“I don’t live paycheck to paycheck. I live paycheck to four days before paycheck.” – Anonymous
Half payments work incredibly well to help you find financial peace. In fact, half payments are the only reason why my family was able to stop living paycheck to paycheck. The half payment method is where you take a regularly occurring payment, such as a $300 car payment, and divide it in half.
You then set aside that money (half of the total bill) at the beginning of the month, and take the rest out when you send out the payment. This will ensure that you have the full payment ready-to-go come payment due date. To clarify, I am suggesting taking the half payment and setting it aside, not sending it in to your creditor. However, if your creditor accepts half payments made before the due date and paying the money immediately would benefit you, do it.
If that seems confusing, here is a little break down of how it works if you receive a bi-weekly paycheck. (I am still using the $300 car payment example from above):
Paycheck #1: $600
Half payment for car payment: $150
Total left from paycheck #1: $450
Paycheck #2: $600
Half payment for car payment: $150
Total left from paycheck #2: $450
What is the purpose of using this system? What if instead of using half payments, we look at this example of how it usually plays out for most:
Paycheck #1: $600
No half payment
Total left from paycheck #1: $600
Paycheck #2: $600
No half payment
Full car payment: $300
Total left from paycheck #2: $300
Some may think that option #2 seems fine, and essentially, there is nothing wrong with it. The issue with the second option is that you now have lost an additional $150 from paycheck #2. Of course, the argument is that you gain $300 to paycheck #1, but do you really gain that money? What usually happens when there is money just left on the table? It typically becomes absorbed somewhere else in your spending because, subconsciously, the money is still available.
Related Post: 👉 How We Paid Off $5,000 of Debt in One Month
If instead, you used half payments, you would manage to have your full car payment every month without having to scrape by at the end of the month. You would end up with more money in your pocket over time and your finances would become easier to manage, lessening your financial stress.
This system will work no matter how often you are paid. If you are paid once a month, consider starting the half payment method by only making quarter payments or small payments every week. Once again, I suggest starting with the smallest fixed bill every month as this is usually an easier place to start and will prevent you from feeling overwhelmed.
The half payment method is exactly how I managed to stop living paycheck to paycheck and how I was able to pull myself out of financial trouble all those years ago. It definitely works, though it can be challenging at first. It will bless you in the end by making managing your money easier.
📈If you need help creating a budget, my favorite free tool (that’s also easy to use) is Personal Capital.
💻If you’re more of a spreadsheets type of person, Tiller is fantastic for setting up and using Google Sheets to manage your money.
✏️And if you’re like me and more of a pen-to-paper type person, head here to see my budget binder tutorial for how I set up and manage our family’s budget for the year.
Make Half Payments
Start using the half payment method for all your regularly occurring payments. Start with your lowest regular payment and divide it in half. Use the half payment method with that payment until you develop the habit. Then start the half payment method with your next lowest regular payment and continue the trend with all your regular payments.
Do you use half payments?
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I too do half payments! Except, I don’t just account in the register, I physically pay it half and half to make sure the money is gone. So for my car payment, I pay half at the first of the month and half at the end. It’s best to check with companies to make sure you can do that — some won’t allow multiple payments (which is sad). We do the same thing on our credit cards we’re paying down. We double the minimums due, so we do half (which is the minimum), then the other half (which is the extra). It helps save on interest charges too.
That is a fantastic way to pay work the half payment system! 🙂
I don’t know if your still helping people with there budget savings.but my question is how can I do a half car payment method .my car payment is 688 a month.
Hi Jose! If your car payment is $688 a month, you’d then take half of that ($344) and work the half payment system from there by either paying half the payment at the beginning of the month or holding onto to that half payment to add in to the other half payment and making the full $688 payment on its due date. I hope that helps Jose!
I have to actually pay it then as well. I can’t seem to trick myself by changing up the check register- kind of like setting the clock forward a few minutes. I had to stop that, too, since I ended up never really knowing what time I was operating on!
We are down to the mortgage and I recently began making half payments- plus a little more- every 2 weeks so that we end up making a few extra payments a year.
I always confuse myself with setting the clock early too! 😉 I can’t wait to only have a mortgage left to pay – y’all are rocking your debt payoff strategy!
I would have to physically pay it out as well. Sort of like setting your clock 5 minutes fast so you’re never late.. I would know in my head the money is still there and be too tempted to spend it.
That’s an awesome way to hold yourself accountable Nicole! “_
That’s what I do as well and have found it thankfully to be helpfully!
