Lesson 5b: Twice a Month Paycheck Plan

July calendar showing a hypothetical payday of the 1st and 16th
Figure 1: Twice a month paycheck

If you completed the tasks in Lesson 3: Get Ready and Lesson 4: Set Up the Spreadsheet, you are ready to move forward in preparing your digital tracker and planner. If you reviewed Lesson 5a: Single Monthly Paycheck Plan, you will see the same steps below. However, the running balance will be different.

In this lesson, you are going to focus on a scenario where you get one paycheck twice a month. After you complete this lesson, you might find that Front Loaded Paycheck Plan in Lesson 5d is beneficial as it is similar to a person who receives a single paycheck at the start of each month. 

Let’s get started with the following actions.

  1. Enter financial commitments and income
  2. Add actual starter data
  3. Update the balance calculations
  4. Tweak the plan

For comparison opportunities, this lesson uses the same income and expenses shown in Lesson 5a: Single Monthly Paycheck Plan.

Enter Financial Commitments and Income

In Lesson 3: Get Ready you gathered the type of commitment, the anticipated amount, and the due dates. Add this information to the sheet for twelve months from your selected start date using the following instructions. 

  1. Enter one month’s worth of information (as shown in figure 2 below), leaving a few lines at the top of the list for when you are ready to add the current balance and outstanding commitments not cashed. Don’t worry about leaving enough or too many. Rows can be inserted or deleted when you are ready.
google sheet shows one month of income and commitments in the check register format.
Figure 2: One month of income and commitments
  1. Copy and paste the month eleven times and change the dates accordingly.
Google Sheet with multiple months copied
Figure 3: Multiple months of income and commitments
  1. Insert rows for expenses that occur semi-annually or annually. For example, three commitments might be
    • Tuition for your master’s degree. 
    • Annual tax bill because you suspect this year’s tax bill will likely be the same last year.
    • Personal property taxes, but the screenshots don’t show it.
Google Sheet screenshot pointing out tuition and annual taxes added to the plan
Figure 4: Add annual and semi-annual commitments

Add Actual Starter Data

Now your digital tracker and planner is ready to receive actual versus planned data. If you need to add more rows, please do so. In the example below, the following have been added:

  • Starting balance as a deposit. This is the current balance of your checking account. This is also the time when the digital tracker and planner replaces your paper check register.
  • Outstanding commitments that you know have not cleared the bank as withdrawals. In this scenario, holiday related purchases.
  • In this scenario, all of the December bills have been paid and processed by the bank.
Google Sheet showing the added starting balance and outstanding commitments
Figure 5: Start your digital tracker and planner with your current balance and outstanding commitments

Update the Balance Calculations

In this step, you will learn a very important aspect regarding sequenced formulas: patching. I just made up the term patching because I needed to call it something. However, you will see with the following mini-tutorial below makes that term descriptive.

Observe the gap in the formulas caused by the Amazon and Hallmark purchases in figure 6.

Google Sheet screenshot showing cells without the balance formula
Figure 6: Inserting rows can break the column of balance formulas

Incorrect Way to Patch the Gap

Your first thought might be to copy the formula from row 5 to the empty rows: 6 and 7. Let’s see why that won’t work. The image below shows the formulas from the balance column. 

Google Sheet screenshot showing cells without the balance formula
Figure 7: If you don’t patch the gap correctly, you can break the balance calculation flow

Notice the following:

  • Formula inconsistency. The H value, how it goes from 4 to 5 to 6 to 5 to 8. The H value should always increase by 1, therefore the second 5 value is the problem.
  • The balance doesn’t change. Line 8 before the formula insert is $1,640.44. Line 8 remains the same after copying the formula into the empty lines when it should decrease.

