save" again, which can be painful, but it doesn't need to be if you increase in small amounts at a time.

If you keep increasing your target number, then eventually you could get it up to a year's worth of expenses. At that point, you probably have no expenditures with a period larger than that, since even property taxes are often paid yearly. This makes things easier to keep track of, and it also has the added bonus of you knowing that if anything happens to you that you would be covered for a year (or however long you've increased your savings by).

When I was young, I followed a similar model, though I just picked an arbitrary number and said "I don't want my finances to drop below $1000." I had a minimum wage job at the time, but I had few expenses to I got my savings up to $1000. Then I just kept increasing it. Eventually, after creeping up over time it was $2000 base savings target, then at some point it was over $5000. Then I got married, had kids, and the target amount has gone up and down over time, but all along I've tried to say "If we have less than $X, then we can't do anything fun or nice."

An additional benefit of staying ahead is that it covers you for the unexpected costs as well. If your target number is $2000, you currently have $2025, and you get smacked by an unexpected $800 car repair bill, you have the money for this unexpected need. You can't spend it below $2000 for wants, but I do for needs. Then I just get stuck for a while back in step 3, saving, until you're >$2000 again.

Answer 5

Pick a time period and normalize everything to that to determine your likely income and expenses. Let's pick 2 months just to prove the point: You will get paid $x every two weeks, so you will receive 4 paychecks totaling 4x in 2 mo. Your husband gets $y every week, so he will have 8y in 2 mo. You will get a bill for $z every month, so after two months you will have spent 2z. Your total income over this period is 4x+8y-2z.

In reality, picking 1 month or 1 year is more practical as your accounting period.

However, there is no law requiring you to spend your entire paycheck as soon as you get it. Money doesn't go stale (well, there's inflation, but that takes decades to matter). Unless circumstances compel you to live paycheck to paycheck, you should be maintaining savings equivalent to at least several months' worth of your incomes by putting some part of each paycheck aside. The frequency of paychecks doesn't matter, so long as you set aside the same percentage every time. This fund will be much larger than your bills, so you can pay your bills from it without worrying about who gets paid when, and things will even out in the long term (long meaning several months).

Answer 6

Considering that married couples are treated as a single financial entity for many intents and purposes, you could simply use one shared bank account where you put both your paychecks and which you use to pay all your expenses. A lot of married couples I know operate that way.

But if you prefer to both keep your financial autonomy, you could create a third bank account for shared expenses. That arrangement isn't uncommon either. If you do not want to pay account fees, you can also maintain the account on paper, but leaving it to the bank is usually way more convenient and way safer. Use this shared account to pay for anything which affects you both, like rent, utilities or groceries you both eat from.

Each of you puts an agreed upon part of each of your paychecks into that shared account. The total money going into your shared account per month needs to be large enough to cover all your monthly fixcost, plus a bit extra to pay for emergencies or unplanned purchases which also affect you both. The rest of your paychecks goes to your personal accounts and is for your personal spending.

But how much is your monthly fixcost and each of your monthly incomes?

Get out your bank statements from the past couple months and do the math. If you want to convert a weekly income/expense into a monthly income/expense, multiply it by 4.33 (average number of weeks in a month). So if you contribute 200 € per week, it's as if you contributed 866 € per month. If you pay 30 € per week on something, you are paying 130 € per month on that thing.

How much of each of your paychecks goes into your shared account, where you draw the line between personal and shared expenses and how you make financial decisions about the funds in your shared account is something you need to decide with your spouse.

Answer 7

I went through a similar transition when I started my current job, going from a biweekly to a monthly paycheck. My emergency fund at the time was plenty to cover a month's worth of bills, so it didn't cause any hardship in that respect. It was just weird at first because it was different. After a few months of managing weekly income, it will seem normal.

Other posters have given good strategies for handling the transition; the key point is really just to set aside some "bill money" from each paycheck as it comes in.

Answer 8

Cash flow management is tricky for both individuals and businesses. We have irregular income so, we do a super simple way (mentally), but tough to implement. We collect the money earned in the current month, and then make a budget based on the money earned in the current month for the subsequent. The tough to implement part is that you need money to pay your bills for the current month. If you can get a month ahead it is simplistic way to manage your cash flow.