I do this too…..but I use bill pay, so I just schedule the payments. It works well for simple loans as it does lower the accrued interest…..
But not for mortgages, because they only post payments at the beginning of the month, so that if you pay 500 at mid-month and 500 at end of month, the lender posts all of it at start of the following month, with no benefit to interest…..
But its great for simple loans, because you split it, lower the interest accruals, manage your cash flow, and with a smaller payment 2X a month, if you round it up, you can actually make more progress.
That’s not accurate. I’ve been doing this for many years with my mortgage, cars and motorcycle and it saves a ton of interest and principle. Plus, you’re not wiped out with large payments.
Not all lenders do that. I’ve worked at banks and for banks for years. I think a lot of the smaller lenders and community banks are easier to work with and don’t worry about when you pay, as long as you pay the total each month.
we do weekly payments because when you make a payment before the due date more money goes toward the principal and less to interest. We get paid weekly so this works for us!
It’s a lot more tedious, but I do it on a weekly basis just so I know how much is available. I also prepare a cashflow spreadsheet and can see about 30-50 days ahead if I plug in all of my expected expenses (utilities, gas, groceries) so I know how much I can spend on other things.
I too do the half payment system. I called the company which financed my truck. It was a $600/mth payment. They allowed me to pay it by half payment. (It is now paid off) My husband and I have 2 accounts, one for our bills and one for spending money. The bill account is the one that gets the half payment per check, which is cool because we pretend that he only got paid the amount in the other account. We never see the money as it direct deposited strictly into this account after we added up the amount we needed. We started doing this when we bought our home in 2008 and it has worked for us. The bill account goes by budgeting too. Some months our electric bill is higher than other months, so a little money stays behind. It gets put back if the electric bill is lower for the higher bill months. Before we were living paycheck to paycheck. We have bills we want to pay off and I saw a comment where that are paying the min on a credit card with the 1st check and adding another minimum payment the next check. I love this idea. I think I will do that too. I cannot wait to have just a mortgage and regular bills. (My husband lost his job and that is how we managed with finances when money started getting slim. Now we are trying to be on our way to financial freedom.
Oh I love that you automate this process!
For electric bill I suggest you to call your electric company and ask for Budget Billing program. It will smotth your payments over the year so you will pay the same each month. It is easier to handle this way.
With budget billing, though most month’s payments are within $10 or so of each other, there are many months (typically summer & winter) where the bill fluctuates.
I came here to say the same thing. Our power company calls it an equal payment plan. That way our bill is the same exact amount each month for the entire year. I love the predictability of it.
The method suggested by Dave Ramsey and John Commuta for paying down multiple debts is somewhat different. They suggest paying the minimum on all except the bill with the smallest balance and putting all excess cash towards the small one until it is paid off. Then, you do the same for the next smallest bill and continue til all debt is gone. One of them calls it a debt snowball. These are separate financial authors but both agree this is the fastest and best way to get out of debt. Hope this helps
I divide all my bills into 1/4s , and auto pay. Works great!
This is a great idea! Congrats on getting out of financial trouble–that is a huge accomplishment! Stopping by from Thrifty Thursday–I’m amazed at all the great financial ideas shared there.
I think this is a great idea. My challenge when it comes to starting something like this or even beginning a budget is- if you have bills due out of the first paycheck, you may not have the money left to put back half for the bills due out of the second paycheck. It almost seems like to begin any kind of budgeting system you would have to be a month ahead. I’m sorry, I’m a novice at this. 🙂 Do you have any tips for just getting started on a half payment system or a budget?
When I first started with the half system, I took it one bill at a time because I didn’t have any money in savings to fall back on. I chose the lowest ‘regular’ bill that didn’t change month-to-month and then added a new bill every month to the half payment system. Hope this helps! 🙂
I love this idea and I love to start with the smallest bill. Could this also work by putting half into a seperate checking account that you do not use? I have one from then I had a home business and never use that account. Then I would still know the money is gone but I could also make 1 payment still.
I think it could work Tricia. You can always try it for a month or two and see how it does for you. 🙂
I have a separate account for my mortgage. I get paid weekly, so I put 1/4 of it in weekly. It has helped me so much! I don’t feel as broke as I would have with paying the whole thing out of one paycheck.
Would this be hard with automatic payments? I tend to forget to pay altogether so I have most set up automatically.
I have it set up with a couple of companies as automatic payments, but it really just depends on the company and their payment system. You may be able to go through your bank to set up as well.
