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Strategies to Save

11 Tips for Budgeting Monthly Bills on a Weekly Paycheck

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

While Chelsea Jackson finished her Early Childhood Education degree at Georgia Gwinnett College in 2016, she took a job as a cashier at a local grocery store. The 23-year-old earned $9.25 an hour and was paid on a weekly basis, bringing in about $250 with each paycheck.

Getting paid on a weekly basis, she says, came with its own set of challenges. She needed to figure out how to save enough from each paycheck to cover bills due later in the month while also meeting her immediate needs (food, gas, etc.) at the same time.

“When you get paid weekly you don’t really have a snapshot of what your true income is because it’s gone so fast,” says Jackson, who now works as a first grade teacher. “It’s such a little amount, you really don’t see how much you make until the end of the month when you add up your paychecks.”

More than 30% of U.S. businesses pay workers on a weekly basis, according to the U.S. Bureau of Labor Statistics. Cashing a paycheck every week might sound like a great deal, but it can actually make budgeting for bills more challenging.

Exacerbating matters is the fact that workers who are paid weekly are already at a financial disadvantage, as they are more likely to earn less than their counterparts who are paid biweekly or monthly. Employees on weekly pay schedules earn an average of $18.62 per hour versus $24.81 (workers paid biweekly) and $28.45 (workers paid monthly), according to the BLS.

There are ways to adjust to a weekly pay schedule and still meet your financial obligations at the same time.

Here are some tips:

Change your bill due dates if you can

If you can, ask whatever entity is sending you a bill each month if you can move your due date to one that’s more convenient for your budgeting purposes.

“You kind of have to have one thing pushed back so it doesn’t hit you all at once,” says Shannon Arthur, 22, who receives a weekly paycheck as the assistant manager for a department store in Suwanee, Ga.

Arthur says her credit card bill comes during the second week on purpose. She called her credit card company to change the bill’s due date to better fit her payment schedule.

Work with your lenders when you can’t meet your due dates

If two bills overlap and there isn’t enough money in the bank for both, workers are left with a hard choice. Arthur found herself in that situation, and she knew she was going to be late paying her phone bill. She found that honesty worked in her favor.

“I just explained to [T-mobile] my situation,” she says. They allowed her to pay $20 of the bill that week, then pay the remainder the following week.

But she stresses making a good-faith effort to pay your bill on time if you’re going to ask for extra time as you’ll likely need to show you have a good payment history or the company may not allow you to pay later.

Save your “extra” check

When you’re paid weekly, you’ll have some months when you’ll receive five paychecks instead of four. “Those months should be used strategically,” says behavioral economist Richard Thaler.

He advises workers to budget based on receiving four paychecks each month and then use the fifth, or “extra” paycheck to boost or address your financial goals.

“When it comes around, or if, perish the thought, there are outstanding credit card bills, pay them down,” says Thaler.

Chart your cash flow

Know exactly what money you have coming in and how much you have going out each month. Lauren J. Bauer, a financial adviser based in Greensboro, N.C., recommends creating a list of all of your bills. From there, calculate how much you need to withhold from each paycheck in order to cover those bills by their due date.

“It makes it easier than just writing down a total for all your bills and trying to get them paid when you think about it,” says Bauer. She says the chart makes it easy to see what you’ll spend by check, so that you know how much money you’ll have coming in and what you’re able to pay for that week.

Set aside money to cover bills in advance

“If you’re getting paid weekly, you need to develop a discipline to save for things that you pay for on a monthly basis,” says Peter Credon, a New York, N.Y.-based financial planner.

Jackson says she relied on a simple strategy to make sure her bills were paid on time. She strove to save up three months’ worth of expenses. Once her savings fund goal was met, rather than paying her bills with a bit of each paycheck, she used her savings to pay bills as they came. Then, she replenished some of the funds each time she was paid.

This strategy is all about taking back control of your budget.

“If you have enough money [set aside], you can prefund things in many aspects and have control,” Credon says. “You’re controlling your finances and how you spend your money.”

Set aside funds for emergency expenses

No matter how often you’re paid, you should build an emergency fund that holds enough money to cover about three to six months’ worth of your fixed expenses. It can help cover irregular or unexpected bills that don’t line up with your pay schedule, like an emergency dentist visit or a trip to the auto shop.

“The emergency fund helps keep you out of long-term debt,” says Credon. “Focus on building up a little more cash on the side to get yourself through the tougher times. He says you may even want to save a little more if you’re a shift worker and your hours fluctuate.

Keep your spending money in a separate account

An easy self-hack that helps combat overspending is to transfer funds you need to cover your expenses for the month to a designated checking account and restrict yourself to using only those funds each month. Automatically transfer the amount you wish to save to a separate savings account, so you’ll be less likely to spend it.

