If you’re paid biweekly, it can be a challenge to create savings plans you can stick to. Here are 5 steps to help you set up a biweekly savings plan.
Being paid every other week is a great thing. If Friday isn’t payday, the next Friday is. But when you look at the calendar, your paychecks and bills don’t always line up. Add on top of that a series of savings goals you want to reach before the end of the year.
Stop stressing over staying on top of your savings goals and set yourself up for success instead.
Define your savings goal
First things first. Define why you want to save money and how much you need to save. If this is your first savings goal, maybe you want to start with $1,000.
Or if you want to save for a vacation, you’ll need to estimate all of your likely expenses along with additional spending money.
Whatever your savings goal is, the first step is to set one and it will be different for each person.
Calculate how much you need to save each paycheck
If you’re paid biweekly (every other week), you’ll receive 26 paychecks each year.
Now take the target amount you set for your saving goal and divide it by 26. That number is how much money you need to save each paycheck for the next year.
If you set a goal of $1,000 then you need to save about $39 from each of the next 26 paydays.
But do you have 26 paychecks, or one year, to reach your goal?
If you’re starting your goal during the year and need to complete it in less than 26 paychecks, divide your target savings amount by the number of paychecks you’ll receive before your deadline.
This is where a paycheck calendar comes in handy to help you count your future paydays.
You can create your own or look at a regular calendar to help you figure this out.
Check if your budget can handle your biweekly savings goal
Before going further, double-check your current budget to make sure you have room to set aside your goal money.
Having more time to save to reach your goal will make it easier to succeed. But if you set a larger goal than your budget can handle you’ll either need to adjust your budget or change your target.
You need to double-check your budget because the best way to reach your savings goal is to pay yourself first instead of saving money after you pay your bills. Consider your savings goal as another bill. A bill to yourself!
Decide where you’re going to save your goal money
Next, you need to decide where you’re going to keep your goal money. You could either use an existing account or set up a separate savings account to hold this money.
With all the work you’ve just done to set your target and figure out how much you need to save per biweekly paycheck, you don’t want to accidentally spend the money.
Setting up a separate savings account will put a small barrier between your spending money and your saving goal money.
And having a separate account lets you easily see your progress.
Before you set up a new savings account double check if there is a minimum balance requirement to avoid fees. Banks such as Capital One and Ally allow you easily open new savings accounts with no minimum balances. Or if there is a minimum balance it’s a $1 or less.
Update your direct deposit instructions
Now that you’ve decided your biweekly savings plan and where you’re going to keep the money, automate your savings by updating your direct deposit.
Keep things simple by saving the same amount each paycheck and by automating the savings process. Let your employer do the heavy lifting for you by automatically depositing your money into your savings account.
Automate paying yourself first so you can crush your goal without any extra effort.
Don’t worry if you’ve already reached your direct deposit split limit. Instead, take a look at your bank’s options for scheduling recurring transfers. Try setting up a recurring transfer for the day after payday so you can still automate your savings.
If you set up the transfer for the same day it’s possible the bank will try to deduct this transaction before your paycheck arrives. Contact your bank for more information to confirm.
And don’t forget to track your biweekly savings plan progress
There’s something to be said for checking off each savings deposit towards your goal. Automating the process will keep you on track to reach your goal, but there’s also a level of satisfaction in seeing your progress.
Paying yourself first will keep your goal on track and once you get halfway there don’t forget to take a moment to celebrate a job well done.
What else has helped you create your biweekly savings plan?
Defining and reaching your savings goals are important for your overall financial wellness. Maybe you’re saving for financial security or to have fun on a vacation. No matter the reason, you need a plan that fits your biweekly pay schedule. Automating your savings will help keep you on track.
What other tricks have helped you set up your savings plans?
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