Use your ‘bonus’ paycheck to reach your financial goals faster

If you are paid biweekly, you’ll likely feel a bit more financially flush two months each year. Why? You’ll get three paychecks that month instead of being paid twice a month. It truly feels like a bonus. (And those of you who are paid each Friday will get a fifth paycheck four times a year!)

Getting three paychecks in one month creates a great opportunity for you to increase your savings, make a big dent in your debt, or open a new bank account with your extra funds. If you plan ahead to capitalize on this financial opportunity every time it occurs (see schedule below), the impact on your savings or debt will be equivalent to a month’s worth of your income. 

Why is it like a bonus?

Let’s assume that your expenses are consistent from month to month and you’re making ends meet during the ten months when you only get paid twice.

It's logical, then, that if you’ve been successfully paying your monthly expenses with the income from two paydays during your ten two-paycheck months, you should be able to pay your bills with only two checks during the two months when you get a third paycheck. That means you can dedicate your entire third paycheck toward other financial goals without impacting your ability to pay your usual monthly expenses.

Boost your savings. During the months you receive this third, bonus paycheck, set that amount aside as savings. Beef up your emergency fund, or save for retirement by contributing to a Roth IRA on top of your workplace 401(k). Add it to a savings account dedicated to paying for a family vacation or holiday purchases. Save for an upcoming home improvement project or add to your child’s college fund.

Open a new checking account. If you’ve been wanting to switch your checking to a high-yield checking account like Alliant’s but you’re nervous about making a math error and bouncing a check during the transition, use the extra funds from your bonus paycheck as a cash cushion to transition bills to your new checking account with less stress. It’s the perfect opportunity to get a checking account with fewer fees and a high-interest rate.

Pay down your debt. If you have credit card debt, student loans or a car loan, dedicate the bonus paycheck to paying down that debt. Pay off high-interest debt first to save the most money on interest.

Tackle multiple goals. Not sure which goal you should pursue with your extra check? Split it across several goals to make some progress toward all of them. For example, you can save part of your bonus paycheck and dedicate part to debt reduction, which is an especially good plan if you have debt and lack an emergency fund. Or save part of your extra paycheck in your emergency fund and part in your holiday gift fund.

Have some fun! Every once in a while, we all need to pamper ourselves instead of always saving money. Let yourself spend a portion of the bonus paycheck on a special splurge. Go to a ballgame or concert. Get a massage or a manicure. Buy the new jacket or Coach purse you’ve had your eye on. My rule of thumb is that I can spend up to 10% of any bonus money on fun purchases or activities, but the rest goes into savings. 

When will you get your “bonus” paycheck?

Be strategic in planning how to use your next "extra" paycheck to accomplish your financial goals of debt reduction or a savings boost.

And because a big part of being strategic is having a plan, we've calculated the dates when you'll receive an extra/bonus paycheck for the next two years and provided it in the table below. Add them to your calendar so they'll be baked into your budget and financial plan! 

2024 Three-Paycheck Months

• If your first paycheck of 2024 is Friday, January 5, your three paycheck months are March and August.
• If your first paycheck of 2024 is Friday, January 12, your three paycheck months are May and November.

2025 Three-Paycheck Months

• If your first paycheck of 2025 is Friday, January 3, your three paycheck months are January and August.
• If your first paycheck of 2022 is Friday, January 10, your three paycheck months are May and October.

2026 Three-Paycheck Months

• If your first paycheck of 2026 is Friday, January 2, your three paycheck months are January and July.
• If your first paycheck of 2026 is Friday, January 9, your three paycheck months are May and October.

Pam Leibfried is a marketing content specialist whose love of words led to a writing and editing career. After a brief stint teaching English, she transitioned to corporate communications and spent 20 years at The Nielsen Company before joining Alliant’s content development team. Early in her work life, Pam’s friend Matt explained the benefits of a 401(k) and her dad encouraged her to start a Roth IRA. Their good counsel prompted her to prioritize retirement savings, which just might enable her to retire early so she can read more and live out the slogan on her fave T-shirt: “I have a retirement plan: I plan on quilting.”