My employer recently changed their payroll schedule from bi-weekly (every other week) to semi-monthly (twice a month). For budgeting reasons, I am very happy with this change, since I have found semi-monthly to be the best payroll schedule to combine with a monthly budget.
When I worked as a contract software developer several years ago, I was paid weekly. This had some definite advantages such as never having to go more than a few days before another payday. However, I also spent a lot more money and could not properly manage my finances because the desire to “reward myself” with a treat or a night out on payday meant I was doing those things far too often. In the end, it was pretty challenging to coordinate a monthly budget plan with weekly pay periods.
Recently, I was paid bi-weekly, which was a little bit easier because there were not as many pay periods to account for in the budget. The problem with bi-weekly for the way we budget is that the paydays constantly shift around since a payday may be on the 15th one month, the 14th another month, the 12th another month, and so on. Additionally, your annual salary is broken up into 26 paydays. This means that for ten months of the year, you make less money than the other two. Often when those “bonus months” happen, the third paycheck is treated just that way, as a bonus that gets spent on things outside the budget. In order to avoid being tempted in that way, we have found that the best pay cycle that works for us is semi-monthly.
With semi-monthly, we get paid the same amount every month: 1/12 of our annual salary. We also get consistent paydays. I have usually been paid on the 15th and last day of the month at jobs which use a semi-monthly cycle. However, I have also seen the 1st and 15th and even 7th and 21st. The great part about semi-monthly is you take home more money per paycheck than bi-weekly (over 8% more in fact) and it is reliably consistent in timing. Since more or less all of our bills are monthly and due around the same day of the month, month after month, having a paycheck that mirrors this helps budgeting tremendously.
For example, in our monthly budget I was previously unable to make all of our major monthly bill payments as well as take out our monthly cash for our envelopes (Groceries, dates, clothes, etc.) I would have to wait until halfway through the month to pay something. With the semi-monthly change, my take-home pay is higher now and we can both take out the cash we need and pay all the major bills on the first paycheck of the month. This leaves the second paycheck for things like debt snowball payments.
I know most people have no control over when they get paid, but if you work at a small company, your management may be open to the idea of switching to semi-monthly pay periods. It’s great for budgeting and it puts more money in your pocket on a more consistent basis in line with your expenses.