Return to The Money Mentor Blog

Boost your savings or reduce your debt by an entire paycheck – painlessly!

May 25, 2018

By Pam Leibfried

When I joined Alliant’s team of volunteers teaching Operation HOPE’s financial literacy curriculum at area schools, I spent some time researching budgeting and savings techniques to find tips to share with my students. One of the savings tips I found caused a major “eureka,” lightbulb-over-the-head moment for me.

I get paid every other week, which means that I receive two paychecks per month for 10 months, but a third paycheck during two months.1 The tactic that I think is pretty brilliant is to trick yourself into thinking of those third monthly paychecks as “bonus” paychecks instead of as regular pay.

You can then use the bonus paychecks to pay down debt or boost your savings. Dedicating two whole paychecks toward specific financial goals is a great way to make huge strides in achieving them.

Why is it like a bonus?

Let’s assume that your expenses are pretty consistent from month to month and you are making ends meet during the 10 months when you get only two paychecks. It's logical, then, that if you can successfully pay your monthly expenses with the income from two paychecks during those 10 months, you should be able to do so during the two months when you get a third paycheck. So you can dedicate those third paychecks toward other financial goals.

  • Boost your savings. During the months you receive this third, bonus paycheck, set that amount aside as savings. Beef up your emergency fund. Contribute 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. Fund your child’s college savings account.
  • 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. 
  • Tackle multiple goals. 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.
  • Have some fun! Every once in a while, we all need to pamper ourselves. 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 personal 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! 

Next paycheck   2018 “bonus” paychecks   2019 “bonus” paychecks   2020 “bonus” paychecks
May 25 March & August  March & August January & July
June 1 June & November  May & November May & October


Why some months have bonus paychecks

When you get paid every other week, you receive 26 paychecks each year (52 weeks divided by 2), which means you receive two paychecks most months. But if you think it through, two paychecks a month for 12 months equals only 24 paychecks, not 26. So in most years, there are two months of the year (generally, months in which you get a paycheck on the first or second day of the month), when you get three paychecks.