There are many different budgeting methods and structures out there. Which one is right for you depends on your own preferences and personal financial situation.
In this post I’m going to discuss the biweekly budget.
What Is The Biweekly Budget?
The biweekly budget is, as the name implies, a budgeting method that requires you to create a new budget every two weeks, or when you receive each paycheck.
I’m calling it the ‘biweekly budget’ because most people get paid every two weeks, but if you don’t, you could also call this budget the ‘paycheck to paycheck budget’.
There’s a certain stigma attached to the concept of living ‘paycheck to paycheck’. It’s widely perceived to be a sign of a lack of financial means or of poor money management skills.
However, there is a difference between living paycheck to paycheck and budgeting paycheck to paycheck.
If you’re living paycheck to paycheck, it often means that you have little to no money saved up, and that you depend on each paycheck as it comes in to cover all your living expenses, bills, spending, etc until you receive the next paycheck, when the cycle starts over again.
This usually means that if you miss one paycheck for whatever reason, you’re automatically behind by a minimum of two weeks’ worth of expenses. Not only that, but overspending, a large unexpected expense, or even just a lower than anticipated paycheck can all spell financial disaster. This type of financial situation makes it dangerously easy to fall into debt, and extremely difficult to escape the cycle you’re stuck in.
If you’re budgeting paycheck to paycheck, it doesn’t necessarily mean that you don’t have enough money to cover your expenses without that next paycheck. You could have thousands saved up in your bank account and still budget your money as your paychecks come in, for a variety of different reasons, which I’ll explain shortly.
So, while this type of budget is pretty much the only option for people who are living paycheck to paycheck, it’s still a completely legitimate budgeting method for everybody else too.
Who It’s For
The biweekly budget is simple, straightforward, and easy to follow once you get it set up. For those qualities alone, it makes it a great budgeting method for people who don’t want to bother putting a ton of time and effort into their budget.
It’s also a great option if you’re just starting out on your employment journey and you’re new to receiving a regular paycheck, or if you just don’t have much experience with budgeting. The easier a budget is to learn how to implement, the greater the chance there is of you sticking to it.
As I mentioned above, it’s also a very useful tool for those of you living paycheck to paycheck. In fact, amongst your limited budgeting options, it’s probably your best bet. I know it may seem like your situation is hopeless; trust me, I’ve been there.
But the good news is that if you carefully plan out your budget and stick to it, you can eventually escape your situation. It’s infinitely better to have a budget than to not have one, even if it seems like you don’t make enough money to warrant it.
The only way to break the cycle of living paycheck to paycheck, bar some financial miracle or windfall, is to plan and budget your way out of it.
How To Start
Before you start using your new budget, consider doing a financial ‘spring cleaning’ by going over all your expenses and lowering them as much as possible.
This should be done on a regular basis, and before starting a new budget is the perfect time to do so.
Check out my post Lower Expenses = Free Money for some help doing this. After all, the lower your expenses are, the more wiggle room you have in your budget to spend on… well, everything else.
Once you’re done that, the first step is to mark down all of your anticipated fixed bills and expenses, such as mortgage/rent, car payment, phone bill, etc.
Also mark down your paydays. Each payday will be the start of a new budgeting cycle.
I mark my financial information down in two places. First, I use the calendar app on my laptop. It’s useful to have it on your computer because that’s most likely where you’ll be creating your budget while checking your online bank accounts, credit card statements, etc.
I also add all the relevant information to the calendar app on my smartphone, in case I want to check up on my budget while I’m out, and so that I can handle any online banking I need to do while I’m away from home.
You could use a regular paper calendar and a pen if that’s what you prefer.
You don’t technically need to use a calendar, but I find it to be the easiest and most convenient thing to use. It makes it easy to glance at the period you’re budgeting for and determine exactly which bills are due and when, before your next paycheck arrives and the next budgeting cycle starts.
No matter what you use though, I definitely recommend marking it down somewhere instead of relying on your memory, because you will inevitably forget a bill payment or an upcoming expense, and that’s how budgets are broken.
When it comes to regular variable expenses like gas and groceries, you should calculate what your average biweekly spending is. To do this, go back into your records and add up how much you spent in each category in each month for a certain number of months (I recommend 6). Then, add those totals together and divide by the number of months you calculated; that will give you your monthly average spending. Now, divide that number by two to determine your average biweekly spending.
So, for example, let’s calculate my biweekly spending on groceries. I’ll only go back 3 months for the sake of brevity. Let’s say I spent $375 in December, $346 in January, and $326 in February. I would then add up all those totals to get $1047. Then divide that number by the number of months you included. So in this case, divide by 3 to get $349. That’s my average monthly spending. Divide that number in two to get your biweekly average spending, $174.50. This is the amount that you need to include in your budget every two weeks.
Note: I use my credit card for everything (I am a points collecting enthusiast) so it’s easy for me to go back into my records to determine my exact spending patterns. Most online banks have the same feature, if you’re a debit card user.
