How to save money on a biweekly paycheck

If you get paid every two weeks, then you’ve probably noticed those magical three-paycheck months. Maybe you thought your company’s payroll people made a mistake, but lucky for you—they didn’t. You get at least two additional-paycheck months like this a year.

Whether you’re building your savings or paying down debt, every paycheck counts. Here’s how to save money on a biweekly paycheck and some other budgeting tips to help get the most from your money.

Why do we sometimes get three paychecks in one month? If you’re paid biweekly, you get 26 paychecks throughout the 12-month year. That means two months out of the year you’ll be paid three times. Those two additional paychecks can help you achieve your savings goals. But without a plan in mind, they can seem to disappear as quickly as they arrived in your checking account.

The first thing you need to do is to find out when each of your monthly paychecks will hit your account. Grab a calendar, write down your paydays for every month in a given year and highlight the two additional paychecks. Because the paychecks will fall on different days every year, it’s important to track them in advance.

You could decide to give yourself some room in your budget throughout the year or use the money for something specific.

Lots of people ask themselves how they can budget to help get the most out of their paychecks. If this is you, consider these five ideas:

As you consider how to save money on a biweekly paycheck, start by looking at your debt.

Make a list of all of your debts organized by balance and annual percentage rate (APR), which is the yearly cost of borrowing money on a loan or credit card. Paying off the debt with the highest APR could save you the most money because its balance costs the most to carry.

For instance, if you owe close to your credit limit on a credit card, that high balance compared to your limit (known as credit utilization) could hurt your credit score. Alternatively, paying down a few low-APR, low-balance debts can help you gain momentum and bring other financial benefits. You might also choose to put your paychecks toward any student or car loans you might have.

If your budget helps you tackle debt repayment, you may start to owe less and have less interest accruing each month, freeing up even more cash from your future three-paycheck months.

Paying down debt isn’t the only option as you incorporate a third monthly paycheck into your biweekly budget.

An emergency fund that can help cover three to six months of your regular expenses can help you weather financial setbacks, such as a lost job or medical emergency, without having to take on new debt. Since these funds may sit untouched for long periods, consider keeping them in an account where they can continue to grow. Instead of letting your hard-earned cash sit idle, put it in an account designed to boost your savings and give your future self a head start.

Keeping these funds separate from your regular checking and savings accounts may help you reserve them for the unexpected. This also reduces the temptation to dip into them for nonemergency expenses. Typically, a good place to keep your emergency fund is in a high interest rate savings account. 

If you want to create an emergency fund or add to an existing one, then think about automatically transferring paychecks into one. Setting up automatic savings is a straightforward way to help move money from your Capital One 360 Checking account into your savings without having to think about it.

If you want to save for a goal like a new car or home, or boost your retirement accounts, contributing two full paychecks out of your 26 can be a good start.

If you’ve got a financial goal in mind, consider transferring your paychecks from your checking account to a savings account—for example, a 360 Performance Savings account—or a tax-advantaged retirement account right away.

For goals with a specific timeline—like a down payment or a vacation—a certificate of deposit (CD) can be a smart place to put a paycheck. With a CD, you lock in a fixed interest rate and keep the funds separate from your everyday spending, making it easier to leave them untouched until the term length is over. Just choose a term that lines up with when you’ll need the money, since withdrawing early typically comes with a fee.

If you already have an emergency fund, are currently debt-free and are making good progress on your savings goals, think about paying certain monthly bills ahead of time.

Before paying ahead, it’s recommended to check with your provider to make sure there are no prepayment penalties. It’s also a good idea to ask about any limits or restrictions on making payments in advance. Some providers may even offer a discount if, for example, you pay your car insurance premium for the full year instead of making monthly payments.

Depending on your budget, it may also be worth exploring whether prepaying expenses such as utilities, your mobile phone bill or rent could help you save money or simplify your monthly finances.

If you’re still wondering how to budget your paychecks, remember that managing money isn’t only about dollars and cents. Emotions play an important part in personal finance because they’re often at the root of people’s decisions. Accepting this idea could help you successfully manage your money.

Maybe you want to plan your next vacation to get away from the daily grind, or you’ve been hoping to finally have a date night at your favorite restaurant. There’s no need to feel guilty about including some spending on yourself within your biweekly budget.

When you’re deciding how to budget given your paychecks, you might find yourself going back and forth between options.

While everyone’s priorities are different, having a plan for your paychecks can help you make the most of them.

Here’s how you can try to save money on a biweekly paycheck:

• Use paychecks strategically by focusing on goals like paying down debt, building an emergency fund or contributing to retirement. 

• Create a plan before your paycheck arrives so you can avoid unnecessary spending and make intentional choices with your money. 

• Choose a strategy that fits your financial situation and goals. Then, use these opportunities to build stronger money habits over time.