Let’s Divide and Conquer!
An Introduction to the Half Payment Budget Method.
By Stephanie Cláudia Gonçalves
Are your bills too high and paycheck is too small? Do some bills use up most of one paycheck and leave you with barely any money to cover other expenses? It is a frustrating cycle but you are not alone. According to one survey, 62% of millenials are living paycheck to paycheck. The survey found that millennials are the generation who are less likely to feel financially stable.
How do you get out of this frustrating cycle? The Half Payment Budget method might be the solution that you are looking for.
If you are paid bimonthly or on a weekly basis, this method will be the most practical for you. It involves splitting your recurring bills in half. You do not pay only half of the bill for each paycheck. You hold onto the money so that you have the full payment ready on the bill’s due date.
For those of us who are receiving one paycheck per month, this method could still work. Personal finance coach, Jessi Fearon, suggests to make quarter payments or small payments every week instead.
How to get started?
- Start with one fixed bill.
- After that, write down all of the payment due dates for your bills.
- Split the bills in half and write down your new scheduled payment dates.
- As you get more confident with using the method, include all of your other bills.
Side note. Did you know that you can actually call your creditor and ask to change your pay dates to make payment more convenient for you?
Normal Budget vs. Half Payment Budget Method:
Let’s use a simple example to demonstrate the difference between the two methods. This is a sample plan for somebody who gets paid bimonthly.
Recurring bill: $400 Rent
|Normal Budget||Half Payment Budget|
|Paycheck No.1: $800 No half payment. Total left from Paycheck No.1: $800 Paycheck No.2: $800 No half payment. Full rent payment: $400 Total left from Paycheck No.2: $400||Paycheck No.1: $800 Half Payment for Rent: $200 Total left from Paycheck No.1: $600 Paycheck No.2: $800 Half Payment for Rent: $200 Total left from Paycheck No.2: $600|
As you can see, the half payment method leaves you with a significantly more balanced budget. One disadvantage of a normal budget is that you subconsciously think that you have more money to spend after your first paycheck. What ends up happening? You overspend (Psst: We have a special article to help you avoid as well!).
The beauty of the half payment budget method is that it ensures that your bill payments are more evenly spread out. If most of your bills are due at the same time, you end up spending your full paycheck on them. Then you are not able to pay for groceries and you have to wait until the next paycheck.