Putting the extra money in savings can help prevent you from getting used to a larger budget. It stops you from seeing you have more money in your budget for the next week and thinking you can overspend. You take that money out of the equation to keep your spending habits tamed.

Make partial bill payments with every paycheck

If you know the date and amount of an upcoming bill, you can get ready for the payment ahead of time to lessen your financial burden during the week when the bill arrives.

For example, let’s say your rent payment is $700 per month, but you receive only $400 per week. Each week, set aside $175 for your rent and reserve the leftover funds for other expenses.

This way, a large, recurring bill like a mortgage or student loan payment won’t eat up the majority of your paycheck the week the bill becomes due. Plus, you’ll already know you have the money to cover the bill.

Try not to splurge

When you’re paid weekly, you’re paid quite frequently, so it can be easy to feel like your next payday is right around the corner. But you may run out of money faster than you imagine. When Jackson was paid weekly, she was forced to be strict with herself because she wasn’t paid that much at a time.

“There were definitely weeks or months when I would splurge,” says Jackson. “Those six days [till the next paycheck] can feel like a really long time.”

Use apps to track your spending and saving

You can set bill reminders on your banking or budgeting applications to remind you when a bill will be due in the coming week or set alerts to let you know when you’re overspending in a category you’ve budgeted a limit for.

Jackson says she used the budgeting app Mint to reign in her spending on food since she realized she was overspending at the grocery store.

Don’t forget to check your credit report from time to time if you use credit cards or have loans you’re paying off. “If you’re paying your bills on time and promptly, you’re also building your credit score,” says Credon.

Keep your goals in mind

Admittedly, if you’re already struggling to live paycheck-to-paycheck, saving up can be tough, but it’s not impossible.

“Watching a budget isn’t fun because most people want to be able to do what they want when they want to,” adds Credon. He suggests building in some rewards — like getting to go on a date night once a month — to help stay on course. He says to think of longer-term goals to keep you going, like the ability to buy your own place or take a trip for a few weeks overseas.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at [email protected]

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Strategies to Save

How to Save Money Using the 20% Savings Rule

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

You can find a lot of conflicting financial advice out there, but one recommendation that is rarely disputed is that you need to save money for the future. A strong savings game – including a savings account, an emergency fund and a retirement account – is a basic requirement for good personal financial health.

Understanding that you should build your savings is step one. Step two is knowing how much to save. That’s where the 20% savings rule comes in. This rule is part of the 50/30/20 budgeting method, popularized in a 2006 book by U.S. Senator Elizabeth Warren and her daughter Amelia Warren Tyagi, titled “All Your Worth: The Ultimate Lifetime Money Plan”.

Read on to learn more about the 20% savings rule and how it can help you save more.

What is the 20% savings rule?

The 50/30/20 budget recommends you divide your after-tax income in three broad categories:

  • 20% for savings: This includes savings for both near-term goals and your long-term financial security. Money in this category should be saved in an emergency fund, a high-yield savings account, and retirement accounts.
  • 30% for wants: Spending for things that are nice to have, but not strictly necessary. Money in this category is for entertainment, dining out, vacations, or a gym membership.
  • 50% for needs: Money in this category is for required monthly expenses like rent or mortgage payments, utilities, insurance, groceries and transportation.

Stephen Caplan, a financial advisor with Neponset Valley Financial Partners, a wealth management firm in the Boston area, said the 20% savings rule makes a lot of sense, especially for young people, because it helps safeguard against lifestyle inflation.

“The beauty of maintaining a 20% savings rate is that as you progress in your career and increase your earnings, you are able to live a nicer lifestyle and direct more money toward your future financial goals,” Caplan said. “If you focus on saving a specific dollar amount, rather than a percentage of your income, it’s easy to frivolously spend additional income.”

How to maximize the 20% savings rule

What makes the 20% savings rule work? It’s simple, flexible, and it can help you save more in the long run. Here’s how to make it work for you.

Set a budget

While other budgeting methods rely on detailed categories and strict dollar amounts, the 20% savings rule lets you allocate a percentage of your income to a variety of savings methods and accounts. This can be especially helpful if your income fluctuates from month to month. In months when you earn more, you can save more. If you earn less, you save less.

Start by calculating your after-tax income. This is the amount you have available to spend each month after taxes have been withheld from your paycheck or set aside for quarterly estimated payments if you are self-employed. If your employer withholds retirement contributions or insurance premiums, add them back in to reach your after-tax income. Now, multiply that number by 20%. Ideally, that’s how much you’ll put aside to savings each month.

Establish an emergency fund

Having an emergency fund is an essential component of long-term financial success as it prevents life’s curveballs, such as job loss, medical bills or unexpected home repairs, from sending you into debt.

