The Half Payment Budget Method

The Half-Payment Method: Is It Right for You? - The Budget Mom

It’s so frustrating to know that on paper you make enough to cover your expenses with even a little cushion for additional spending…BUT for some reason, you’re having the hardest time paying all of your bills and having food on the table. The half payment budget method may be your solution to break the paycheck to paycheck cycle and help you make ends meet without a stress level overload.
Regardless of income, so many of us live paycheck to paycheck and have a hard time finding extra money. You’re not alone in this struggle!

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 If traditional budgets do not work, you really might want to consider this method instead.The half payment budget or biweekly pay budget is really a simple concept that takes a little extra planning to get started. But once you get this method working, you will finally breathe a sigh of relief when you’re properly managing your money and you may even find a way to build your emergency fund and even have extra for your savings account. Doesn’t that sound GREAT?!
This system helps many people stop living paycheck to paycheck.  Basically, the half payment plan is where you take your regular, recurring bills and divide them in half and save these halves from your two paychecks to pay your bills ON TIME.Yes! Each payday, you set aside the “half payment” and make the full payment when the bill is due.Just hold on to your “half payment” until you have combined it with another “half payment” from your second payday.

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Example:Monthly income: $2,500 (paid $1,250 every other week)Recurring monthly payments (other than utilities):Mortgage/Rent: $900
Vehicle Payments: $450
Auto insurance: $100When you apply the half-payment method, your weekly budget would look something like this:Paycheck #1 – $1,250Set aside $450 for rent/mortgage
Set aside $225 for vehicle payments
Set aside $50 for insuranceLeaves $525 out of your paycheck for other expensesPaycheck #2 – $1,250Take $450 from previous paycheck and add $450 and pay $900
Take $225 from previous paycheck and add $225 and make full $450 payment
Take $50 from previous paycheck and add $50 to make $100 paymentLeaves $525 out of your paycheck for other expenses from each check
Now, let’s compare this to the method that many use – to just pay when the bill is due:Paycheck #1 – $1,250  Rent – $900Leaves $350 for all expensesPaycheck #2 – $1,250Vehicle payments – $450
Insurance – $100Leaves $700 for additional expensesIf you do the math, you will notice that you still have the same to spend over the course of a month, however, you will see a difference in the amount from each paycheck.  You might show that you have more money left after your 2nd paycheck of the month, but will you really save that?  Most people do not. If they have extra month to spend, they just spend it.


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THE PROS:

  • A consistent way to track your budget.
  • You’re less tempted to overspend when you know exactly how much you have and need.
  • You don’t have to use credit cards, or worse, payday loans to cover your bills.
  • Relieves stress by balancing your expenses.
  • Helps you see where all of your money goes by having this method on paper.

THE CONS: 

  • You have to keep track of your half payments.
  • You have to train yourself to not touch your half payments.
  • You need to get a half a month ahead to begin this method.

I don’t suggest jumping into this budgeting method all at once.You’ll need to ease into the system to see if it works for you. Starting might have you tightening your belt a little more, in the beginning, to get the flow going. But this will ease up after you have it all working properly.You should start with the pay period where you have the least amount of bills due and start with only one expense. I suggest starting with your car payment and work with that payment for a month or so to get the hang of things.Once you see how the half payment budget method works, you can begin transitioning all of your bills to this system.How you choose to “set aside” your money is really up to you and will definitely take a degree of self-discipline. Many banks allow you to open separate accounts or holding accounts which may be used.

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HOW TO START

I would not recommend that you jump in and change all of your bills so that they are paid using this method.  That may be too much and you might quit before you even really get started!  Instead, select one bill, such as a car payment, and try using the half payment method for a few months.  Once you see it works, you can transition other bills into this same payment method.

WHY IT WORKS

So, why would you use the half payment method?  For many it works better because you have around the same income to spend out of every check, rather than cutting your spending in half like you see in the second example.  For many, there is always that paycheck that makes spending tough.  When you have to pay a few larger bills all out of one check, it often leaves little to no money left for other purchases.By changing to the half method, you are still paying your bills, but you are just earmarking money to pay a bill due later in the month.  You still have the same income.  You still pay your bills on time. However, you have more disposable income every two weeks by doing it in this way.What is great about this method is that it works no matter how you are paid.  If you are paid monthly or weekly you might try using a quarter payment method every week (breaking out your check to leave spending weekly).

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