How To effectively Use the Half Payment Budget Method To Save Money

Half Payment Method. Is the budget plan right for you?
Let’s be honest- being deep in debt with no clue on how you’re going to dig yourself out sucks? Or seeing a loved one living paycheck to paycheck without a plan how they’ll get out is pretty disturbing. Both situations make life extremely difficult. If this sounds like you – the half payment budget method may be your solution to crushing the paycheck to paycheck cycle.

The budget method can assist you to manage your money with minimal stress. Its a fast and easy way to pay off debts by distributing the payment pressure over two pay periods.

Regardless of income level, most people in North America experience their pay running out before the end of the month. The struggle is real even for those pulling in six figures. Living within your means is key to getting out of debt and a budget is a fundamental tool to help you meet your monthly obligations stress-free. A budget is a cornerstone of your financial success, regardless of your income.

What is a Half Payment method

A half payment method is where you add up all your recurring bills and divide the amount into half payable on the first of next month. From every paycheck, you put half away into a separate account to amass the full amount after the second pay. When a full amount is piled up in the account you settle all bills due at once.

It needs a bit of planning at the beginning but once you get it working it makes your life easy. In fact, once its fully implemented it can easily help you to build up a rainy day fund for emergencies and even funds for investing. Building up an emergency fund is extremely important as it eliminates the risk of breaking the budget to pay for unplanned expenses, for instance, car breakdown or accident.

Half payment budget
Photo credit stockunlimited

How Does the Half Payment Method Work

Well now let me break it down for you how the half payment method works. If you get paid twice a month then this is a suitable bill payment strategy for you. So during the first pay period, you set aside half of my bills due from my paycheck. To achieve your budget and saving goal, open several savings accounts to deposit the cash. Although the interest you earn is next to nothing however its better than leaving it under your mattress.

When your second paycheck hit your bank account, you only come up with the second half due then you pay all your bills on the first day of the month right on time.

Let’s see how the half payment budget method works by comparing it with the traditional practice of paying bills on the first of a month.

For example, lets assume your total recurring monthly bill payout is $2000 and you get paid twice a month – your list of monthly bills are as follows:

List of Monthly Recurring Bills:

    • Rent: $800 due on 1st of every month
      Car Payment: $300 due on 5th of the month
      Credit card: $120 due on 15th of every month
      Internet: $100 due on the 15th of every month
      Utilities: $150 due on 10th of every month
      Student Loan: $230 due on 10th of every month
  • A traditional method of monthly bill payment works as follows:

    $1000-Paycheck #1 paid Mid-Month-
    • Credit card: $120
    • Utilities: $150
    • Internet: $100
    • Student Loan: $230
    Total Payment Due: $500
    Amount Leftover: $500

    $1000-Paycheck #2 paid on the 1st of the Month
    • Rent: $800
    • Car payment: $300
    • Car Insurance: $100
    • Cellphone bill: $50
    End of the month paycheck: $1000
    Total payment due: $1100
    Money Remaining: $-50

    It works well at the beginning of the month as you can cover all your expenses. But when it comes to mid-month paycheck the traditional budget doesn’t work well because it’s not enough to cover for all of them. If an emergency happens around mid-month you will have to borrow or use a credit card to pay for it. Half of the month you afford gas and food with the leftover funds. However, the other half goes to pay all of it in cash or credit card.

    Half payment budget

    Photo credit stockunlimited

    But this can be well-coordinated with a half budget plan, so let’s see how it works.

    Example #2 The Half Payment Method
    $1,000- Paycheck #2-paid on the 15th
    • Rent: $40
    • Car payment: $150
    • Credit card: $60
    • Utilities: $75
    • Internet: $50
    • Student Loan: $115
    • Money Left:$140
    Total payment due: $860

    $1,000- Paycheck #1-paid on the 1st
    • Rent:$400
    • Car payment: $150
    • Credit card: $60
    • Utilities: $75
    • Internet: $50
    • Student Loan: $115
    Money Leftover:$140
    Total payment due: $860

    Financial discipline is key to make half payment plan work

    The beauty of the half payment method is that it teaches you financial discipline and keeps track of where your money is going. As you can see there is leftover cash at every pay period which can be saved for a vacation, retirement or downpayment for a home. It helps you visualize your budget and look for ways how you can improve your spending habits.