Correct Way to Patch the Gap

  1. Let’s delete the wrong formulas from rows 6 and 7 and start again.
Google Sheet with the wrong formulas deleted.
Figure 8: Remove the faulty formulas to start again
  1. Stretch the highlight from the formula above to the formula below the gap. 
Google Sheet with cells highlighted, formula to formula
Figure 9: Patch the gap by spreading the highlight from formula to formula
  1. Click Ctrl+D on a PC or Command+D on a Mac to duplicate the formulas. I described this process recently as, “It’s like spreading peanut butter.” My client recommended I share that here.
Google sheet showing the correct formula
Figure 10: Duplicate the formula and see that that now are in order
  1. Observe the changes.
    • The H value increases by 1 before and after the gap is patched.
    • The balance decreases from $1,640.44 to $1,608.60 on row 8, accordingly. 
  2. Now, fill in the rest of the formulas. Highlight the last formula and the subsequent cells.
Google sheet with the last formula cell highlighted as well as all the cells below
Figure 11: Fill the balance column with the balance formula
  1. Duplicate the formulas by clicking Ctrl+D on a PC and Command+D on a Mac.
Google sheet with updated balance formulas showing the future holds a negative balance before the next deposit
Figure 12: Projecting income and expenses into the future can reveal when commitments exceed income
  1. Observe what happened in this example. Did something similar happen to you?
    • The lagging expenses from December haven’t cleared the bank, but you are setting aside that money for when they do. It’s likely that you have those amounts in your paper check register so this isn’t anything new. However, I have found that not everyone is as diligent in keeping track.
    • Notice that if your budget for Food/Gas/Misc. is used as planned, you will be spending more than you have available. That’s not something you want to do.
  2. Consider addressing negative balance options
    • Preferred options
      • Cut back – Don’t spend the $200 each week for Food/Gas/Misc. Clip coupons. Buy generic. Wait until you have the money. Immediate gratification can lead to financial problems.
      • School loan – This big bill is unusual and might be the contributing to the negative balance. Consider applying for installment payments through the semester. That allows you to pay what you can each month.
    • Potentially dangerous options – Borrowing for day-to-day living, be it via a credit card or from your own savings, creates unwanted debt that can snowball out of control and/or depletes savings meant for more urgent matters.
      • Credit card – If you need a credit card to eat, you aren’t living within your means. However, your semester bill might be paid this way if a low-rate school loan is not available. 
      • Savings – Assuming you have a savings, what was it intended to support?
        • School? – Okay. This makes sense for the tuition bill. Insert a row in the digital tracker and planner for the $685.00 deposit. That will offset the check for your tuition payment.
        • Emergency? – Emergencies refer to scenarios such as large medical expenses or the loss of a job. Spend this account and you leave yourself vulnerable.

“I spent my paycheck on what I wanted when I wanted. Then, when my truck broke down, I couldn’t pay for the repair. So, I spent my inheritance on the repair instead of the house my grandparents hoped I would use it for.”

– anonymous client

Tweak the Plan

Planning a negative balance is not a good plan, obviously. So, how can you turn the red into black?

google sheet shows an updated plan and improved balances
Figure 13: Adjustments to the plan

Several adjustments were made to lower commitments and balance the plan up to tax season.

  • Correct a quarterly commitment recorded for each month: Water bill. That only happens every three months.
  • Make changes to the weekly allowance for Food/Gas/Misc.
    • Reduce the allotment from $200 to $175. It means brown bagging lunch and drinking the free office coffee. It could also mean not indulging in vaping or smoking, for instance.
    • Move the 1/15/2021 allotment draw to 1/16/2021, after paycheck deposit.
    • Tighten the belt on 1/8/2021 and lower the allotment to $120. This means saving some of the $175 from the previous week.
  • Sign up for electronic deposit for the 1/16/2021 deposit. That moves money availability from 1/17/2021 to 1/16/2021.
  • Obtain a student loan that breaks your tuition payment into five installments. If this doesn’t work, consider
    • Using a credit card. There will be interest applied, but you might owe interest in the installment plan as well. Set up a five month payment plan to pay off the credit card.
    • Using your savings. The same payment plan applies so you can pay yourself back and rebuild your savings.
  • The negative balance anticipated near tax time is still an issue. When the time comes, this amount might be more or less. However, the same payment options apply.
    • Return to the budget and see it you can live on $150 a week to lower the potential negative balance even further.
    • Use a credit card that you payoff quickly.
    • Borrow from yourself but payback savings quickly. Do not take money from your 401K. It’s a bad habit to start and it can be expensive as you will owe taxes on it.

Next Lesson …

Your next lesson depends on your specific situation.

Published by Cindy McCourt

I wear many hats: author, website planner, Drupal consultant, instructional designer, trainer.

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