The Half Payment Method for Budgeting Your Money

For the longest time, one of my biggest money issues was the frustration of knowing that I made enough to cover my bills, yet I still felt broke for long stretches every month.

The first half of every month is bill heavy and when most of the larger expenses are due. The second half of the month has the fewest bills.

As a result, I used to feel broke for half the month and flush the other half.

If after paying all your bills at the beginning of the month you wind up eating rice and beans for a week straight or buying groceries with a credit card to last until your next paycheck, that’s a huge problem. It’s also a major source of financial stress.

Wouldn’t it be fantastic if all our monthly payments were evenly distributed so the first half of the month wasn’t so overloaded with bills? Yeah, never going to happen. It’s just not something we can control.

What if there was a way to smooth out your bills so you pay the same amount toward your bills every time you get paid? There is!

It’s called the half payment method.

How Does the Half Payment Method Work?

With the half payment method, you add up your monthly bills and divide the total in half. When you get paid, you set aside the money for half your expenses so one paycheck covers half your expenses. The next paycheck covers the other half.

If you’re worried about not being able to leave the half payments alone, you can move the advance half payments to a separate checking account you use only for bills. Online banking makes transfers quick and easy. Move the money somewhere else if you’re worried you might lose track or accidentally spend it.

If your mortgage lender, landlord, creditor, or service provider accepts partial payments, you can make a half payment in advance after that first check and then pay the other half on the due date. Do it if it makes you feel better or if there’s some other advantage to it like saving on interest. It’s unnecessary, though.

Pros and Cons of the Half Payment Budgeting Method

Like most things, the half payment system has its advantages and disadvantages. We’ll look at the pros first:

Advantages of the Half Payment Method

  • It’s a simple way to keep your finances straight compared to more labor-intensive budgeting techniques.
  • You’ll know where your monthly income goes.
  • You won’t be able to overspend if you move the half payment money into a separate account you use only for paying bills.
  • You break the cycle of living paycheck to paycheck regardless of your income level.
  • You ease the stress of being broke half the month and waiting for that next check.
  • You don’t need to use credit cards as a bridge until you get your next paycheck.

Simple, no more paycheck-to-paycheck living, and no stress. Sounds great. So what are the disadvantages?

Disadvantages of the Half Payment Budget

  • There’s some work involved initially. Before starting, figure out how much to save and get your due dates straight. Going forward, you’ll also have to track half payments and account for any changes to regular payments or recurring amounts.
  • It might take time to get used to the idea that you can’t touch your half payments or spend down to a zero balance.
  • It takes time to set up. You should be at least half a month ahead before the benefits of this method kick in.

The half payment method solves a common financial problem: feeling broke for half the month every month. But it’s up to you to decide whether the pros outweigh the cons.

How to Start the Half Payment Method

Woman entering numbers on her phone calculator app.

You can’t really dive in all at once. You have bills due that can’t wait for you to gather up the full payment from your next two paychecks. But you can ease into this system slowly.

In the beginning, you might have to examine your spending habits, cut expenses a bit, and free up extra money to focus on putting aside half payments for your recurring bills. It’s temporary and it’s worth it. Once you have the system working you’ll feel so much relief.

Start with the pay period when fewer bills are due. If you get paid twice a month on the 1st and 15th, that’s probably going to be that mid-month check. If you get paid biweekly, it’s going to depend on your paycheck cycle and where your paychecks fall this month, so it might take a little extra work.

Pick a monthly recurring bill that is the same amount every month. Pick one of your less expensive bills that is smaller than your rent or mortgage payment. A car payment or a student loan payment is a good candidate as it won’t take too much belt-tightening to get this going.

If you get paid biweekly, two months out of the year you get 3 checks. Those three paycheck months are the perfect time to start this.

You could also do a no spend challenge to get this going. Use the money you save from not spending any money on non-essentials to move to the half payment method.

Once you have one of your bills moved over to a half payment schedule, it becomes a matter of putting aside half payments for the rest of your bills one at a time until you have each payment ready to go on the due date.

Traditional Budget vs Half Payment Method Budget Example

Let’s see how the half payment method works in practice as opposed to a traditional budget. Half payment budgeting is about splitting fixed monthly expenses, so we won’t include expenses that vary month to month like groceries in this example. We’ll start with a traditional budget.

Let’s say you take home $3,400 per month. The money hits your bank account on the 1st and 15th. Your monthly fixed expenses look like this:

  • Rent: $900 due on the 1st
  • Daycare: $300 due on the 1st
  • Netflix: $16 due on the 1st
  • Car payment: $300 due on the 2nd
  • Car insurance: $100 due on the 5th
  • Gym membership: $40 due on the 16th
  • Mobile phone: $100 due on the 18th
  • Internet: $80 due on the 22nd
  • Student loan debt: $150 due on the 25th

Here’s how you would handle these expenses with a traditional budget:

Traditional Budget – Paycheck 1: $1,700

  • $900 for rent
  • $300 for daycare
  • $16 for Netflix
  • $300 for your car payment
  • $100 for car insurance

You only have $84 left until you get your next check.

Traditional Budget – Paycheck 2: $1,700

  • $40 for the gym
  • $100 for your phone plan
  • $80 for internet access
  • $150 for your student loan

You have $1,330 left during this pay period.

Variable expenses like groceries and utilities that fluctuate every month aren’t included. Neither is discretionary spending. You use the leftover money from each check to pay for those expenses.

Hopefully, you’re able to save some money for next month because that $84 from your previous paycheck has to last you until the 15th. But many people can’t put aside enough during the flush pay period to make up for the broke pay period. That’s when they turn to credit cards.

They might charge something they don’t really need figuring they’ll just pay it off later when they get their next check. Or they might need to pay for necessities like groceries or electricity with a credit card.

This perpetual cycle of being broke and then flush can lead to another perpetual cycle of credit card debt. Being trapped by debt makes it difficult or impossible to reach your goals like building an emergency fund, saving for a down payment, or reaching financial freedom.

The half payment method solves this. You’ll have more disposable income available for any additional expenses.

So let’s see how this scenario plays out budgeting with the half payment method instead.

Half Payment Budget Method – Paycheck 1: $1,700

  • $450 for rent
  • $150 for daycare
  • $8 for Netflix
  • $150 for your car payment
  • $50 for car insurance
  • $20 for the gym
  • $50 for your phone plan
  • $40 for internet access
  • $75 for your student loan

Now you have $707 left. That’s a lot more reasonable than trying to stretch $84 for two weeks without taking on new debt.

Half Payment Budget Method – Paycheck 2: $1,700

  • $450 for rent
  • $150 for daycare
  • $8 for Netflix
  • $150 for your car payment
  • $50 for car insurance
  • $20 for the gym
  • $50 for your phone plan
  • $40 for internet access
  • $75 for your student loan

Again, $704 is left over. The money that remains after your regular expenses is distributed evenly.

It’s much easier to cover your variable expenses this way. You can also leave the credit cards in your wallet. You might even find a little extra to put into your savings or a retirement account.

If you get paid weekly, you can still use this system to pay your regular bills and get off the paycheck-to-paycheck hamster wheel. You just need to adjust it so it becomes the quarter payment method by setting aside one-fourth of your fixed expenses each paycheck.

Will the Half Payment Method Work for You?

The half-payment method works well for people who get paid biweekly or twice a month. You can also use it with other budgeting methods, like the cash envelope system or the 50-30-20 budget rule. If you’re sick of being broke half the month, try setting up.

It takes time to get half payments for every recurring bill put aside. But once you get to that point, bills become much less of a financial burden and you’ll have some financial peace.

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