Harness the Power of the Third Paycheck

If you get paid biweekly, you know the thrill of receiving a third paycheck in a month.  Weekly paycheck people have some months that they receive FIVE paychecks!  This “extra” paycheck is not free money, so don’t blow your hard earned cash on frivolous things.

Why Three Paychecks?

Most people that get paid biweekly, only think about getting paid twice a month.

12 x 2 = 24.  Right?

Right, but since there are 52 weeks in a year, there is a whole month that is unaccounted for with this reasoning.  There are actually 26 pay periods in a year (26 x 2 = 52), so there are two months that you will receive three paychecks.

If you are a teacher that doesn’t get paid over the summer (like me), you may not notice this other three paycheck month because it might be built into the balloon payment that you receive at the end of the school year.

Different Deductions

Check out the deductions on your third paycheck in the month.  Your health insurance and possibly 403b or 401k contributions could be turned off for this third paycheck.  This could make your third paycheck higher than your typical checks.

Budget Considerations

If you budget for all of your monthly expenses out of the two paychecks you typically receive in a month, then it may be tempting to spend this third paycheck on a trip or a new computer or on a shopping spree.  It’s easy to forget that even though you usually cover your expenses from two paychecks, you still have two weeks of living to pay for before your next paycheck.

Groceries don’t grow on trees, after all (actually some do, but you get the point).

A much better approach, is to divvy up this third paycheck into the following categories:

  1. Living Expenses and Financial Obligations
  2. Financial Goals
  3. Kick Around Cash

Living Expenses and Financial Obligations

First and foremost, use this third paycheck to cover all of your living expenses and any financial obligations (such as loan payments or credit card bills) that you may have.  Make sure your rent or mortgage payment is covered, and that you have enough money to pay for groceries and any bills.  If you have a loan payment or credit card payment due, then cover that, as well.

Financial Goals

Once you have taken care of living expenses and financial obligations, use as much of the rest of this paycheck, as you can, to help you meet your financial goals.   You could do one or more of the following:

  • Pay down debt
  • Add to savings
  • Contribute to retirement accounts

Kick Around Cash

It’s easy to get burned out with frugality or strict budgeting, so leave yourself a little extra from this paycheck to spend however you like.  This could be a little extra money to go out to dinner, or to buy yourself a new pair of shoes.

My Plan for this Third Paycheck

This week I will be receiving my third paycheck for the month.  Here is how I’m planning to divvy up this paycheck:

  • $500 to joint checking for living expenses and financial obligations
  • $350 to house fund
  • $461 to max out Roth IRA for 2016
  • $289 for extra car payment
  • $100 for Mr. Farmhouse Finance’s birthday dinner and gifts

What do you do with your third paycheck in a month?

Illusion of Scarcity Worksheet (PDF)

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Download this free worksheet and start paying yourself first.


  • Budget for financial obligations and recurring expenses
  • Prioritize your financial goals
  • Make all your transfers on payday
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2 Comments

    • Thanks for commenting, Francesca! My husband and I have two different ways of dealing with the bi-weekly paycheck. I have a list of monthly goals that I divvy up between the two paychecks. For example, from one paycheck I add to our vacation fund and emergency fund, and from the second I contribute to my Roth IRA. My husband, on the other hand, splits everything 50/50 between the two paychecks and contributes to all of his savings accounts from both paychecks. It’s all about finding the system that works for you.

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