Sunset Train Tracks Station

3 Paycheck Months

I am on the “every other Friday” payroll, as with many people around the United States. This year, September is the second of two months where I get three paychecks. Because I am used to two paychecks per month, it is like a bonus check.

What do I do with my bonus money? Great question! Here are my ideas for the best use of a third paycheck.

Extra Loan Payment

I often write about paying your loans bi-weekly rather than monthly. There are a couple of reasons for this. First, you match your income stream to your expenses. If you don’t get paid monthly, why should you get hit with a giant loan payment monthly?

Second, paying every payday saves you mortgage interest. Loan interest compounds daily, so paying more often will lower the compounding effect and save you money.

But, twice a year, you will make an extra half payment. That equals one full extra payment per year. That helps you pay down the debt faster, build your equity faster, and save a ton of money on interest over the life of the loan. If you want, you can even round up your payment for a faster payoff.

Extra Savings

You can save up to $5,000 per year in a Roth IRA. Most people do not do that. With two extra paychecks, you can make a big dent.

Do you have an emergency fund saved up? What if you were fired tomorrow? How long could you survive? If the answer is less than three months, you should put that extra paycheck into a savings account for a bad day.

Life Experience

I have a long life list with big goals on it. Many of them involve international travel. Some involve taking up new hobbies or skills that require expensive equipment or classes. An extra paycheck goes a long way toward a flight to Europe or a set of DJ turntables.

Your Ideas

What do you do with the third paycheck if you get one? If not, what would you do with it? Please share how to save money in the comments.

Image by Mark Strozier / flickr

12 thoughts on “3 Paycheck Months”

  1. We get paid twice a month so I don’t have to worry about it.  Long ago, I was employed by a company that did every two weeks, so the three paycheck months were nice.  Most of that went to savings, but I was making a lot less so the impact was less then as what it would be now 🙂

  2. I use the extra paycheck as savings. I actually budget on two (every other week) paychecks purposefully so that this seems like a bonus! I love it. It sneaks up on me most of the time and I am so happy!

  3. Andrea @MoneyMastered

    I’ve never really understood how people end up with extra money from a third paycheck. Whether I get paid on the 27th or the 2nd, the same bills are still due before I get paid again. And I’m saying this as someone who previously got paid twice a month. I guess it just depends on how you look at your bills – I don’t necessarily divide mine up by the month of the year; I look at them on a rolling basis from one pay period to the next.  

    1. I look at everything as two halves of a month and budget accordingly, so when I get three checks the extra income is like a bonus.

  4. For me it doesn’t matter half of every single paycheck goes into the joint family fund – and then my personal checking account just grows by bits and pieces if I don’t spend a lot or goes down if I do spend.

    Ignoring my situation, I would take that extra and split it up! Maybe a few hundred at your mortgage, few hundred at an account for those turntables and a few hundred in your roth.

    I usually don’t opt for the all or none approach on anything

    1. Two turntables and a microphone? lol

      Thanks for the comment Evan. That split approach makes a lot of sense. I am always in favor of balance.

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