How To Use The Half Payment Method (with Calculator)

*This post has been reviewed by an Illinois Registered CPA. However, when making important financial decisions, it's best to speak with your financial advisor.

Last Updated on April 12, 2023

How we typically end up learning to budget

When I was just starting out after college and got my first job, I just knew that all my money troubles would be solved because the amount of money I was making on a per year basis just seems so large!. (NOTE: our half-payment calculator is at the end of this post if you’re in a hurry!)

However as we all find out after our first month or two we realize that the amount of money that we are making just doesn’t seem to cover the amount of things that we want combined with the amount of things that we need to live on a day-to-day basis.

You realize that you have to do things like understand if radiant heaters save money, what a smart thermostat does, or how to use Google Nest to save money.

And if you make the same typical mistakes that I made as a youngster, getting into car and credit card debt, trying to keep up with the Joneses, random purchases on a whim, then you too will understand the pain that happens when that first months arrives when you still have bills due but you have no money left for the rest of the month.

This is usually the point when most people get serious about budgeting and trying to figure out ways to manage their monthly expenses while still not living like a hobbit. We buy books and do Internet searches on how we can solve this particular painful problem.

One of the solutions that you may come across is the half payment method which at first glance makes a heckuva lot of common sense. But in actuality even something as simple as this process will have some pitfalls attached to it.

A word of caution though: if you are spending more on a monthly basis than you make in two paychecks per month, then you can go ahead and stop reading right now. This method simply will not work for you. You need to step back a square, grab a butcher knife, and start cutting all unnecessary expenses from your life.

For me, I had to wait until exiting graduate school to become a true budgetary minimalist.

In order to solve this half payment method problem you’re going to have to go extreme Spartan until you are able to create some breathing room for yourself.

What is the half payment method and how do I use it?

The half payment method is a budgeting technique that takes a portion of your paycheck earnings and applies it to one half of your monthly bills. If done correctly you should be able to pay all of your bills using two paychecks per month, while also leaving you money left over to save or to spend in a discretionary way.

Now this does not mean that you actually pay half of your cable bill or power bill with the first paycheck, but that you set aside one half of the amount needed. The best way to do this is to put it into a separate account so that you are not tempted to spend it on spur of the moment purchases.

The worst thing that can happen is for you or your spouse to accidentally spend part of the money needed to pay your bills in total at the end of the month.

Some monthly bills can be paid prior to sending in the total end of the month bill. For example, some mortgage companies will allow you to split your monthly mortgage payments in half. This is a great technique to pay off your mortgage slightly faster than it would normally be paid if you waited till the end of each month to pay it. This is due to how interest works with respect to how much time has passed for each payment.

What are some good reasons to use the half payment budgeting method?

Some of the advantages you could find using this method include;

• It’s very easy to understand this methodology and takes no time to implement
• your whole family can be very clear on where your money is going
• you will never be left with extra bills to pay and not enough paycheck to pay it
• as long as your paychecks are greater than the amount of bills you pay you should always have extra money to save or splurge on something you want
• it makes it much easier to train yourself to get off of credit cards because you’ll know exactly how much money you will have after each paycheck to spend on your needs

So what are some of the drawbacks to this method?

• It will require you to get a full understanding of all of your monthly bills and possibly use a spreadsheet
• you will have to develop a level of comfort with having money available that you cannot spend as you see fit
• if your bills are overwhelming your current paychecks, the first month may feel like suffering to you
• you may have to decide to cut some things you really love out of your life in order to ensure that you have money left over to meet basic needs

The great thing about the half payment method is that you should never have that awful feeling of trying to decide which bill is not going to get paid this month because you simply don’t have enough money to pay everything.

So, what is the best way to start the half payment method?

The biggest problem for many people is that they typically do not have money available to pay a bill when it arrives in the mail. In some instances the bill might be late or about to become overdue very soon. So beginning by paying half of a nearly overdue bill will just make things even worse.

The first thing that you need to do if you want to get on ½ payment system is to pay your bills as they come due, and set aside half of that amount for the next month. What this means is that you will not be able to set up the system for all of your bills in the first month but you will need to stagger them in order to get fully onto the system while not starving your family.

For example: Assume that you receive $1500 every two weeks and you have the following monthly expenses:

• rent $750 (due on the 1st)
• childcare $400 (due on the 1st)
• utilities $250 (due on the 5th)
• car note $250 (due on the 20th)
• Insurance $100 (due on the 20th)
• cable and Internet $100 (due on the 15th)
• cell phone $100 (due on the 15th)
• subscriptions $100 (due on the 15th)
• leaving you with $950 to buy food gas gifts etc. each month

if you were to try to pay all of these bills at one time and say for half for the next beginning of the month you would need to have available $2050 to pay the bills all at once while also having money for eating and getting around until your next paycheck. The next check you’d then send off what half of the bill payments ($1,050) leaving $450 do as you please.

Now you can see the problem with this process. Most people simply do not have enough savings in an emergency fund or savings account to knock the entire month’s worth of bills out at one time.

So your decision-making processes have to come into play here. Maybe the first thing you would do is pay your utilities, cable, and cell phone, and subscriptions in full, then save for half of the same total for the next paycheck.