Doing some research on this, I found the app Coinage. From their site: Using your schedule, Coinage clearly lays out your finances so you can predict where you’ll be at the end of the week, the end of the month, or the end of the year.

I will be trying it out and see if it helps in planning and management of money.

Answer 9

My personal strategy: I have a money market mutual fund (I use Vanguard but there are many others), and I have my paycheck deposited into that, and not my checking account. Then I have an automatic transfer setup from my money market fund into my checking account, for whatever usual amount that I need to pay bills. This does require that I have enough of a buffer of extra money in the fund, but that is also my emergency cushion, so I almost always have plenty there.

Some other advantages of this method, one, you get good interest rates on your surplus cash, and second if you get a bonus or such, you are not so tempted to spend it as it does not make it to your checking account.

Answer 10

First off, you need to have enough cash cushion that you reason not in "daily pay" but in yearly pay. This is to be fixed asap, many good resources on how to attain this can be found in this SE.

Then you set up a joint account for common expenses where you contribute proportionally to your incomes. Monthly, daily weekly etch pay MUST not matter because this account MUST have about 2 months of "cushion".

Answer 11

If you exactly earn as much as you spend, your bank account will vary around a fixed point. The variations around this point are caused by the timing of income and expenditures, but the average does not.

Now your problem seems to be that you worry about a timing variation, presumably because that would cause you to bounce checks or have other credit problems. That means you really worry about your average bank account being too low.

The safe bet is to have your average at (or above) one month of expenditures. In effect, you pay your bills in February with the money you made in January. That way it does not matter exactly where in January your salary was paid, or even how often. Nor does it matter exactly when in February the bill will arrive.

Credit cards make this slightly easier by allowing you to pay in February for purchases made in January. But the trap here is that it's very easy to delay the credit card bills one more month. That is much more expensive - don't do it. Also, this grace period only applies to purchases; you can't use this for cash advances.

Answer 12

Even with as many answers as already exist here, there's one option that hasn't been explained.

Don't change anything

Since your husband is getting paid more than before (as explained in the comments), you really should be getting more in your bank over time. Since you state that you can already easily pay your bills, you just have to let his paychecks accumulate before paying the bills.

Here's some math that might help, hopefully:
Random yearly salary: $120,000 (for easy math)
Monthly pay (ignoring taxes): $10,000
Bi-Monthly paycheck (again ignoring taxes): $5000
Equivalent Weekly paycheck (once again ignoring taxes): $2307.69 (52 weeks)
New weekly paycheck (ignoring taxes and including pay increase): $2500 (for easy math)

Each month, your husband used to get 2 paychecks that equaled $10k, now he generally gets 4 paychecks that equal the same amount. You don't have to do anything except wait to pay the bills at your normal time. If you have enough money in the bank already, you don't have to worry if it seems like more is going out than coming in, because that's just not true.

What is true is that for 4 months each year, you'll be getting an "extra" 5th check per month, which earns you $10k more a year, for a new salary of $130,000. You're already getting the same amount per 4 week month as before, so your finances are fulfilled, and with the raise, you're doing even better.

Of course, this example has been greatly simplified, but it should still show you how your new situation works with even as little as an 8% pay raise.

Budget

It seems as if you have a basic budget: money comes in, so you pay the bills. That's great, but it's missing a gap in your peace of mind. No, I didn't spell that incorrectly. Since you are confused, possibly slightly panicking, and don't understand your new situation, you aren't seeing where your money is at clearly enough to leave your mind at peace with the new situation.

I could go on about different methods of budgeting and how they help & hinder, as well as what's right in your situation, but I won't. Instead, I'll point you to a great book that does it for me, in simple terms & concepts, which make it really easy to understand and implement. The book "America's Cheapest Family" has a variety of options for budgets and, as a side benefit, shows you how to maximize the benefit of how you spend your money while spending less of your money.

I'm not affiliated in any way with this book (any referral added to the link is done by SE, as they've done on previous Answers of mine), but rather I'm a satisfied customer. I've read the book at least twice and have learned better ways to manage my money and my budget.

This family has not only learned how to budget for themselves, but they've personally helped many people fix their own situations and wrote the book so they could help more people than those they can fit around their kitchen table. Also, the book really is written by the whole family. Most of it is tag-team written by the husband and wife, but the kids also chime in at different places in the book. The parents have taken the time to teach their kids how to budget, so the kids won't have the same problems the parents did.