How to Use the Half-Payment Method
to Stop Living Paycheck to Paycheck

We used the Half Payment method of paying some of our larger expenses each month, and it was a life saver and life changer for us when it came to budgeting. 

We have been on the bi-weekly paycheck plan since we were first married. Before using the half payment method, I would pay each bill in full when it was due. Well, let me tell you. We had a lot of lean times. Why? Because many of our bills were due on or close to the first of the month.

Back then, I wasn’t a Dave Ramsey follower, so I would pay the bills before we would even eat. Sound familiar? That wouldn’t leave much for groceries, gas or anything else.

Then, if we could just make it to the middle of the month, not as much would come out of that second check, but I had to play catch up. Therefore, this budgeting system that I was using wasn’t working well at all. I wasn’t able to save any money, we always felt broke and I dreaded the first of each month. I knew then, that something had to change and I had to figure out a better way.

The Aha Moment
Then one day, I had one of those moments. I learned about the Half Payment method and once I started to implement it, I figured it out that the financial burden would be lifted if so much wasn’t coming out of one check.

The Half Payment budgeting method has worked incredibly well for my family and for others that I have shown this system to. It has allowed us to get out of debt and increase our savings, substantially.

Read on and I will explain how simple and necessary this method is to use—along with the Cash Envelope System—and how it can help you break the paycheck to paycheck cycle.

Here is a breakdown of what your month might look like. Say you have a monthly income of $2,400 net ($1,200 every two two weeks). Your monthly reoccurring expenses, not counting variable expenses, like utilities are as follows:

Rent/Mortgage: $1,000

Car Payment(s): $450

Car Insurance: $100

You have total reoccurring monthly payments of $1550.

Scenario #1

Paycheck #1: $1,200

Rent/mortgage due on the 1st: $1,000

Left over to pay other bills: $200

Paycheck #2: $1,200

Car Payment due on the 15th: $450

Car Insurance due on the 15th: $100

Left over to pay other bills: $650

That doesn’t look so bad at first glance, buy when there’s only $200 left to make it to the middle of the month for groceries, gas, discretionary spending, etc.…we know that could be gone before you know it. By the time you get to that next paycheck, the $650 is quickly absorbed for the expenses that you didn’t have money for earlier in the month. And, how many of us would or could actually put any of that money away for a rainy day?

The next scenario is how the Half Payment method works. If you get paid weekly, you would simply divide your mortgage/rent and expenses by 4 instead of 2.

Scenario #2

Paycheck #1: $1,200

Mortgage/Rent half payment to set aside: $500

Car half payment to set aside $225

Car insurance half payment to set aside: $50

Left over: $425

Paycheck #2: $1,200

Mortgage/Rent to add to $500 already set aside: $500

Car payment to add to $225 already set aside: $225

Car insurance to add to $50 already set aside: $50

Leftover: $425

In both scenarios, there is $850 left over for other bills, but in the first scenario, you are left precariously short for two whole weeks.

How to Implement the Half Payment Method
If you’ve been using the method in the first scenario AND it’s the beginning o the month, chances are that you have already spent the beginning of the month’s paycheck since that’s when mortgages and rent are usually due.

I recommend beginning this method in the middle of the month OR whichever paycheck you have the least amount of bills due. Instead of changing your whole budgeting system all at once, start with one bill. For me, I started with the largest one, which was the mortgage payment, but you don’t have to do that. You can start with your car payment or a small bill until you get a handle on the way this system works.

Once you see how it is working, then you can start transitioning your other bills into this payment method.

Willpower and Self-Discipline
One thing I want to mention is that this method takes self-discipline. When you earmark money for a certain item, you must not use it for something else. The easiest way I found to avoid this was to actually move the money out of our checking account and into another account. For some reason, if I left the money in our regular checking account, it would disappear.

Most banks will let you open multiple checking accounts with no problem. I have two additional checking accounts that I refer to as my holding accounts. Nowadays, it’s very easy via Internet banking to move money from account to another. You might as well take advantage of.

I also want to mention that I’m not talking about actually paying half the bill early or twice a month. I’m talking about moving the money to another account that belongs to you, until it’s due. If you want to pay twice a month, maybe because you don’t trust yourself to leave the money alone until bills are due, that would be something you would have to work out with your lender(s).

If you don’t want to open a separate checking account, you can go the the bank and take the money out and put it away in an envelope. This is a great way to start implementing the cash envelope system. If you’re not sure how to use the cash envelope system, I wrote a post here on this method.

Why the Half Payment Method Works
The Half Payment method will work for you no matter how many times a month you’re paid. This method can free you from the paycheck to paycheck cycle and allow you to finally begin to get out of debt and increase your savings substantially.

For most of us, there’s that time in the month when making ends meet can be very difficult. This way of budgeting allows us to even out each paycheck by giving you the same amount of income to spend for each paycheck. It keeps you from lying to yourself and making you believe that you have more money to spend than you actually do.

Budgeting without doing the half payment method will eventually lead to increased debt. This, in turn, will permanently keep you in the paycheck to paycheck cycle.

By using the Half Payment method, you’re still paying the same amount of bills with the same amount of income, but you’re purposely setting aside money that your earmark for that particular bill to be paid later in the month. This, in turn, will give you more disposable income every two weeks—depending on paydays—by doing it in the way.

Do you use the Half Payment method for any of your bills? Let me know in the comment section how you implemented this system and how you like it.

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