    A super favorable part of the half payment method is that you’re never in RED the entire month which prevents you from hating to budget and extreme uneasiness. In addition, you’re always aware of where funds are going at every stage in the process. As long as you don’t overspend on an unplanned item outside the budget then you’re fine. Should there be any leftover cash on hand MOVE the money out of our checking account. Open an account to hold and accumulate leftover cash before deciding on how it will be absorbed.

    Related : How to Budget and Save Money (A Fresh Look at 6 Best Budgeting Methods)

    Pros of the half payment budget method

    • You’re less likely to use credit cards or loans to cover for a bill payment.
      You know where your cash is going as you have it written down on paper.
      Helps you build a budget for your spending categories using the cash envelope or digital envelope for instance utilities, groceries, food, savings, etc.
      Keeps a well-defined record of where your money is going.
      There is less temptation for overspending as everything is recorded and noted.
  • Cons of the half payment budget method

    • Strict discipline is required to track your half payments and not spend it useless stuff
      You need planning a month or more ahead for it to start
      It’s not practical if you get to apply on monthly wages
  • To ensure complete success of this method it takes willpower and self-control.

    budget with half payment

    How to make the Half Payment Method work successfully

    The most effective way of saving with the half payment budget method is by opening a separate bank account strictly for this use or apply the digital envelope budget method and the cash envelope method.

    A digital envelope method is a budget system where you keep cash in different bank accounts (make pretend envelopes) as a source of payments for a variety of monthly expenses.

    The cash envelope method is a budget plan that allocates cash into designated envelopes for each category of spending. Once you spend the money in your envelope, you can’t spend anymore.

    Budget method requires planning ahead

    You have to plan months ahead of time before you begin the half payment budget method because you need the half payment cash on hand to start. Alternatively, you can begin the payment plan with the smallest bill such as the internet for $100 monthly by saving $50 from your first monthly salary. Once this is satisfied then you move on to the next bill like utility bill for $150. Go from there and have it working over several months period. Do whatever works for you given your current financial situation as long as in the end you have it fully implemented then your life will be groovy.

    In Summary
    Financial freedom does not positively relate to making a higher income. However, it’s about what you want out of life and decides to make the proper changes to achieve your financial goals. To drastically improve your financial situation you need to stick to a budget. It can dramatically improve your financial situation for instance; reduce debts, boost savings for a rainy day and grow wealth. Eventually, bailing you out of a paycheck to paycheck dependent cycle. If you still can’t make ends meet maybe find a side hustle to bring in more cash.

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    Let me know if you’ve used or are using the half payment method for any of your bills? how is that going and how do you like it.

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    11 thoughts on “How To effectively Use the Half Payment Budget Method To Save Money”

    1. This is a great strategy for those struggling to budget. One more thing I would add is that getting out of credit card debt can save hundreds, if not thousands, in interest. This is money that can be put towards student loan debt to pay it down faster. It’s not easy but it can be done with, as you said discipline. Giving up things like takeout meals, gourmet coffee, etc., can also save money that can be used towards paying down debt. You gave some great tips.

      1. I agree with you Lynnette credit card debt is harder to break out of and if you find a way to pay it off. You can save thousands of dollars in interest payments. Discipline is fundamental as you cant have a cake and eat.

    2. When I first started budgeting, I used the 1/2 payment budgeting method and it was great. We’re now a month ahead and use the previous month’s income to pay for the current month’s expenses.

    3. Pingback: How does Consumer Credit Counseling Services Help to Tackle Credit Problems - Investadisor

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