I’ve been unemployed for three months and finally start my new job tomorrow! I made cuts to all the excess stuff like Spotify and Netflix, but I was living on my savings and eventually the money ran out. I now find myself a month behind half of my bills and by the time I get a paycheck another round of bills will have popped up. Will there be a way for to catch back up or will I always be a month behind, asking for an extension?
Hi Eden! I think that you will definitely get caught up. It’s a challenge for sure, but just take it one bite at a time. I’d start with your smallest bill/expense first to try get caught up on and work your way up from there. I’m super happy that you have a new job ready for you in the am! I’m praying for a great first day for you! 🙂
I just proposed this to my husband yesterday, I got myself out of debt before we got married this way too a LOOOONG time ago. But he is so resistant to any form of budgeting and I am so over living paycheck to paycheck…
I can totally relate! My hubs hates the “b” one!
I’ve not used this method before – very interesting. I think if you have it automatically taken out of your account, it could be helpful in keeping your available money more consistent. Thanks for the tip!
Hello, I am stopping by from the Frugal Friday Link Up Party. What a fantastic idea! I think I am going to try this with my utility bills for the month of November. Would you suggest the same method even getting paid bi-weekly? Thanks for sharing these great tips!
Yes, you can still do this if you receive a bi-weekly paycheck. I suggest you start with one bill and another bill each month to slowly ease your way into it. 🙂
I get paid weekly, so I divide my utilities by 4 and make payments
Example: water $80.00| month. $20.00\weekly
This way we are never late on bills
That is an awesome idea Lily!
This has nothing to do with half payments but wanted to share…I cut my dryer sheets into thirds …they will like a charm!!
I have used the 1/2 and 1/2 method for a long time. I especially like it for the car payment and the mortgage, as those are the 2 biggest expenses. This way I am always a 1/2 payment ahead, which doesn’t sound like much, but does make a big difference.
I only get paid once a month at the end/beginning (depending on how you look at it). I get a super small extra paycheck every two weeks from my second job, but that’s really not worth mentioning since it is so measly. How would you do something like this when you get paid only once (essentially)?
Hi Maryanne! I would start by setting aside a small amount from your monthly paycheck each month until you had enough to save up to cover one bill’s half payment (pick one with the lowest payment amount). Then I would start using the half payment method with that bill and then start setting aside money to cover the next lowest bill’s half payment and continue the cycle that way….hopefully this makes sense! 🙂
We also have a monthly income, and the biggest struggle we face is being short at the end of the month for things like bread, milk, and incidentals. Our budget is VERY tight and we still have small children, as well as two in college. I pay every bill at the start of the month no matter the due date. I set aside a weekly allowance in another account to pay ourselves (basically to cover those needs like bread, milk, gas, etc.) as the month goes along. Whatever is left over we use to pay down our lowest bill. It is harder to plan- being paid monthly- but it does help keep you on budget.
Hello,
I’ve always struggled with my budget as well and I really like the thought of having about the same amount of money left over from each paycheck. Of course, I would like to use the ynab system and live a month ahead, but I think this is a good babystep. I’ve never heard of this before. I was reading a comment and you mentioned to start with the lowest monthly payment first? I think I can make that work. The problem is me thinking that we actually have that money to spend still since it’s still sitting my our account. I will try this on our $30 bill and build up from there, I hope this works! Also, may I request to see your bill and budget binder contents? I purchased your ebook and am in the process of setting mine up.
It’s definitely all about baby steps! You have to change your mindset so you think that you don’t have the money. I don’t have post on my binder, but I use monthly dividers from Avery and spearate out my bills by month along with my budget. I then have dividers for the “funds” accounts that I keep track of.
Hi, I’ve been reading the comments on here and I wanted to add something. I have a budget and I move the money that I am saving to pay bills later in the month to my savings. I have a spreadsheet and split the money out to each column for specific bills to be paid. This way I do not touch the money until it is time to pay that bill. I feel that my control over spending is much better than keeping it in my checking. When it is time to pay I just move that amount to checking to pay. I hope my comments help others too.
$300 would be too high of a payment for someone making $1,200 take home. The person in that example has bigger underlining issues, if they’re spending 25% of their pay on a car.
Agreed, but it is just an example with simple math.
Never thought about this and it would have saved me a lot of headaches when I was still in debt. While it might not make sense at first, leaving too much money ‘on the table’ is indeed an invitation to overspend, especially if you’re not too disciplined.
Yes it is!
I used to do this for my mortgage.
This is definitely good advice for those trying to avoid credit card use to pay the bills. I have found getting paid semi-monthly instead of bi-weekly has made it easier for me to stick to a budget since there is never the 3 paycheck month issue.
