“I don’t live paycheck to paycheck. I live paycheck to four days before paycheck.” –Anonymous
Half payments work incredibly well to help you find financial peace. In fact, half payments are the only reason why my family was able to stop living paycheck to paycheck. The half payment method is where you take a regularly occurring payment, such as a $300 car payment, and divide it in half.
You then set aside that money (half of the total bill) at the beginning of the month, and take the rest out when you send out the payment. This will ensure that you have the full payment ready-to-go come payment due date. To clarify, I am suggesting taking the half payment and setting it aside, not sending it in to your creditor. However, if your creditor accepts half payments made before the due date and paying the money immediately would benefit you, do it.
If that seems confusing, here is a little break down of how it works if you receive a bi-weekly paycheck. (I am still using the $300 car payment example from above):
Paycheck #1: $600
Half payment for car payment: $150
Total left from paycheck #1: $450
Paycheck #2: $600
Half payment for car payment: $150
Total left from paycheck #2: $450
What is the purpose of using this system? What if instead of using half payments, we look at this example of how it usually plays out for most:
Paycheck #1: $600
No half payment
Total left from paycheck #1: $600
Paycheck #2: $600
No half payment
Full car payment: $300
Total left from paycheck #2: $300
Some may think that option #2 seems fine, and essentially, there is nothing wrong with it. The issue with the second option is that you now have lost an additional $150 from paycheck #2. Of course, the argument is that you gain $300 to paycheck #1, but do you really gain that money? What usually happens when there is money just left on the table? It typically becomes absorbed somewhere else in your spending because, subconsciously, the money is still available.
Related Post: 👉How We Paid Off $5,000 of Debt in One Month
If instead, you used half payments, you would manage to have your full car payment every month without having to scrape by at the end of the month. You would end up with more money in your pocket over time and your finances would become easier to manage, lessening your financial stress.
This system will work no matter how often you are paid. If you are paid once a month, consider starting the half payment method by only making quarter payments or small payments every week. Once again, I suggest starting with the smallest fixed bill every month as this is usually an easier place to start and will prevent you from feeling overwhelmed.
The half payment method is exactly how I managed to stop living paycheck to paycheck and how I was able to pull myself out of financial trouble all those years ago. It definitely works, though it can be challenging at first. It will bless you in the end by making managing your money easier.
📈If you need help creating a budget, my favorite free tool (that’s also easy to use) is Personal Capital.
💻If you’re more of a spreadsheets type of person, Tiller is fantastic for setting up and using Google Sheets to manage your money.
✏️And if you’re like me and more of a pen-to-paper type person, head here to see my budget binder tutorial for how I set up and manage our family’s budget for the year.
Make Half Payments
Start using the half payment method for all your regularly occurring payments. Start with your lowest regular payment and divide it in half. Use the half payment method with that payment until you develop the habit. Then start the half payment method with your next lowest regular payment and continue the trend with all your regular payments.
Do you use half payments?
OTHER POSTS YOU MAY ENJOY
JOIN THE CHALLENGE!
Money controlling you? I know the feeling. My family has been living this real life on a budget for a long time and I can tell you that there's never a perfect season, but with a few changes you can start to reign in your money issues.
Join the 5-Day Challenge today and start getting your money life in order this week!
FAQs
With the half-payment method, you split your monthly recurring bills in half. If you're paid on a biweekly schedule, you'll set aside half of the bill's payment so you're ready when the full payment is due.
Is it better to split bills between paychecks? ›
Overall, paying bills on a bi-monthly basis can be a useful strategy for budgeting with bi-weekly paychecks, as long as you're willing to put in some extra effort to keep track of your payments.
How to split paycheck for bills? ›
Our 50/30/20 calculator divides your take-home income into suggested spending in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment. Find out how this budgeting approach applies to your money.
What is the best way to divide pay? ›
Poorman suggests the popular 50/30/20 rule of thumb for paycheck allocation: 50% of net pay for essentials: groceries, bills, rent or mortgage, debt payments, and insurance. 30% for spending on dining or ordering out and entertainment. 20% for personal saving and investment goals.
How to split monthly payments? ›
Split bills by income
Consequently, many opt to split bills proportionally according to each person's income. For example, if Person A makes $6,000 per month, and Person B makes $4,000 per month, their total income is $10,000. Person A earns 60% of that, while Person B brings in 40%.
What is the 50 20 30 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
What is the smartest way to split your paycheck? ›
Many budgets begin with the 50/30/20 rule, which suggests setting aside 50% of your income for essential expenses, 30% for nonessential expenses and 20% for savings.
Is $1000 a month enough to live on after bills? ›
But it is possible to live well even on a small amount of money. Surviving on $1,000 a month requires careful budgeting, prioritizing essential expenses, and finding ways to save money. Cutting down on housing costs by sharing living spaces or finding affordable options is crucial.
What are the benefits of the half payment method? ›
A smaller chance of overspending: The half-payment budget method can reduce the need to splurge or overspend with the extra money in your account in the middle of the month. Decreased pressure of living paycheck to paycheck: The half-payment method can relieve the anxiety to make ends meet toward the end of the month.
What is the fairest way to split bills? ›
Splitting bills based on your income is more fair than splitting them down the middle. To do this, you both can set up a direct deposit from your individual accounts to the shared joint account for your agreed share of the expenses.
As a result, it's recommended to have at least 20 percent of your income left after paying bills, which will allow you to save for a comfortable retirement. If your employer offers matching 401(k) contributions, take advantage so you can maximize your investment dollars.
What is split pay method? ›
Key Takeaways. A split payment involves using multiple payment sources to settle the whole cost of a single transaction. Split payments allow individuals to use multiple payment methods to complete an order, or enable several individuals to jointly contribute part of the order total.
How do I split my paycheck automatically? ›
Determine if your employer offers split direct deposit by checking with your payroll department or signing into your account on your payroll provider's website. You may be able to divide your paycheck based on either a percentage or a dollar amount.
How to start half payment method? ›
During the pay period prior to when a bill is due, you'll set aside half the cost of the payment. When it's time to pay, you won't be struggling to come up with the entire amount from your most recent paycheck. You'll only need half, which you'll add to the money you previously set aside.
What is the easiest way to split a bill? ›
By asking to split the check beforehand, you can establish what the payment situation will look like at the end of the meal. Use this moment to explain to the group that you're trying to save money and don't plan to order drinks or an expensive appetizer.
How do most couples split bills? ›
50-50 Bill Split
Splitting shared bills down the middle is one of the easiest approaches to a joint financial life. Each person pays half. This straightforward approach makes budgeting as a couple consistent. Each person pays half the rent, subscriptions or insurance from individual accounts.
Is it better to pay bills biweekly or monthly? ›
If your biweekly budget helps you tackle debt repayment, you'll start to owe less and have less interest accruing each month, freeing up even more cash from your future three-paycheck months.
Is it better to split payments? ›
Better financial management: 74% of consumers choose split payments to manage their budgets better. This is because split tender payments allow customers to choose methods that suit their financial situations and preferences to avoid overspending, which can lead to debt.
Why splitting bills based on income is best? ›
Splitting bills based on your income is more fair than splitting them down the middle. To do this, you both can set up a direct deposit from your individual accounts to the shared joint account for your agreed share of the expenses.
Is it better to pay all bills at once? ›
In reality, it doesn't matter when you pay your bills as long as you pay them before the due date. Some people spread out bill payments over the month to ease the financial burden, while others find it makes more sense to pay off everything for the month at once.