Most financial experts recommend building an emergency fund equal to three-to-six months of expenses. If you don’t have this much saved yet, allocate a chunk of your 20% savings to establishing an emergency fund.

Focus on fixed costs

If you have trouble allocating 20% of your income to savings, Caplan recommends taking a hard look at the needs category before cutting wants.

“Too many people focus on trying to cut back the 30% discretionary spending category and ignore the big purchases in the 50% category,” Caplan said. “These expenses are usually fixed costs, such as mortgage, rent, and car payments, so getting them right from the start can have a significant impact on your financial well-being.”

Maybe you are spending more than you can afford on housing. It’s not simple to find a new apartment or sell a home, but over the long term paying less in rent or downsizing your mortgage could yield major savings. That new SUV may have felt great during the test drive, however it may be possible to reduce your monthly car payments by finding a more modest sedan. Again, downsizing could help rightsize your budget.

Get out of debt

Another unique aspect of the 50/30/20 rule is how it treats debt payments. Mortgage payments and minimum payments towards other debts, such as student loans and credit cards, are categorized as needs. After all, you need to pay at least this much every month to keep your home, avoid defaulting and preserve your credit score.

However, any additional payments made to reduce the principal balance of your debts are considered savings because once you’re out of debt, you can redirect those payments to savings.

If you have non-mortgage debt, after establishing an emergency fund, allocate a portion of your 20% savings to getting out of debt. The sooner you pay it off, the more you’ll have for long-term saving and investing.

Save for retirement

If you have access to a retirement plan through work and your employer offers matching contributions, you can boost your retirement savings without allocating more than 20% of your income to savings.

Contribute at least up to the percentage your employer matches. When your employer matches your contribution, it’s free money for you.

Create an automated savings plan

Too often, people make the mistake of saving only what is left over after covering their needs and wants. You can avoid this by automating your savings. Most banks will allow you to set up an automatic draft from your checking account into savings, or your employer may be able to have a portion of your paycheck direct deposited into savings.

When you automate your savings, you’ll save time, make it easier to commit to paying yourself first and reduce the temptation to spend what you should be saving.

Is 20% the right amount for you?

The 20% savings rule is simple and flexible, but it’s not for everyone. If you’re living paycheck-to-paycheck, just covering the necessities or facing other financial difficulties such as job loss or debt, you might need to work on increasing your income before you prioritize saving.

Caplan also noted the 50/30/20 rule might be a challenge for people residing in cities with high cost of living like San Francisco, New York, Los Angeles, and even Boston. “You’ll earn more in these cities,” Caplan said, “but housing costs a disproportionate amount of your income. This makes it challenging to keep your fixed costs under 50% of your income.”

If allocating 20% of your income to savings just isn’t feasible, start with a lesser amount, such as 15% or even 5%. The most important thing is to start saving. Eventually, as your circumstances change and you pay off debt, you can get closer to the 20% rule of thumb.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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Strategies to Save

Understanding the 50/30/20 Rule to Help You Save More

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Budgeting is tough. Not having enough money to cover your monthly expenses can leave you scrambling to dip into your emergency fund or relying on a credit card.

If you are looking for another way to manage your finances, you could consider percentage-based budgeting, which relies on a percentage of your income to determine your spending limitations. In a month where you earn more, you’ll have more to spend across your categories.

One approach is the 50/30/20 rule. This budgeting method was popularized in “All Your Worth: The Ultimate Lifetime Money Plan,” the 2006 book by U.S. Sen. (and current presidential candidate) Elizabeth Warren and her daughter Amelia Warren Tyagi.

Read on to learn more about the 50/30/20 rule, how to use it and why it might be the key to helping you save more.

What is the 50/30/20 rule?

The 50/30/20 rule states that you should budget your income in three categories: needs, wants and savings. It starts with your after-tax income. This is the amount you have available to spend each month after taxes have been withheld by your employer or set aside for quarterly estimated payments if you are self-employed.

If you receive a paycheck and your employer withholds retirement contributions or insurance premiums, add them back in to get to your after-tax income. Once you’ve determined your monthly income, you’ll budget it as follows:

  • Budget 50% toward your needs: These are required monthly expenses, such as your rent or mortgage payment, utilities, insurance, groceries and transportation.
  • Budget 30% toward your wants: This is the fun stuff, such as dining out, entertainment and the barre class you take on Saturday mornings.
  • Budget 20% toward your savings: This is for your financial security and long-term goals, such as creating an emergency fund or saving for retirement. This also includes vacations or home improvements.

Todd Murphy, a financial advisor with Prime Financial Services in Wilton, Conn., recommended direct depositing your paychecks into multiple bank accounts: 50% to checking for needs, 30% to a different account for wants and the remaining 20% to retirement and savings accounts.