Your next paycheck might pay your rent and leave you with enough funds to get through the entire next two paychecks, which is once again a difficult task but a little more doable if you plan ahead. But remember you saved half for the bills you paid in full the last paycheck so you can go ahead and pay those half payments.

Your next check arrives and it’s time to pull out $275 to pay your utilities and $375 to pay half your rent. Congratulations! You have now successfully negotiated your way onto the half payment system.

An even easier way to start your half-budget process

If you want to just jump right in and the most painless way possible and the best thing to do is to plan to use one of the extra paychecks that we typically get when working at a job that pays us every two weeks.

Typically, there are two months out of the year where everyone who gets a paycheck every two weeks will get an extra paycheck. If you plan properly, you can use those extra checks to go right into the half payment system. The problem is once again that many of us do not even realize that we get to extra paychecks each year because our spending is so chaotic and out of control.

But when used properly this is by far the easiest and least painful way to get started using this method. Once again it requires you to plan ahead and think about how your life is going to look different when you use that extra paycheck to pay down half of your bills instead of whatever you typically do.

Why the half payment plan method works better than most budgeting methods.

The problem with most budgeting methods is that they require us to intensely study our habits as well as our monthly spending all while juggling our regular life duties of working and taking care of ourselves and our family. And to be honest it’s just downright hard for most people to really love tracking how they spend.

With the half payment plan method, most of the hard work is done within the first month you start the process. From there your life becomes quite a bit easier because once you take care of all of the half bill payments you need to make, and all you have to do is figure out how to spend the rest of the money from this particular paycheck that you have.

It stops being an abstract exercise in mathematics and becomes a real-life day-to-day activity that helps you clearly figure out how you’re going to spend your excess cash in a way that allows you to be fiscally responsible.

Other methods of using spreadsheets or apps to do budgeting feel restrictive to most of us but also don’t feel like they accurately reflect what’s going on and our lives because inevitably things happen that we do not budget for more expect and since they are not in the budget something has to give. And usually when that first budget month is broken because things didn’t work out the way we expected, that budget or app is dead to us going forward.

To see how this happens let’s review a traditional monthly budget example using the same info as above where you’d get paid $1,500 every two weeks:

• rent $750 (due on the 1st)
• childcare $400 (due on the 1st)
• utilities $250 (due on the 5th)
• car note $250 (due on the 20th)
• Insurance $100 (due on the 20th)
• cable and Internet $100 (due on the 15th)
• cell phone $100 (due on the 15th)
• subscriptions $100 (due on the 15th)
• leaving you with $950 to buy food gas gifts etc. each month

Assume you have budgeted to pay everything you can with your first paycheck.

You would pay rent, utilities, car note, and insurance ($1,350) leaving you $150 for some beans and rice to make it to your next paycheck.

The next check would pay cable, cell, childcare, and subscriptions leaving you $800 to feast on until the next paycheck. Most of us would try to make sure that the next paycheck payout would not leave us destitute with on $150 available to us so we would be sure to allocate some of this overage available to add some extra guacamole to our beans and rice.

Having a big pot of money after paying bills might feel like a win, but it is actually a tiny bit counterproductive. The problem with this method is that it is hard to get into a rhythm of slowing down spending rates and saving for the unexpected. This approach feels more like a feast or famine approach where you may not feel completely in control of your finances.

It’s a lot like intermittent fasting (the process where you eat all your daily calories within a short window of time as opposed to our normal pattern of “grazing” throughout the day. In theory it is wonderful for your health, but in practice I will end up overdoing the Twinkies as soon as my eating time window opens.

Same with forcibly restricted spending. “I” will most definitely not be judicious with the second check’s extra funds. It’s just not part of my make up. I’d be far more likely to overspend on things I want but don’t need in this scenario.

So will the half payment method work for you?

The answer of course depends entirely upon you. Are you the type of person that would prefer to pay all of your bills at one time at the beginning of the month for example? Or are you the type of person who likes to have a little bit of money left after each paycheck in order to manage to the next paycheck? Only you can know how you will react when presented with the situations.

However, in my opinion it is far easier for the majority of people to understand how to operate properly if given a limited amount of money that they can spend over the next two weeks when compared to spending double that amount of money but needing to live on it for an entire month.

Your ability to plan ahead as well as avoid temptation when trying to control your spending on a biweekly or monthly basis will have a great deal of impact as to which method works best for you.

Also most people simply cannot adhere to a strict budget that only leaves him with a small amount of money after one paycheck but then a large amount of money on the next. This leaves them vulnerable to adding credit card debt during the lean times and needing to use their overages during the good times to pay down those debts.

Check out our half payment budget method calculator below to see how you’d fare! Use it as a way to figure out how much faster you pay off a 15 or 30-year mortgage with biweekly payments.

Eventually we will pair the calculator with a half payment method printable worksheet you can keep.

The cool thing about this calculator is you can also use it as a:

• Biweekly mortgage payment calculator
• Biweekly loan calculator
• Bi-weekly mortgage calculator accounting for extra payments
• Biweekly payment calculator with extra payments for other types of debt
• A weekly car payment calculator