How To Use The Half Payment Method

The Half Payment method of paying some of my larger expenses, each month, was a life saver and life changer for us, when it came to budgeting.  I have been implementing this method for so many years, that I can’t even remember when I started it.

We have been on the bi-weekly paycheck plan since we were first married.  In the early years, I would pay each bill, in full, when it came due.  Well…let me tell you!  We had plenty of lean times.  Why?  Because so many of our bills were due on or close to the first of the month.

Back then, I wasn’t a Dave Ramsey follower, so I would pay the bills before we would even eat.  Sound familiar?  That wouldn’t leave much for groceries, gas or anything else, for that matter.

Then, if we could just make it to the middle of the month, not as much would come out of that second check, but I had to play catch up.  Therefore, this budgeting system I was using was not working.  I wasn’t able to save anything, we always felt broke and I dreaded the first of the month, with a vengeance.  I knew then, something had to change and I had to figure out a better way.

Aha Moment

Then, one day, I had one of those moments.  You know…when that proverbial “light bulb” actually went on!  I began to implement the Half Payment method when I didn’t even know that’s what it was called.  I kinda figured it out on my own that the financial burden would be lifted if so much wasn’t coming out of one check.

The Half Payment budgeting method has worked incredibly well for my family and for others that I have shown this system to.  It has allowed us to get out of debt and increase our savings, substantially.

When my daughter began her journey into adulthood…i.e…paying her own bills, I showed her this method, because she had been trying to make ends meet the way most people do it.  Pay the whole bill when it’s due.  Well, it wasn’t working for her either.  She was making good money as a hair dresser, but couldn’t hardly feed herself for half the month.  Each month the cycle would start over.  Can you say “Rat in a wheel”??

Read on and I will explain how simple and necessary this method is to use (along with the Cash Envelope System) and how it can help you break the paycheck to paycheck cycle.

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Here is a break down of what your month might look like.   Say you have a monthly income of $2,400 net ($1,200 every two weeks).  Your monthly reoccurring expenses, not counting variable expenses, like utilities are as follows:

Rent/Mortgage: $1,000

Car Payment(s): $450

Car Insurances: $100

You have total reoccurring monthly payments of $1,550.

Scenario #1

Paycheck #1: $1,200

Rent/mortgage due on the 1st: $1,000

Left over to pay other bills: $200

Paycheck #2: $1,200

Car Payment due on the 15th: $450

Car Insurance due on the 15th: $100

Left over to pay other bills: $650

Well, that doesn’t look too bad at first glance, but when there is only $200 left to make it to the middle of the month for groceries, gas, discretionary spending, you name it…we know that could be gone in a blink of an eye.  By the time you get to that next paycheck, the $650 dollars is quickly absorbed for the expenses that you didn’t have money for, earlier in the month.  And as human nature would have it…how many of us would or could actually put any of that money away for a rainy day?

The next scenario is how the Half Payment method would work.  If you get paid weekly, you would simply divide your rent/expenses by 4 instead of 2.

Scenario #2:

Paycheck #1:  $1,200

Rent half payment to set aside:  $500

Car half payment to set aside: $225

Car insurance half payment to set aside:  $50

Left over: $425

Paycheck #2:  $1,200

Rent to add to $500 already set aside:  $500

Car payment to add to $225 already set aside:  $225

Car insurance to add to $50 already set aside:  $50

Left over:  $425

In both scenarios, there is $850 left over for other bills, but in the first scenario, you are left dangerously short for two whole weeks.

How To Implement The Half Payment Method

If you’ve been using the first scenario method AND it’s the beginning of the month, chances are that you have already spent the beginning of the month paycheck because that’s when most rents and mortgages are due.

I would begin this method in the middle of the month OR whichever paycheck you have the least amount of bills due.  Instead of changing your whole budgeting system all at one time, start with one bill.  For me, I started with the largest one, which was the mortgage payment, but you don’t have to do that.  You can start with your car payment or a smaller bill until you get a handle on the way the system works.

Once you see how it is working, then you can begin transitioning your other bills into this payment method.

Willpower & Self Discipline

One thing I really need to mention is that this method takes self discipline.  When you earmark money for a certain item, you must not touch it.  The easiest way I found to do this was to actually MOVE the money out of our checking account and into another account.  For some reason, if I left the money in the regular checking account, it would disappear or as I always say, “it gets absorbed”, never to be seen again.

Most banks will let you open multiple checking accounts, with no problem.  I have two additional checking accounts that I refer to as Holding Accounts.  Now days, it’s very easy, via internet banking, to move money from one account to the other.  You might as well take advantage of it.

I would also like to mention that I’m not talking about actually paying half the bill early or twice a month.  As you read above, I’m talking about moving the money to another account that belongs to you, until it’s due.  If you want to pay twice a month, maybe because you don’t trust yourself to leave the money alone until the bills due, that would be something you would need to work out with your lender(s).  

If you don’t want to open a separate checking account, you can go to the bank and actually pull them money out and put it away in an envelope.  This is a great way to start implementing the cash envelope system.  If you’re not sure how to use this system, click the link for my blog post on this method.

Why The Half Payment Method Works

The Half Payment method will work for you no matter how many times a month you are paid.  This system can set you free from the paycheck to paycheck cycle and allow you to finally begin to dig out of debt and to increase your savings, substantially.

For most of us, there’s that time in the month where making ends meet can be really difficult.  This way of budgeting allows us to even out each paycheck by giving you the same amount of income to spend for each paycheck.  It keeps you from lying to yourself and making you believe that you have more money to spend than you really do.

Budgeting without doing the half payment method eventually will lead to increased debt.  This, in turn, will forever keep you in the paycheck to paycheck cycle.

By using the Half Payment method, you are still paying the same amount of bills with the same amount of income, but you are purposely setting aside money earmarked for that particular bill, to be paid later in the month. This in turn, will give you more disposable income every two weeks (depending on paydays) by doing it in this way.

Do you use the Half Payment method for any of your bills?  Let me know in the comment section how you’ve implemented this system and how you like it.  I love to hear from my readers.

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