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

November 28, 2018

By Pam Leibfried

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

If you’ll get a biweekly paycheck on Friday, November 30, you’ll likely be feeling a bit more financially flush this month. Why? You’ll get three November paychecks instead of your usual two monthly paychecks. (And those of you who are paid each Friday will get a fifth November paycheck this week!)

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 are 3-paycheck months like getting a bonus?

Let’s assume that your expenses are consistent from month to month and you’re making ends meet during the 10 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 10 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 any impact on 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. 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 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 increase the interest you earn on your checking 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. 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 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. 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
December 7 March & August March & August January & July
November 30 June & November May & November May & October


Paycheck trivia: Why some months have an extra paycheck

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

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.”

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