Budgeting is an essential aspect of your personal finances. It’s one of the basic things you must do to manage and spend your money effectively every month. However, it’s important you know that there are various budgeting strategies. This means there are diverse ways to budget money. It’s your responsibility to pick the perfect budgeting method that will improve your income.
The half payment budget method, for example, is a very efficient strategy for budgeting your income. In this article, you will understand exactly how this budgeting technique works, and practical examples will also be provided to ensure you understand all aspects.
If you realize that the half payment budget method suits your financial situation, then you can keep using it for as long as possible.
What Is The Half Payment Method?
The half payment budget method is a unique budgeting technique that entails taking your regular monthly bills and dividing them in half. This means as soon as you get paid, you will keep half of the bill’s payment so you won’t be caught unaware when the full payment is due.
Who Does The Half Payment Budgeting Method Work For?
The half payment budget method is mainly for people who are paid biweekly and are struggling to make ends meet each paycheck. It’s a very helpful way to pay your bills in full, manage your salary, and ultimately improve your financial situation.
How The Half Payment Budget Method Works – With Examples
For a lot of people, the first half of the month holds up the most bills. By the time you finish paying all your bills at the beginning of the month, you don’t have much left to cover your normal daily living costs.
Apparently, you will feel broke and might resort to using credit cards until your next paycheck arrives. At this point, you are living paycheck to paycheck and piling up credit card debt. This will eventually lead to huge financial stress.
If you want to pay your bills conveniently without using credit cards and longing for your next paycheck, then you must know how to use the half payment budget method.
Here is a visual example and breakdown of how the half payment method works:
– Let’s assume your monthly take-home pay is $4,000, and you get paid twice per month (on the 1st and the 15th).
– Your fixed monthly expenses look like this:
- Rent: $1,200 (due on the 1st)
- Car payment: $300 (due on the 5th)
- Water bill: $50 (due on the 5th)
- Cell phone: $50 (due on the 15th)
- Insurance: $200 (due on the 10th)
- Internet: $50 (due on the 1st)
- Netflix: $15 (due on the 25th)
Here is what a typical monthly budget would look like:
First paycheck arrives on the 1st – $2000
- Rent: $1,200 (due on the 1st)
- Internet: $50 (due on the 1st)
- Car payment: $300 (due on the 5th)
- Water bill: $50 (due on the 5th)
- Insurance: $200 (due on the 10th)
Above are fixed bills that are paid in full in the first half of the month.
Total payment due: $1,800
Amount left over: $200
You can clearly see that the leftover amount of $200 is not enough to cover your living costs such as groceries, transportation, and even emergency expenses. This can compel you to rely on loans or credit cards just to get by, thereby running into debt.
Second paycheck arrives on the 15th – $2000
- Cell phone: $50 (due on the 15th)
- Netflix: $15 (due on the 25th)
Total payment due: $65
Amount leftover: $1,935
As you can see, you have more money left in the second half of the month. But if you don’t have a budget in place, you might spend the money carelessly.
Now that you have understood this concept, below is what a half-payment budget would look like:
First paycheck: $2000
- Rent: $600
- Car payment: $150
- Water bill: $25
- Cell phone: $25
- Insurance: $100
- Internet: $25
- Netflix: $7.50
All the bills are halved.
Total payment amount: $932.50
Amount leftover: $1,067.50
This is how it would look when using a half-payment budget worksheet.
Second paycheck: $2000
- Rent: $600
- Car payment: $150
- Water bill: $25
- Cell phone: $25
- Insurance: $100
- Internet: $25
- Netflix: $7.50
The leftover halved bills are cleared.
Total payment amount: $932.50
Amount leftover: $1,067.50
Apparently, you will have $1,067.50 left after paying your fixed bills (in half) at the end of each 2-week period. The remaining amount of money, if managed properly, should cover your living costs without having to use credit cards. If you are the frugal type, you may even have enough money to put towards your savings or towards building an emergency fund.
How To Use The Half Payment Budget Method
Now that you have understood how the half payment budget method works, it’s time to learn how to practically apply it to your finances. Here is a simple 5-step process of how to use the half payment method:
Step 1: Itemize All Your Regular Bills
The first thing you must do is write down all your regular bills and their due dates just as you’ve seen above. These bills should be your fixed expenses, things you always have to spend money on every month. You can use a recurring bill worksheet for this. It helps you track all your monthly bills and their due dates.
If it’s your first time doing this, you might be tempted to scribble down the bills in your mind instead of literally writing them down with a pen and paper or spreadsheet on a PC. Don’t fall for this trick. It’s the easiest way to fail at budgeting. Always write out your fixed expenses and the specific due dates you are supposed to make the expenditures.
