Are you living check by check? Do you ever feel like you have more money at one pay period than the other? Are there any paychecks that you have no money left at all?
Today, I want to talk about the half payment method. This is the best thing we ever did for ourselves. This method changed everything for us and I want to share it with everyone else.
I will start explaining with an example first. Suppose that your net pay after taxes is $1500 each paycheck. Your pay dates are the 1st and 15th on of the month. You have several obligations that are listed with their due dates of each month:
Car and renters insurance – $100 -Due on the 1st
Rent – $850- Due on the 5th
Utilities- $250 -Due on the 7th
Credit Card -$100 -Due on the 15th
Car Loan – $450- Due on the 18th
If you use your first check to pay for the obligations due in that period, you would pay the insurance, rent and utilities for a total of $1150. It means that you only have $350 left of your paycheck to pay for groceries, supplies, kids classes, pet expenses, eating out and anything else. It is simply not enough.
On the second pay period, you pay your car loan and credit card for a total of $550. Now, you have left $950 so you feel rich and you spend everything. Does this sounds familiar?
This was definitely the situation for our family for a very long time. Then, we learned about the half payment method.
Instead of paying everything on the corresponding pay period, you write down your obligations and take out the same amount of money for each paycheck and set it apart.
In the prior example, the total amount of fixed expenses is $1850. That means that you will need to set apart $925 per paycheck. This way you will have $575 left in every paycheck. You can save the money in envelopes and take it out to male the payments or you can several banking accounts that you can transfer from when you need to make the payment. When you need to make the payment, take out of the envelopes or the separate banking account. Simple, right?
What do you think about this idea? Do you use this payment method too?