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Read the best tips for budgeting extra income in a zero based budget. Whether it's a third paycheck, refund, gift, or any other form of extra cash, learn how to maximize this extra income to bolster your budget. #savemoney #debtfree #budget #createabudget

If you are currently paid on a bi-monthly schedule where you receive your paycheck every other week, you’re going to have two months per year where you receive three paychecks! Amazing, right?! The bills for that month don’t change, so how do you budget that third paycheck to make the most of it?

Without having a plan in place, this extra paycheck can quickly disappear with you wondering what happened to it.  Believe me, it has happened to us before!

These same principles also apply to any “extra” money that you didn’t plan for. This could be a bonus, a cash gift, income from a side hustle that is inconsistent, inheritance, a tax refund, and so on.

Related: Why I Use a Paycheck Budgeting Method

Figure Out Which Months You’ll See a Third Paycheck

The first step to creating a plan for your third paycheck is to figure out when you’ll actually see it.  On a bi-monthly pay schedule where you receive your paycheck every other week, you will receive 26 paychecks per year.  Seeing as there are 12 months per year X 2 paychecks, we would expect to see 24 paychecks.

Based on how the calendar actually works, there will be 26 paychecks on an every other week schedule, so that gives you 2 additional paychecks per year.  This can fall in different months each year, so you’ll need to get your calendar out and write down your paychecks for the entire year to see which months have a third paycheck.

The Best Plan for Your Third Paycheck

There isn’t necessarily a “right” answer for how to best use this third paycheck.  It’s ultimately up to you and what you prioritize to decide how to make the most of it.  We have done various different things with our third paycheck over the years, but most of the time it has revolved around decreasing debt and increasing our savings.

Here are some ways that I would recommend utilizing a third paycheck:

  1. Emergency Fund- Dave Ramsey generally recommends creating an emergency fund with at least $1000. I definitely feel like this is the bare minimum amount you want to aim for, but set a goal for an emergency fund that makes you feel the most secure.  Maybe that’s one month of mortgage/rent or one month’s income.  The goal of an emergency fund is to have money set aside that you can use to avoid going further into debt in the event of an unexpected expense or income shortage.
  2. Sinking Funds- Sinking funds is money that you set aside for a major purchase that you know that you’ll need to make in the future. These are things that are expected but will have an impact on your ability to remain within your set budget plan.  This could include:
    • A new car
    • New tires
    • A new appliance- washer & dryer, refrigerator, dishwasher, etc.
    • Kids’ braces
    • Holidays
    • Back to School- supplies, tuition, school photos, clothing, etc.
    • Yearly subscriptions/fees- Amazon Prime, Credit Card Fees, HOA, etc.
    • Clothing Needs
    • Home repairs
    • Tax Fund
    • …the big expenses are really endless aren’t they?!
  3. Save Towards a Big Goal- One big goal that you may have is to save for a down payment on a home or to pay for a home in full.  These are big goals that take time, so a third paycheck is a great way to add to these funds.  Another example of a big savings goal would be kids college funds.  These are things that you don’t have to do but are really nice to contribute towards.
  4. Invest in a Business or Side Hustle- I’ve talked to a lot of moms who are really interested in starting a business or side hustle but feel they don’t have the funds to get started. If you’ve spent any time on my blog, you know that I’m a huge believer in starting a blog to make money from home. A third paycheck can help you launch a blog and invest in the tools and resources you need.
  5. Family Fun or Memories- Maybe you haven’t been on vacation as a family in a while (or ever), and it is something that you want to prioritize.  I have also used a third paycheck to fund family photos since they can be expensive but so valuable.  Another great idea is saving for dates nights since babysitters and dinner out can cost a pretty penny.

Prioritize and Create a Plan

Sit down with your significant other and have a conversation about what is important to each of you.  Discuss your financial goals and where you see the money being best utilized.

Do you want to get out of debt over anything else?

Are you panicked constantly because you don’t have savings to cover the unexpected?

Could your relationship really benefit from some time together as a couple?

The most important thing is to have a plan in place BEFORE you ever see that money in your bank account. That means the second you see it, you can take action to meet your predetermined goals.

Other Posts You May Like:

Have I missed anything? What are some ways that you’ve been able to capitalize on a third paycheck or unexpected money in your bank account?

Read the best tips for budgeting extra income in a zero based budget. Whether it's a third paycheck, refund, gift, or any other form of extra cash, learn how to maximize this extra income to bolster your budget. #savemoney #debtfree #budget #createabudget


Sarah Nichols

Sarah Nichols, founder and CEO of Let's Talk Mom Business, has a background in business, research, advocacy, and family finances. LetsTalkMomBusiness.com combines her Masters in Business Administration (MBA) and her love for budgeting and frugal living to help others take their family finances into their own hands by teaching budget basics, how to earn income from home as a mom, DIY tutorials, and frugal fun.

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