If you mostly use cash, you’re probably out of luck unless you keep all your receipts. If you don’t, take your best guess at your average biweekly spending on your expenses. From now on, keep all your receipts, or at least note down somewhere how much you’re spending each month on each expense. It’s very hard to create a budget if you don’t know what you’re spending in the first place.
Don’t forget to include in your budget any non- or semi-regular expenses that may be coming up soon that you know of, such as prescriptions, vehicle servicing, etc.
If you know how often these irregular variable expenses come up, it’s always a good idea to put away a percentage of their cost in each month (or in this case, every two weeks) leading up to the month the expense occurs. This prevents you from having to pay for large expenses all at once, which could either force you to scramble to find the money elsewhere in your budget, or force you to use credit and put yourself into debt.
Let’s go over another example, for the sake of clarity. Let’s say I have a prescription that needs to be refilled every 6 months that costs $150. And let’s say I just refilled it last month, so I still have 6 months to save up for the next refill.
But, since this is a paycheck to paycheck budget, let’s calculate this budget based on the number of paychecks you will receive before that expense occurs, as opposed to how many months there are left until your next refill. If you will earn 14 paychecks before your next refill is due, divide $150 by 14 to find that you need to save about $11 from each paycheck in order to have enough.
After all, it’s a hell of a lot easier to fork up $11 every two weeks rather than $150 all at once, isn’t it?
The sum total of your paycheck minus all your bills and expenses within that budgeting cycle, including the average biweekly cost of all the semi-regular expenses you budgeted for = the amount that you have left over until your next paycheck.
What To Watch Out For
Please do not assume that you can blow all your leftover money from each cycle on whatever you want. This inevitably will lead you down the path of living paycheck to paycheck instead of just budgeting that way.
You need to be saving a portion of your leftover money from each cycle. How much is up to you, of course, but the more the better.
First of all, save up an emergency fund. Having one is extremely important, no matter which budgeting style you prefer to use. You will need it one day.
No matter how hard you try to budget for all your expenses, unforeseen things are going to come up.
And even if they don’t (they will), wouldn’t you rather have it and not need it, than need it and not have it?
There’s a sign on the gravel road that leads to my favorite beach that reads: Be Prepared For The Unexpected.
So much wisdom. Listen to the sign.
You should also be using some of your leftover money to work towards your financial goals. Want to buy a car? Save up for a down payment on a house? Go back to school? The sooner you start saving, the sooner you’ll have enough money to achieve your dreams. For help with this, check out my post: How To Create SMART Goals To Help You Achieve Your Dreams Faster.
Another downside to the biweekly budget is that our bills and expenses are often higher in one budgeting cycle compared to another. This means that, unless you account for this variability, the amount you have leftover in each cycle could vary widely.
Why is this a bad thing?
Well, imagine in Cycle 1 you made $1,042. Your only expenses in that two-week period were your cell phone bill and your Internet bill, along with your average biweekly grocery and gas spending. The total of your expenses came to $310. This means that you have $732 left to spend on whatever you want, right? Awesome! So you blow it all and buy that new phone you’ve been eyeing and go on a shopping spree to boot.
Now let’s say in Cycle 2, you again earned $1,042. But this time, your expenses due are your mortgage payment, car payment, car insurance, house insurance, and again your average biweekly grocery and gas spending. Now your total expenses come to $1,410. That’s more than you have! You’re now $368 in debt and have zero dollars for discretionary spending until your next paycheck. And now you have a minimum of $368 less dollars to work with in your next cycle.
You can see how this type of situation can quickly lead to the terrible cycle of being stuck in debt and living paycheck to paycheck instead of budgeting paycheck to paycheck. Not so awesome.
This is why, if you’re going to use the biweekly budget, you really need to be looking at least one cycle ahead when you create each budget. Before you spend everything you have leftover in one cycle, make very sure that you’ll have enough money in the next cycle as well to cover all your expenses.
This is also why it’s so important to budget for as many of your semi-regular expenses as possible. The more expenses you budget for in each cycle, the less financial surprises you’ll have and the better idea you’ll have of how much money you really have left over to work with in each cycle.
If you’re in a similar situation and most of your bills come out around the same time of the month and you feel like saving enough money from one cycle in order to have enough in the next cycle could be a big issue for you, or if you just want to make this budgeting method a little easier on yourself, it’s a good idea to call some of the places you make regular payments to and ask if you can change your payment dates.
Try to organize it so that the total amount of your bills and expenses due in each cycle does not exceed the total amount of income you will earn in that cycle, which will help prevent overdrafts and debt. It will also allow you to maintain an average amount of discretionary spending money between each cycle.
If half your bills come out of your account in one cycle, and the other half come out in the next cycle, it makes it a lot easier to maintain financial balance. It allows you to focus on one cycle at a time instead of always worrying about having enough money for the next one.
And, again, make sure you’re saving money from each cycle towards an emergency fund, so that you’re prepared if anything unexpected does come up.
You are now fully versed in the art of creating a biweekly budget!
Please leave a comment below if this was helpful to you, or if you have any comments or concerns. I appreciate any feedback! And feel free to share what kind of budgeting method you prefer, or other budgeting methods you’d like to learn about.