Step 2: Employ A Budget Calendar
If you are a visual learner, you should make things much easier for yourself by using a budget calendar. This would help you see when each of your regular bills is due for payment every month. With a budget calendar in place, you can also write down your paydays, your savings contribution dates, and any special events you need to be aware of (birthdays, anniversaries, vacations, etc).
Fortunately, there are several free online tools and mobile apps you can use for this. If you use an Android phone, go to Play Store and search for budgeting apps. Most budgeting apps have a special feature that allows you to create a budget calendar. If you use an iOS device, you can find these apps on the App Store.
Step 3: Take Each Bill And Divide It In Half
Having written all your regular bills and their due dates, the next step is to divide the bills in half.
For example, if your rent is $900 per month, you would have to set aside $450 from each paycheck (let’s say you are paid biweekly). This half payment should be ready before your rent is due so by the time your second paycheck hits your account, you can complete the bill and pay your complete rent for the month. This method makes it easier to pay your bills without feeling overwhelmed.
Step 4: On Every Payday, Seclude The Money You Need
Whenever you get paid, transfer the money for your half payment into a separate savings account. Please don’t leave the money in your checking account since you might be tempted to spend it. If you want to prevent overspending and keep the money safe, it’s best to transfer it to a savings account. In fact, the transfer should be automated so you don’t have to lift a finger.
Choose a financial institution that allows you to open multiple savings or checking accounts for free with a low balance requirement.
Step 5: When You Need To Pay A Bill, Retrieve The Money To Your Checking Account
Before the due date of your bills, transfer the money back to your checking account and pay in full. These steps actually seem tedious, but they are the only way you can use the half payment budget method successfully.
In the beginning, it might be challenging to follow these steps accurately. But as you get used to it over time and apply the half payment budget tips you’ve learned, you will do just fine.
Pros And Cons Of The Half Payment Budgeting Method
Before using this budgeting technique, it’s important to know why it’s very useful and why it may not be the perfect option for everyone. Here are the pros and cons of using the half payment budget method:
[Pros]
- Helps You To Manage Your Finances
Budgeting your money with this technique is a great way to manage your finances, especially if you are not earning so much money. It enables you to gain control of your expenses and live below your means. But more importantly, the half payment method will help you stay out of debt, and you will be able to pay all your fixed bills and essential expenses with ease.
- Prevents Paycheck-To-Paycheck Living
One of the main benefits of using this budget method is that you won’t feel like you’re living paycheck to paycheck to make ends meet. This means you won’t always go broke before you receive your next take-home pay.
- You Can Track Your Expenses
Using this budgeting technique makes it so much easier to track your spending. This is because you have your bills and their due dates written out. You can always identify what you spent your money on and when you actually spent the money. It’s a great way to be accountable to yourself concerning your expenses.
- Prevents Impulse Spending
It would be difficult to indulge in impulse buying since you have moved your half payments to a separate savings account solely for paying bills. The remaining cash left in your checking account would be meant to cover your living costs, and if you are self-disciplined, you won’t consider trading your living expenses for impulse purchases.
- More Confidence And Control Over Your Budget
The half payment budget method gives you control over your budget for each month, and that comes with some sense of confidence. You will be confident, knowing you can pay your bills and cover your living costs without using credit cards and landing yourself in debt.
[Cons]
- It Takes Time To Set Up
One of the downsides to using this budget method is that you should be at least half a month ahead of your bills. This means it might be a bad idea if you have $0 savings and you’re trying to use this technique for the first time. You will definitely struggle to keep up.
- Temptation To Spend The Money Kept Aside For Bills
You can’t deny the temptation that comes with watching half your salary in a savings account untouched. This money is set aside for your bills and must not be touched. This is why it’s always advised to transfer this money to a separate savings or checking account you don’t regularly use. You shouldn’t even have a debit card connected to the account.
- You Must Pay Close Attention To Due Dates
You must always pay attention to the due dates to avoid missing on-time payments. This is why using a budget calendar is very important. It’s the only way you can be reminded of your outstanding bills that need to be paid. A good budgeting app should offer tracking options or a calendar to notify you of due dates.
Final Notes On Using The Half Payment Budget Method
If your paycheck comes biweekly, this might be the best budgeting technique you need. You can pay bills on time even without having a ton of money sitting in your checking account. However, the half payment budget method is not suitable for people earning once a month. They should budget their money differently.
Mind you, if your income is low, you should consider cutting down your living costs so you can cover all your expenses without resorting to using credit cards.
Pin this for later!
