Most employers pay their employees twice a month or biweekly. If you get paid biweekly, there are two months in 2020 in which you will get three paychecks.
If you get paid twice a month, you will get 24 paychecks a year. If you get paid biweekly, you will get 26 paychecks a month. Those who are getting paid biweekly, get two extra paychecks a year.
The key is to plan your monthly budget based on two paychecks rather than three. If you plan ahead, you can use the two extra paychecks to reduce your debt, save for your dream vacation, or a home improvement project you have always wanted to do.
If you get paid on Fridays:
If your first paycheck for 2020 was on January 3, then your three paycheck months are January and July.
If your first paycheck for 2020 was on January 10, then your three paycheck months are May and October.
What if you get paid on a Thursday?
If your first paycheck for 2020 was on January 2, then your three paycheck months are January, July, and December.
Take advantage of your 3 paycheck months
Putting the extra paycheck to work
If you plan ahead, you can put the dollars from the 2 extra paychecks to work. Most people don’t have a plan and end up spending that money. Even worse, some people don’t even know what months those extra paychecks come in.
Pay off your high-interest debt – if you have a high-interest credit card debt or a car loan, use the money to pay some of it off.
Pay off your mortgage – Consider paying off a portion of your mortgage. Check with your mortgage company to ensure that you have no prepayment penalties. If you do this, more of your future payments will go towards the principal and less towards debt.
Save for downpayment on a house – If you don’t own a house, use the money to save for a downpayment on a house
Save money for Christmas gifts – Save the money to buy Christmas gifts at the end of the year
Emergency fund – If you don’t have an emergency fund, use the extra paychecks to start one. Rule of thumb is you need 6 months of expenses saved for emergencies such as an illness or unexpected job loss.
Save for home improvement projects – Use the money to save for that dream home improvement project, whether it is renovating the kitchen or upgrading your media room
Contribute to your retirement account – if you have an IRA or a Roth account, contribute to it to save for retirement. If you don’t have one, it’s time to open one.
Invest in dividend-paying stocks – If you would like to replace the income from your job with passive income, buy some good dividend stocks
If you get paid biweekly, you will get two extra paychecks a year. What months you get the extra paychecks depends on your pay calendar. Have a plan in place to put those extra paychecks to work. Contribute to your retirement account, save for a vacation or your dream home improvement project, or pay off high-interest-rate loans.