Hmmm this is totally making me think about how I do things. We already budget bi-weekly but spread (full) payments our rather than split in half, I’m going to see if it makes sense for us to try it this way 🙂
Hi! I wanted to comment that we do something different but the same concept. I moved half of my bills so that the bills are pretty equal for the first and second halves of the month. Calling some creditors/companies and simply asking for a different due date was easy. That way we weren’t strapped the first half after paying rent for example. Thought this could help 🙂
That’s an awesome idea Sarah! 🙂 Thank you!
When I was VERY young and married with a newborn, I had no idea how to budget (or anything else for that matter). I found the only way I could make ends meet from my husbands weekly paycheck was to have an envelope for each expense and put a 1/4 payment of each bill in each envelope every week. This was in the mid-70’s before online payments, etc., but I don’t see why the same method wouldn’t work today!
I’ve really been trying to do this, especially because ALL my big bills are within a week of each other (car, rent, car insurance, and renters insurance…!).
The main reason I commented was to say thanks for using a low paycheck number for the example. So many financial blogs are things like, “If you save half of you $2,400 paycheck, you can have all you’d debts paid off in a year!’ Yes, because I make that much money. 😉 Small numbers are more related and make it seem more manageable, even if my monthly income is more than that!
Thank you Steffani! 🙂
I really loved this post! I am glad I came across this. I believe I will start doing this to help in our financial paycheck by paycheck starting with a couple of our smaller bills. Thanks for the advice!
i have been doing this for years! Working in banking, I can tell you that it also has the added benefit of knocking off some of the interest you wind up paying over the long run as well. I have my mortgage, car and home insurance and I did have my car payment set up to pay this way until I payed it off last November. I also have the taxes on my house set up the same way to go into a savings account each month for the next year based on the last years bill. I have also set up a “Christmas” savings account through my credit union that I can’t touch till November that I put $20 a payday in. Come November I have a large portion of it payed for already without having to struggle.
That is AWESOME Tracy! You are right about the interest too!
I take every amount for the year and divide it by 26 as that is how many paydays I have. I have a budget savings account in which my paycheck is deposited. I transfer bills payments to my checking and pay them (mostly on-line). The remainder is listed in 34 categories on a piece of paper. These include all utilities separate, car loan, gifts, vacation, clothing, camping, sports, donations, union dues, household repairs, car repairs, vehicle registration, mortgage, insurance, gas (we have a charge account at a local station who bills us monthly), hot lunch, boys for school, oil changes, etc. I print a new sheet each pay day and update the amounts based on spending and payday deposit. We always have enough then for the once/twice a year payments like taxes, vehicle registration,etc. Some amounts are $3 and others are $20 depending on how much we need each year.
We pay our car/life/house insurance monthly so we it can more easily be budgeted.
We take out cash for groceries/personal hygiene/paper products, eating out and our “fun money”.
When we started, I wrote down everything I could think of that we spend money on in a year and tried to find the amounts (last years checkbook, a calendar etc). I then collected all the money we had in checking, savings, etc. I started each “account” that had to be paid (utilities, insurance, mortgage etc) with one half of a monthly payment or 1/26th of the year payment. I then distributed the few remaining dollars into the other categories as they were ranked by importance (household repairs came before vacation) til the money was allotted.
I re-do this in the fall when I find out our new paycheck amounts. (We both teach.) I make adjustments as I learn about the increases etc that happened over the year. Like my son now wears a 14 shoe…I need more int eh clothing budget or sports to cover the cost of shoes for him.
You ROCK Emilie! And goodness, size 14 shoe!!! I once dated a guy with a size 12 shoe size and I remember trying to buy him a pair of shoes for his birthday one year and struggling to find anything!
I am going to try this. I get paid twice a month and it is never on the same days.
This is based on bi-weekly paychecks. We get weekly pay, so would i just divide my bills in half and do some 1st and 3rd and the other 2nd and 4th? This could get confusing.
