Every-Other Week Paycheck - Paying This Month's Non-Recurring Bill Expenses and Next Month's Recurring Bills
I get paid every two weeks and have my monthly bills divided into the 1st and 15th and then attribute my paychecks for the year to pay either the 1st or the 15th, with two "free" paychecks. I haven't had a "free" paycheck since joining the YNAB community, as I'm just now finishing up my free trial.
My last paycheck was on January 23rd, but is actually the money to pay my February 1st recurring bills. The issue I'm running into is I don't have enough of a buffer to leave those funds untouched for daily expenses (food, gas, etc) until 2/1. So, there are transactions being charged against February's money in January.
Am I making this more difficult than it needs to be? Any guidance/suggestions will be greatly appreciated.
If you need the money now to buy groceries, then you don't actually have it available to pay bills on February 1. So you just need to be really honest about where you are financially. If you need to buy gas tomorrow, make sure there is money in your fuel category. Unbudget from other categories that you had been building up in order to cover your February 1 bills.
- Budget enough for gas, etc. in Jan to get you to 2/1.
- Budget bills from Feb. 1 through Feb. 15.
- TRY to budget toward bills from Feb. 15-end of Feb with this end-of-Jan check. This is Rule 4 at its best.
Every little bit in Step #3 will get you ahead and therefore require less from of the end-of-Feb check (letting you put it further into March). Repeat this every month, getting a little more ahead in the "new" next month's area.
At some point, your last check in the month will completely fill out the remainder of next month. Now you're home free -- it no longer matters you are paid bi-weekly. You can wait until you get both checks and budget the following month in one go. (Temporarily stash the first in a holding category so it's out of the way until the end of the month.) You will have a single, month-sized, effective paycheck to budget on a calendar basis, ideally with a couple clicks.
Once you can budget your checks entirely into next month's area, I think it's far easier to chuck the remainder into an emergency/income replacement fund rather than try to budget past next month's area.
Trying to fit your pay cycle into the monthly YNAB budget cycle is like trying to fit a square peg into a round hole.
I see a lot of people doing this, making categories to line up with their paychecks. I get why it is done, you want to make sure you cover all your expenses with that paycheck, but that is overlooking the root of your problem. You are likely living paycheck to paycheck.
I am not saying you cannot do this in ynab, but you are going to struggle with using it and looks like you are hitting one of the reasons why.
Categories should reflect your priorities, not your pay cycle. This can be difficult when starting YNAB because you don't have enough cash on hand to live on last moths income.
This is just my opinion, so long as you try to budget based on your pay cycle, you will struggle to use ynab. I would put forward, ask yourself why you split your categories to align with your paycheck. A big thing to get the concept of, and I think it would help a lot of new people, categories = priorities. Your priorities don't have a paycyle and neither should your categories.
You first need to budget for your immediate expenses to get you through until Feb. Put money needed in your food and gas funds. The remaining you can put towards your February bills. You may need to look at your priorities to have the money needed for February 1st bills. Take money out of categories that aren't as important (like Fun, clothing, dining out, etc) to cover the February transactions if you are able to. Things may be tight until your February paycheck.
I also get paid bi-weekly. When I first started budgeting, I had a list of all of my expenses with the due dates and determined what I could pay for out of each check. I know all the things I need money for each month (bills and daily expenses). I fund different categories depending on which paycheck it is. I set up my categories so I know what I am putting in each category by paycheck in order to cover my bills and daily expenses each month. It makes it really fast for me to see that with Paycheck 1 I need to fund a certain amount for that category. You can always add in extra if you have it to any of your categories so you can get a month ahead or more, but it tells me the minimum I need to fund the category for that paycheck. I also do this for my Christmas fund and other savings funds. I don't know if that will help but it works well for me. You can see I put $30 in my fuel fund each paycheck (P1 &P2). I fund my cell phone category out of paycheck 2 because it is due the first of the following month. I add $75 out of each paycheck to my student loan category for the month because $150 is due the 5th of the following month before the first payday. I hope that makes sense.
Give yourself at least 3 months to work out the kinks of how you want YNAB to flow. It will take that long for you to get a real grasp on actually how much you spend on groceries and fuel, and other important to you things each month. So don't worry about shuffling and don't stress about moving money in categories.
My BF gets paid bi-weekly, and I get paid 1st and 15th. I REALLY prefer my pay cycle even though it means the amounts fluctuate a lot more than when paid bi-weekly. The most important thing I've learned with his checks (I run his budget) is that I need to double check with what is due between that pay check and the next one and make sure I have it covered. Some bills, I split into half in the budget (basically what Maroon Piccolo does), and fund that category out of money from 2 pay checks. So in my budget I have noted what the exact due date of each bill is so that I know when the category has to be funded by. (So it says 1 next to the mortgage, and 9 next to the phone bill, etc). So then I don't have to worry about whether or not things are covered until the next pay day.
We are not really able to do much about getting ahead based on our current income. But we had a few windfalls last year that enabled us to take care of a few things, which gave us more breathing room. So I fund the mortgage category with half of the payment each pay check, and then it sits there until it's needed, which is actually a full month later. So I mostly ignore how much is in the category and just put in the correct amount per pay check (half the payment) and I know that it's there. We also had the chance to pay our car insurance in the 6 month lump sum, instead of the monthly payment, so I also fund that category in preparation to do it again in April, so each pay check I put $175 into the car insurance category, and it'll sit there until it's needed (or an emergency... we can always switch back to monthly if need be, but I don't think we'll need to do so).
Hope that helps a little bit!
Hi Khaki Horn ! If you get a chance, you can learn all about how to increase the time between when you earn money and when you spend it in our Break the Paycheck to Paycheck Cycle workshop.
Let us know if you still have questions!