What to Do With a Three-Paycheck Month - Rho Thomas (2024)

2020 Update: You might also like these episodes of my podcast!

007 | Budgeting for Lifestyle Freedom and Financial Independence

017 | How to Budget Using the Zero-Based Budgeting Method for Lawyers

019 | The Secret to Building Wealth and How Anyone Can Do It

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If you get paid biweekly, listen up!

There are two months each year when you receive three paychecks. This can have a huge impact on your ability to reach your financial goals quickly.

Because there are 52 weeks in a year, when you’re paid every other week, you receive 26 paychecks throughout the year.

Most months, you only receive two paychecks, but during two magical months each year, you receive three!

Mr. TMG gets paid biweekly, and January is the first of our three-paycheck months for 2019. Yay! (I get paid twice a month in the middle and at the end of the month, so nothing special here.)

The beauty of the third paycheck

If you get paid biweekly and don’t know when your extra paychecks are coming, stop reading now, grab a calendar, and make a note of when each payday is. This will help you see where your three-paycheck months are so you can better plan for them.

For the majority of the year you only receive two paychecks each month, so your expenses are fully covered by the amount you receive in two checks.

When a third paycheck comes around, it’s like bonus money!

How to use the third paycheck effectively

Okay, now that you know you have this “extra” money coming twice a year, what should you do with it?

If you’re on fire with your financial goals (like we are), your first thought might be to immediately put the entire check toward your debt, savings, or other goal.

Pump your brakes.

Although this would be my inclination, too, you may want to reconsider.

Think about when your bills hit. They’re not spread evenly throughout the month. Some of the biggest ones, such as your rent or mortgage, are right at the beginning of the month—i.e., before you’ll get your next paycheck.

Big. Problem.

You don’t want to end up draining your checking account as the early month bills come in (or worse, not having enough money for your bills).

That will lead to panic and anxiety as you wait for the next check to come in. Our goal is to eliminate the stress surrounding our money, not add to it.

Rather than using the entire extra paycheck at once, budget half in your income for this month and half for next month. (By the way, if you don’t have a budget, click hereto get started.)

This way, you’ll have a decent buffer as those bills come in.

What should you do with the money?

I say all the time that personal finance is personal, so only you can decide that. You have to do what’s right for your situation or family.

That doesn’t stop me from sharing a few suggestions, though…

If you don’t have an emergency fund, you could set some money aside for that. The amount of your emergency fund depends on your specific situation and comfort level, but everyone should have something.

Still in debt? The third paycheck would make a nice extra payment to help knock it out more quickly and save you money in interest.

Maybe you’ve got a large expense coming up, such as a purchase you need to make or a car repair. Setting money aside for these expected expenses will keep you from going into debt later.

If you’re already out of debt, have an emergency fund, and don’t have any large expenses on the horizon—okay, superstar!—you could use your extra check to boost your retirement savings.

As I mentioned here, with Baby TMG on the way, we planned to buy furniture and other baby items we needed to stock up on this month. Part of the third paycheck will go to that.

Related: 27 Tips to Save Money When You Have a Baby

I’m sure it’s a huge surprise that the rest will go on our debt.

What should you NOT do with the money?

Okay, I know I said personal finance is personal, but there are still some things you should be wary of with this money.

You have such a great opportunity to improve your financial situation. Don’t end up not making a plan for the money and wondering where it went. (We’ve been there for sure.)

You also don’t want to spend it all frivolously, although I don’t see any harm in taking a small amount (maybe $50 or $100) to spend. Small rewards help keep you motivated to reach your long-term goals.

Related: 8 Tips for Setting Financial Goals and Crushing Them

Related: Starting from the Bottom: Staying Motivated to Reach Your Goals

There are many ways to make the most of a third paycheck to reach your goals. Don’t let the opportunity pass you by.

Whatever you do, be intentional. Your future self will thank you.

How often do you get paid? If you’re getting a third paycheck, what do you plan to do with the money?

What to Do With a Three-Paycheck Month - Rho Thomas (1)

Rho

Hi, I’m Rho! I’m a wife, mom, and Biglaw associate who believes that true wealth is having control of your time. I help busy lawyers like you take back control of your time by teaching you how to achieve lifestyle freedom through mindset shifts and financial independence. Read a little more about me here.

What to Do With a Three-Paycheck Month - Rho Thomas (2024)

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