You could do it that way for sure or if you wanted to, you could take the bill and divide it into 4 weekly payments from your paycheck. Which ever way would be easier and work for you. 🙂
I use the half payment but i do it through my bill pay and I send out a half payment every two weeks and it works out great. Not only do I have all my monthly payments in but I also make one extra payment a year I know that doesn’t seem like a lot but over the course of a thirty year loan that cuts almost 3 years off of that loan.. Not to mention I use that for my regular bills. I usually have a credit on all my utility bills so if something happens and I need that extra money I have the option not to pay that bill. I works out great because during the winter when I have a higher gas bill I don’t have to worry on where I am going to pull the money from I pay the same amount no matter what
Heck yes Alicia! I love that your utility provider gives you a credit. That is an awesome way to max out your budget! 🙂
Alicia,
We have credits on our utility bills as well and continue to pay the same the amount every month which definitely predicts the budget. I live in AZ and when the summer comes, the extra takes care of the higher costs and not to mention I usually do not pay the electric for July or December due to credit that is available in the account. Thanks to my husband as he created this for us. I just have to make sure not to mess it up, lol.
Thanks!
We just started this system this month! But we found that we are really bad with using our cards and keeping track of finances. So we literally cash our checks leaving only a few dollars in our bank account. Then we physically divide up the money into envelopes for every bill, including things like gas money and groceries. We do this bi-weekly and half the payment we will need goes into the envelope. Then we know every penny has its place and we have our bit of extra money and that we use for fun. But when it is gone it’s gone and you take money out of the correct envelope for the bill/expense you are paying. So far we have done pretty good. It really helps you stay on a tight budget which we are on since I have gone back to school.
That’s a great idea Raquel!
This is a good idea and I have been doing it for years but in a slightly different format. Since I get paid every two weeks, I divide up my bills into what is due within that 2 week period and pay only those. I have a spreadsheet based over 4 pay periods and can see ahead of time what bills are due and when. If there are more bills due in a future pay period then I move a bill ahead to balance out the numbers so that I’m paying approx the same amount out every pay period.
Same concept at yours however i think is probably easier and the whole bill is paid at once.
That’s a great idea Angie!
We do this just for our mortgage since it is our largest expense. I have a second checking account and I actually have 1/2 of the monthly mortgage amount deposited straight into that checking account each pay period. On the day before the money is sent to the mortgage company I move the full amount into our regular checking account.
When we have other large bills that I know are coming up, I will deposit part of the upcoming bill into that 2nd checking account to save the money for the specific bill.
It hlelps us to have tht money physically separated from our regular spending money.
This works for me also as I get paid biweekly
I do this and it also gives you an extra month on bills per year! Banks hate it. My dad taught me how to do this years ago and the bank called him and told him he couldn’t. He still did it because it was HIS loan. The banks loose out on interest and don’t want you to do it.
Yes – so true, banks definitely hate it as it does save on interest. That is awesome that your dad taught this to you early! 🙂
Banks may hate it, but our credit union doesn’t! They offered us bi-weekly payments on a debt repayment loan. Credit unions are the way to go they are there to help you, not hurt you.
Just wanted to let you know. I love this idea for getting caught back up and staying on top of your bills. I linked this page on my website as a favorite method for budgeting.
Thank you so much Jennifer! 🙂
We do this for our mortgage and car loans. We have a secondary checking account set up just for this. Every payday, the half payments are automatically transferred between accounts and are then auto-paid from that secondary account on the due date. Plus, every six months (when that “extra payday” comes around) I send a principal only payment, thus reducing the length of our loans. I’m trying to work out a way to do it for all of our fixed payments, but they’re all on auto-payment plans directly with the companies, so it takes time and extra planning to make it happen. Ideally, the “extra payments” from those could then go into a savings account.
That is such a smart idea of using a separate checking account Chris!
I do something similar. I actually have a separate checking account just for bills. What I do is add up all of the monthly bills, averaging out the utilities (I add a small cushion for fluctuating rates, plus I round the set bills up to the nearest 5), multiply by 12 and then divide by 26 (number of paychecks in a year) and add 20 or so. I then have this amount direct deposited into my bills checking account. I have everything on autopay, except for the utilities which I like to check. So it’s pretty much an automated system. Money goes in, bills get paid with very little work or effort on my part. I just check it a few times a month to make sure everything is going smoothly and there are no surprises (annual bills I forgot about, etc). At the end of the year I usually have a couple hundred built up from my cushion. I like to leave about $500 in case something goes wrong, but any remaining cushion gets put in my savings account.
My second checking account is for food, gas, fun money, etc. I have a set budget for this, which is direct deposited. Once the money is spent for the pay period, it’s gone. I do have a local savings account linked with this one, with a small emergency fund. I also put some of this money into savings for irregular expenses, such as car or home repairs, vet visits, clothing, etc. That way I don’t spend it each month (which I will if it is in my checking acct). Finally, I have a high-yield online savings account. Any money left over in the paycheck after the direct deposits to the checking accounts gets put here. I have a zero-interest-if-paid-in-full-in-five-years loan for my car and some furniture we bought when we moved into our new home. So the savings account is first going to be used to pay that off (I hate debt, even if it is zero interest). I decided that since additional payments will not lower my monthly amount due and there is no interest, I wold put the money in savings first, then when we have saved the remaining balance we will cash out the savings account to pay it off in full. This way if anything major happens we still have the money, plus it accrues interest.
