“I don’t live paycheck to paycheck. I live paycheck to four days before paycheck.” –Anonymous
Half payments work incredibly well to help you find financial peace. In fact, half payments are the only reason why my family was able to stop living paycheck to paycheck. The half payment method is where you take a regularly occurring payment, such as a $300 car payment, and divide it in half.
You then set aside that money (half of the total bill) at the beginning of the month, and take the rest out when you send out the payment. This will ensure that you have the full payment ready-to-go come payment due date. To clarify, I am suggesting taking the half payment and setting it aside, not sending it in to your creditor. However, if your creditor accepts half payments made before the due date and paying the money immediately would benefit you, do it.
If that seems confusing, here is a little break down of how it works if you receive a bi-weekly paycheck. (I am still using the $300 car payment example from above):
Paycheck #1: $600
Half payment for car payment: $150
Total left from paycheck #1: $450
Paycheck #2: $600
Half payment for car payment: $150
Total left from paycheck #2: $450
What is the purpose of using this system? What if instead of using half payments, we look at this example of how it usually plays out for most:
Paycheck #1: $600
No half payment
Total left from paycheck #1: $600
Paycheck #2: $600
No half payment
Full car payment: $300
Total left from paycheck #2: $300
Some may think that option #2 seems fine, and essentially, there is nothing wrong with it. The issue with the second option is that you now have lost an additional $150 from paycheck #2. Of course, the argument is that you gain $300 to paycheck #1, but do you really gain that money? What usually happens when there is money just left on the table? It typically becomes absorbed somewhere else in your spending because, subconsciously, the money is still available.
Related Post: 👉How We Paid Off $5,000 of Debt in One Month
If instead, you used half payments, you would manage to have your full car payment every month without having to scrape by at the end of the month. You would end up with more money in your pocket over time and your finances would become easier to manage, lessening your financial stress.
This system will work no matter how often you are paid. If you are paid once a month, consider starting the half payment method by only making quarter payments or small payments every week. Once again, I suggest starting with the smallest fixed bill every month as this is usually an easier place to start and will prevent you from feeling overwhelmed.
The half payment method is exactly how I managed to stop living paycheck to paycheck and how I was able to pull myself out of financial trouble all those years ago. It definitely works, though it can be challenging at first. It will bless you in the end by making managing your money easier.
📈If you need help creating a budget, my favorite free tool (that’s also easy to use) is Personal Capital.
💻If you’re more of a spreadsheets type of person, Tiller is fantastic for setting up and using Google Sheets to manage your money.
✏️And if you’re like me and more of a pen-to-paper type person, head here to see my budget binder tutorial for how I set up and manage our family’s budget for the year.
Make Half Payments
Start using the half payment method for all your regularly occurring payments. Start with your lowest regular payment and divide it in half. Use the half payment method with that payment until you develop the habit. Then start the half payment method with your next lowest regular payment and continue the trend with all your regular payments.
Do you use half payments?
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FAQs
The half payment method splits the cost of your fixed bills in two so one paycheck covers one half your expenses and the next paycheck covers the other half. This method is great for budgeters who get paid every other week or twice a month.
How to do the half payment method? ›
The half payment method splits the cost of your fixed bills in two so one paycheck covers one half your expenses and the next paycheck covers the other half. This method is great for budgeters who get paid every other week or twice a month.
What is the half and half payment method? ›
What Is The Half-Payment Budget Method? With the half-payment method, you split your monthly recurring bills in half. If you're paid on a biweekly schedule, you'll set aside half of the bill's payment so you're ready when the full payment is due.
What is the 50 30 20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
Is it better to split bills between paychecks? ›
Overall, paying bills on a bi-monthly basis can be a useful strategy for budgeting with bi-weekly paychecks, as long as you're willing to put in some extra effort to keep track of your payments.
What is split payment method? ›
When a customer uses more than one payment method to settle a single transaction, this is called a split payment. For example, a customer might put the total cost of their transaction on two different credit cards. Split payments aren't always used by single customers.
What is half payment called? ›
Partial payment means a payment that is less than the full amount due. Other terms for partial payment include part payment, installment payment, down payment, or upfront payment.
How do I invoice a half payment? ›
Write "50% payment on receipt of the customer order," followed by "50% payment on completion of work," depending on the type of goods, materials, labor, services, etc., provided and the terms discussed.
What is the best way to split your pay? ›
The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
How to budget $4000 a month? ›
making $4,000 a month using the 75 10 15 method. 75% goes towards your needs, so use $3,000 towards housing bills, transport, and groceries. 10% goes towards want. So $400 to spend on dining out, entertainment, and hobbies.
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
What is the pay yourself first strategy? ›
The "pay yourself first" budgeting method has you put a portion of your paycheck into your retirement, emergency or other goal-based savings account before you spend any of it. When you add to your savings immediately after you get paid, your monthly spending naturally adjusts to what's left.
What is a fair way to split bills? ›
Split bills by income
Consequently, many opt to split bills proportionally according to each person's income. For example, if Person A makes $6,000 per month, and Person B makes $4,000 per month, their total income is $10,000. Person A earns 60% of that, while Person B brings in 40%.
What is the best paycheck split? ›
Many budgets begin with the 50/30/20 rule, which suggests setting aside 50% of your income for essential expenses, 30% for nonessential expenses and 20% for savings.
Is it better to budget biweekly or monthly? ›
A biweekly budget allows you to allocate portions of your expenses to each of your paychecks. This can be more effective than a monthly budget when it comes to paying all your bills on time, as well as reaching your savings goals and spending within your means.
How do I split payment between two cards online? ›
Bottom line
When it comes to online shopping, retailers typically won't allow split payments between two credit cards. If you're shopping in person or dining at a restaurant, you're more likely to find merchants who allow it.
How do I ask for a split payment? ›
That means voicing any concern you have about splitting the check before you put your order in. “Hey, I'm wondering how we're planning to split this up — anyone have any ideas?” Senning proposes as a possible script. Or, “I'm going to keep things really small tonight, so I'm going to ask for a separate check.”
Can I split the payment methods for a single purchase? ›
Most online retailers don't allow shoppers to simply split payments between cards when checking out. They may allow shoppers to use a gift card balance and another payment method, but otherwise require a single payment method.
