If you’re on a biweekly pay schedule, you might be getting an “extra paycheck” this week. That’s right, with this pay schedule, there are two months a year in which you’ll get three paychecks. Most people budget around two paychecks a month, so if your bills are taken care of, a third paycheck can feel like extra money.
Have you thought about how you’ll spend it? Two extra paychecks a year can go a long way, but without a plan, they can also disappear quickly. Here are a few ideas to consider, as you’re deciding where to allot that extra paycheck coming your way.
Pay down high-interest debt
Interest can accumulate quickly on debts, so paying down your balances can really help in the long run. Take a look at all of your debts and apply the extra funds to the one with the highest annual percentage rate (APR), as it’ll save you the most on interest costs.
Build an emergency fund
As we all know, tough times can bring financial strain. With a rainy day fund, you can be more equipped to handle unforeseen events. An emergency fund can also help with large unexpected expenses, such as medical bills or car repairs.
Save for a big-ticket purchase
An extra paycheck is perfect for allotting money to those big-ticket items on your wish list. You can put it towards home renovations or use it as a vacation fund. Spending your extra paycheck on something that makes you happy is also a great way to spend these funds. Making financial decisions can be tough, and there is no one-size-fits-all answer. Take a look at your financial situation and decide what is the best option for you – and perhaps it’s a combination of options. Just make the best choice and keep in mind that another “extra paycheck” will come around again.