“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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