Smart Ways To Spend A Third Paycheck

EOD_SteveCalanderPicHappy New Year! This is a magical month for many – not because it’s the beginning of a brand new year but January 2016 has five Fridays in it.

What does that mean? That means some of you will get paid three times this month. Those who get paid bi-weekly on Fridays will get three paychecks this month: January 1st, 15th and 29th. If your biweekly pay doesn’t fall on the first Friday in January then your turn will come in April (which, coincidentally, also has three Fridays on the 1st, 15th and 29th).

A 3-paycheck month means you get 50% more pay than normal. What could you do with all that extra cash?

The Obvious

You are reading an article on a site called “Enemy Of Debt”, so I imagine you want to do something smart to get the most bang for your bucks.

The obvious suggestions are:

  • Catch up on bills
  • Pay down debt
  • Start an emergency savings account

Those are smart and responsible ways if you are trying to get out of debt, but what if you are past that phase?

You could blow it on a 4k TV or have no plan for it at all, but that won’t help you reach your goals. Whenever I get extra money, we put it in our budget and plan accordingly. I recommend you do the same, whether in debt or not.

Smart Ways To Spend A Third Paycheck

Fund a ROTH IRA:
Okay, so this one falls under the “traditional and obvious” category, but it is a really great way to use a third monthly paycheck. If you open a new account then consider having another $50, $100 or more deposited automatically per paycheck. Imagine fully funding a ROTH in 2016 with the seed money coming from a third paycheck month. Wouldn’t that be amazing?

Start paying bills early:
My wife and I began using YNAB (You Need A Budget software) a few years ago. One of the 4 Rules of YNAb is to live on last month’s income. That means you hold onto this month’s check until next month, then use it to pay bills and buy things. A third paycheck can put you well on the way to getting there.

Take a class or course:
Invest in yourself by taking classes or paying for some courses. Education is key to improving your skills and abilities. Increased knowledge can help you improve your effectiveness at work – and bring you closer to a raise or promotion. Knowing how to do something new can help with my next suggestion:

Start a side-hustle:
Tom Corley, author of Rich Habits, discovered multiple income streams were a common trait of self-made millionaires. In fact, two thirds of the wealthy in his study had at least three streams of income. Make a list of the supplies or services you’ll need, then use your third paycheck to launch your new small business.

I no longer work at a job that pays bi-weekly, but my wife earns bonuses from her work. They help us go on vacations without debt, put money towards our daughter’s college, and paid our house off early. Your third paycheck should be handled the same way: Include it in your budget, decide the best use for it, and make every dollar count.

Are you getting an extra check soon? What do you plan to use it for?

About Steve Stewart

6 Responses to “Smart Ways To Spend A Third Paycheck”

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  1. Money Beagle says:

    We just had ours hit last month, and I used it to bulk up a few savings categories, address a couple of shortfalls and put a bit extra toward the IRA. In the end all of it went toward the bottom line of improving our net worth, so that’s what I consider the biggest importance.

  2. Alas, I only get paid once a month, so no extra paycheck. But my boss gives a generous bonus each year, so we always throw that into savings. This year it helped push us up over our yearly savings goal.

    • Wow. You have a real challenge. Getting paid once a month? I can’t even imagine.

      Of course, now I’m self-employed so there is a chance of not getting “paid” at all 🙂

  3. Chuck says:

    I miss the third paycheck since I switched jobs a coupe of years ago and am now on bi-monthly. However, I still get deferred compensation twice a year and have it earmarked for improving net worth. It’s good to have a plan for extra money before it hits the account.

    • Bi-monthly? I’ve never heard it called that before but it sounds like the technical definition of how you and my wife are paid. I used to call it “getting paid on the 15th and the 30th” but even that’s not accurate. I’ll have to start using that. Thanks Chuck!

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