I hope this makes sense. I love this system. I found when I didn’t have separate accounts we were spending our bill money and then that last paycheck of the month was really small after we paid the bills. This way I know what we have to spend on what and I don’t look in the checking account and see a large (well large for us!) balance and think “oh, we can afford this”.
I love your system Anna Marie!
Jessi,
This method has been a life saver!
I’ve always been really good at spending money. I nosedived into a downward spiral, though, starting in Decemeber of last year. My monthly income is about $2,600 and in December I spent $6,500. By early April I had $3,500 in credit card debt in addition to my car loan and high rent.
I did what any aspiring personal finance guru would do and took out a loan at 8% interest to pay off the 19.5% credit card. I took the loan for $4,000 which allowed me to jumpstart the half-payment method and nearly immediately I found myself saying, “is payday this Friday or next Friday?” Jessi…I forget what day payday is! Do you know how awesome that feels?!?
I made a sloppy budget (I budget rounded up amounts for all my bills) so my checking account grows secretly, I’ve always contributed heavily to my 401k ($12,000 in there at 24 as of now), and now I’m saving 75$ a week in addition to paying more than the minimums on my debts. All while still allowing myself $150 PER WEEK for food and alcohol (I am 24 after all).
It’s amazing to find that I really do make enough money to have all the fun I want. I just needed a budget to make me realize it.
Thanks for your super helpful articles!
You are so welcome! I’m so happy to hear of your success! It is truly such an amazing feeling not worrying over payday anymore and I love hearing that the half payment method has worked so well for you! Heck yes! 🙂
I have used this method for my car payment for years. About to start it with rent.
I was able to pay down the loan on my truck about a year early. When I traded that truck in on the car I’m now driving, I only owed $14,084 on it. I received $21,500 as a trade in for my truck. 🙂 That definitely helped cut the new car payment!
Heck yes Emily!!! That is AWESOME! 🙂
How can you start this method?
I currently have all payments student loans, car insurance etc on one paycheck and rent
on the other. You can imagine the rent is a struggle for the two weeks. I want to start this method but not sure how without compromising my bill payment on times. i.e. i cant do it in the first two week paycheck because rent is due and i don’t have “half” saved from last month, same with the end two weeks. Help!
Hi Liz! I would suggest to start small – it doesn’t have to be half, just a portion. I would start setting aside whatever amount you think you could contribute from your paycheck towards the rent and as you get into the habit of doing that it should start to get easier to set more money aside each paycheck. Also, if you haven’t already, I would suggest to go through your expenses with a fine tooth comb to make sure that there isn’t anywhere that you could cut from. 🙂
The first month transitioning to this kind of thing is usually a bit rocky, but it totally gets easier after that. I’ve done this for about 10 years now, never knew it was an actual financial system. It was just what kept me sane knowing that somehow all the bills would actually be covered. I get paid weekly, so I do quarter payments. I use a variant of the envelope system, where I have Quicken automatically “deduct” a set amount every week for each bill I have due (I even have figured out the weekly amount for annual things like insurance) and put it into a savings goal (my envelopes) for each bill. Then when the payment comes due, the full amount of the payment is taken out of my checking account for real, and Quicken pulls the money out of the savings goal. Even for variable bills like electric and gas, it works pretty well. At first I had to stress over every penny, but now things are a bit easier, and if in that final week, I need slightly more over the weekly amount to cover the variable bill, there’s enough slush there to cover it.
Thanks for sharing! I started working just a little over a year ago after being a stay-at-home mom for many years. Just before I started working, I found a budgeting software that set us up to begin making half-payments when I did start working. It works! We have been doing this for over a year and it has made such the difference in our budget and lives! We no longer stress if we are going to have enough to cover our bills. (Of course, having the 2nd. income helped us to achieve the half-payment lifestyle.)
I use this method for every bill and pay a set amount every 2 weeks when we get paid no matter what the bill is. If it’s less than I get a credit, if it’s more usually my credit builds up & pays it. I always round up my bills as well, so usually by end of year. I don’t have a morgage payment near Holidays or have a credit on some bills in case something comes up. This method has enabled me to save more $ and not live paycheck to paycheck cause I knoe exactly what is spent each paycheck and what we will have left. Everything else groceries, spending money and gas is used in cash.