“The most successful clients have separate banks for these accounts to limit the tendency to talk themselves into making ‘exceptions’ on their spending,” Murphy said.

An important note: If you’re working to pay off non-mortgage debts, such as student loans and credit card payments, you might wonder where those fit. Payments towards these debts fall into two categories:

  • The minimum payments required by your student loan or credit card company are needs. You need to pay at least this much every month to avoid default and harm to your credit score.
  • Any additional payments made to pay off the balance faster and get out of debt are savings. Why? Because once you’re out of debt, you can redirect those payments to saving and investing.

How to use the 50/30/20 rule

To show you how the 50/30/20 rule works in the real world, let’s consider a hypothetical example. Miguel’s take-home pay from his full-time job after taxes is $3,900 a month, and his employer withholds $200 a month for health insurance. Here is how Miguel might budget using the 50/30/20 rule.

Step 1: Calculate after-tax income

Since Miguel’s employer withholds $200 a month for health insurance, Miguel adds that amount back to his take-home pay to determine his income of $4,100.

Step 2: Cap needs at 50%

Now that Miguel knows his monthly after-tax income, he needs to think about his needs — what he spends each month on housing, utilities, insurance, groceries and the car that gets him to and from work.

According to the 50/30/20 rule, these costs should take up no more than 50% of his $4,100 income, or $2,050.

Miguel’s costs in this category are as follows:

Step 3: Limit wants to 30%

According to the 50/30/20 rule, Miguel has $1,230 to put toward his wants. That number may seem like a lot to some people, but limiting wants to 30% of income can be difficult.

Miguel has a Netflix subscription, stops for coffee every morning and likes to meet up with friends once a week for drinks. He also likes to take his girlfriend out to nice dinners a couple of times a week and tinker on his vintage motorcycle. Spending on all of those interests adds up.

Step 4: Restrict savings to 20%

The rest of your income should be set aside for emergency savings, putting money toward retirement, saving for future goals and getting out of debt.

According to the 50/30/20 rule, Miguel has $820 for the saving category. Let’s assume that Miguel already has an emergency fund, so he wants to prioritize retirement, paying off debt and saving for an engagement ring. His spending in this category might look like this:

How the 50/30/20 rule can save you more

The great thing about the 50/30/20 rule is it gives you a guideline for living within your means so you can save more.

Make adjustments

The 50/30/20 rule could open your eyes to changes you need to make. For example, if you run the numbers and realize housing takes up nearly 50% of your income, leaving little room for other necessities, you might decide to relocate to a less expensive neighborhood. Or you could look for other ways to reduce spending in the needs categories by shopping for new insurance or clipping coupons when you go grocery shopping.

Reduce your wants

If you’re overspending in the wants category, you may need to change up your daily habits: make coffee at home instead of buying it, cook at home more often or reconsider expensive hobbies. Small changes can add up to big savings over time.

Get a retirement bonus

If you have access to an employer-sponsored retirement plan, you may be able to get a boost to your savings without touching the other categories.

“Contribute up to the percentage your employer matches into your 401(k) or 403(b),” Murphy said. You’ll receive an automatic bonus when your employer matches your contribution.

Put more money into savings

Savings is an essential part of any budget because, without it, unforeseen expenses can leave you struggling to pay necessary costs of living or get you into debt. If you run the numbers and realize you’re not saving enough, look for ways to trim expenses in the needs and wants categories.

Pay off debt faster

Knowing you have 20% of your income to dedicate toward savings and paying off debt can motivate you to pay more than the monthly minimum and make a bigger dent in your balance.

After setting up your emergency fund, prioritize paying off debts. The sooner you pay off any credit cards, student loans and car loans, the more you’ll have to invest and save for retirement.

Is the 50/30/20 rule right for you?

As long as you have income left over after covering your needs, the 50/30/20 rule can work for you. However, if you run the numbers and realize a 50/30/20 split just isn’t feasible right now, don’t give up. Maybe your categories look more like 60/30/10 right now. That’s OK. Start where you are and look for changes you can make to reduce your cost of living, change your spending habits and get closer to a balanced budget.

Bottom line

The 50/30/20 rule is far from the only way to budget, but it’s a simple formula that allows you to meet your wants and needs and save money without strict dollar amounts and inflexible budget categories.

Murphy acknowledged this method might not work if you are experiencing financial difficulties, such as being laid off from your job. In that case, you may need to work on increasing your monthly income to cover your needs before allocating money to wants.

“Greater savings allows for more flexibility,” Murphy said. “If you live on less than half of your income, you are likely to never have a personal recession, regardless of the economy.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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