Heck yes Kayla! I love your story! 🙂
My sole source of income is a relatively low fixed monthly social security payment. This is what I’ve been doing for several years and found it works well for me:
1) I enter my social security deposit and all of my regular monthly bills in my checkbook right before the deposit date; most of these bills are on auto-payment with due dates a few days to a week or so after the scheduled social security deposit. (I also found that billers were very cooperative when their due date needed adjusting to fit my income deposit date.) I get email or snail mail billings well before the due date and can account for bills that have varying amounts, utilities and credit cards for example. My given bank balance at any time is irrelevant, only the whole month counts. Accounting monthly for expenses that aren’t monthly is next.
2) For expenses that aren’t regular monthly bills (mine are medical/dental/health, property tax, pet, clothes and gifts, home/appliances, car repair/gas), I note every amount spent for each every month. I made a chart to do this but you could simply put receipts in envelopes labeled for each category but however you do it, you need to be completely honest and account for every penny. At the end of the year I add up each category and the total of all. I divide that total by 12 months, add 20% for inflation and unexpected crises; that monthly “averaged expenses” amount is then set up as a monthly automatic transfer to a savings account and becomes one of the regular monthly expenses entered in my checkbook. The savings account isn’t tapped into for anything besides the designated yearly averaged expenses.
My method isn’t as complicated and time consuming as it might sound, just a once a year major math session and a one-time set up. The actual totals are always not what I expected, and these things are what can suddenly throw you in a deep deep hole.
3) Also, a trick I do on myself is to give my checkbook balance a minus $150 margin – for instance, when it shows -$10 the actual balance is +$140. When the checkbook starts to show a negative balance I make sure every expense that month is accounted for. Works for me. It’s a little like setting the clock ahead.
Hope this helps someone else living on a tight budget in some way.
I have been doing the half payment method since March to save for a new car and honestly it is the best thing not just for paycheck to paycheck but just in general. I really saw where my money was going, how much was being used for each section, and it really helped me to keep my goals in check. I was able to purchase my new car (thank God), pay down my student loans, and really accomplish some goals as well as know where my money was going. This is an awesome way to start budgeting and I was so surprise to see how much money I was wasting. I used a budget template that I found off pinterest to do my budget and now I half pay every paycheck.
LOVE THIS PAM!!!! Congrats on the new car and getting your student loans paid down!! Those are some incredible goals to have met! 🙂
I get paid on the 3rd of the month, my husband gets paid on the 15th and last day of the month, plus he gets 2 paychecks in between from a second job. Our kids are grown, 2 still live with us. We struggle paycheck to paycheck sometimes up to 2 weeks with no money. We have a lot of miscellaneous bills in addition to utilities and rent. Whatever’s left is used for gas and groceries. How can I start this plan?? It sounds awesome. I don’t know where all the money goes, but it’s rough. Thanks.
Hi Debbie! My first advice is to figure out where your money goes every month so you can nip that in the bud. This post here: https://jessifearon.com/2015/12/how-to-figure-out-what-expenses-to-cut-from-your-budget.html shows my exact process for figuring out budget leaks whenever we get bit by the spending bug. I recommend starting the half payment method with your smallest fixed payment first and then as you develop the habit of paying that payment in half payments, start the process with the next smallest fixed payment and so on from there. If you think it would be easier, you can take your fixed payment and divide it up among the amount of paychecks you receive in month. From your comment it looks like you receive 5 paychecks every month so you could divide your payment up into 5 parts and have those smaller payments pulled out automatically after your paychecks are deposited so you aren’t tempted to spend them. You can transfer them into a savings account or go ahead and apply them to the bill (if they company allows you to make payments that way). I definitely recommend that you do not keep the money sitting in your checking account because it’s liable to disappear in miscellaneous spending or at least I know that’s what happens in our house! :-/ I hope this helps!
I actually do a quarter of the mortgage each week. I have $20 automatically transfered to one savings, 25 to our emergency savings, and 150. to a savings account for the mortgage. Our bank lets us pay half mortgage payments so every other week the 300 automatically goes from savings to the mortgage. That means we pay 13 full payments a year. I haven’t done the half payment with any other bills but that is a thought. I have 3 credit card bills that I am planning on having paid off by the end of April. I was hoping to have that done by Dec. 31 but we had several unexpected items come up, like 4 new tires for our SUV. Not cheap! We will get through this. My husband is on board with getting the credit cards paid off so we can build our savings. He would like to have 10,000 in a savings. We are about half way there.
Just curious how you can do half payments when you have a $430 car payment on the 4th and a $375 car payment due on the 25th. We also of course have rent due on the first and all the other bills due on different days throughout the month. Pay days are twice a month… Any suggestions?
Hi Amanda! I would definitely start with the lowest fixed payment you have a month and work your way up from there because setting aside the $617.50 (total of both car payments divided by 2) at the first of the month may be a challenge to do right off the bat. If your car payments are your lowest fixed payments a month, I’d suggest starting off with paying a quarter ($93.75) of the $375 car payment when the $430 one is due and as you build up the habit of doing it, add in the other quarter to bring the $375 car payment to the full half payment and then add a quarter of the $430 ($107.50) payment to when the $375 payment is due and convenient on from there. Hopefully that makes sense! 🙂
Anything to make the bills seem smaller. In essence you’re saving a little at a time for the big purchase. It’s the same as putting a hundred dollars away so you have $600 after six months to buy your new phone. When you buy it, it won’t seem quite as big of a purchase because you have saved a little at a time. How do you eat an elephant? One bite at a time or one bit of savings at a time. Great advice, great blog!
Do you use any budgeting worksheets to aid you with the process? Thanks
I do! I use mine from my Build a Budget that Works workbook (found here) and Google Sheets so I can easily share it with my husband.
Yes I do!!
I never thought of it as a half payment plan…I like that name 🙂
I would not be able to survive without the half payment plan!! Such a life saver!!
I love the half payment method, especially for my student loans! I have a relatively large minimum payment that would essentially require one entire paycheck to cover so I use the half payment method to make my life (and bills) more manageable. It also helps to keep me motivated for larger payments towards my debts (because half twice a month doesn’t feel nearly as terrible as an all-at-once-monster-payment).
Hello,
I’m just coming across this post. I’m interested in trying to do this for my current credit card. I only get paid once a month. Is it possible to do the half payment method ? Could you give an example please? Thanks so much!
Yes! You can definitely apply the half payment method to credit card balance so long as the company allows that. Since you get paid only once a month you’ll need to work at it slowly. By budgeting your income for the month – figure out how much you can set aside to apply extra to the credit card balance. Even if it’s only an extra $20 it’s a great start. Then hold onto that money until about one week or two weeks after you submitted the first payment and then apply the extra $20. This will take some practice as you’ll have to make sure that you don’t spend the extra $20 but if you start making this a habit with your credit card you’ll be able to start applying the same method to all your payments and help to stretch your money out further.
I love this idea but I am not sure how well it would work with only a once a month paycheck. I would love to give this a try for my mortgage and car payment. My mortgage is $829.15 and my car payment is $500. Should have pay half of each of these at the begging of the month and then the second half before the due date?
That’s what I would do Lauren. My mom is paid only once a month and uses the half payment method for her regularly occurring bills just like that and it’s worked wonders for her. 🙂
Hi, My budget is so tight. I’m disabled and I stay home and do the budgeting and my husband is out shopping with the cards and we have gotten in a mess a few times when he will check the balance in the account and then spend some of it but in fact the balance was just when checks were still out or it was money for a bill in waiting. To solve this a little, I started taking part of the money and moving it to the savings account until the end of the month or when the bill was due that way he would not see the money in the account to spend. One thing to be careful is, with my bank if you transfer back and forth over a certain number of times per month or so they charge me for it. I’m careful to do it once to put the money in and out when I pay the bill(s). Thanks for the great info!!!! Dee in Oregon
Great tips to stick to your budget.Thank you for sharing on Merry Monday! Hope to see ya next week!
Kim
Jessi, this sounds like a great idea, something that will help a lot of people.
I have a question. I used to do this when I was working and it helped a lot. Now that I am not working and we are down to one income, it’s hard to try to get my husband to grasp the concept. So our rent is 1134 and car pymt is 555. Both are due at the beginning of the month. I know what half of each are. But his question is how do we save half of those big bills without being broke?
Hi Astrid! For us, we had to “build up” to it. So we started off setting aside some of the money and just holding on to it. Then once we had set aside the full half of the bills, that’s when we started using the half payment method. I hope this helps!
Great idea and post. I think that if anyone can do this to pay down debt faster then it is definitely worth a try. Thanks for sharing this week at #HomeMattersParty
Ahh!! I’m so glad to see that I’m not the only one that does this!! I’ve done this for years (before pinterest LOL) and it truly helps so much! I use this method for all of our bills!