Why bi-weekly paychecks are better

U.S. Civilian Employment Compensation 2002-2011

Source: Bureau of Labor Statistics

Being able to see more earned income sooner is usually advantageous to seeing income later. Although biweekly literally means twice per week, the term is often used to refer to every two weeks. Several benefits exist to receiving bi-weekly paychecks, and those advantages can save money, reduce potential scheduling conflicts and even earn more money.

26 checks per year

Since bi-weekly is not twice a month, but every two weeks, there are 26 paychecks a year on this type of schedule. This means for two months of the year, three paychecks will be given to people getting paid on a bi-weekly basis. For example, if a year beings on January 1, by July the first day of the most recent pay cycle falls on July 1st, making the 2nd on July 15, and the third on July 29. The pattern repeats again with three biweekly paychecks in December.



Available funds

Although paychecks all amounts to the same income total, it can be helpful to have a continual cash flow. In other words, an advantage of bi-weekly paychecks is a stream of income that is more frequent allows one to have more personal financial liquidity. Moreover, insufficient funds can cause checks to bounce, or overdraft fees to be triggered causing more cost than benefit.

Bill paying

With more liquidity, bill paying is often better facilitated making another advantage of bi-weekly paychecks.  Since bills may become due on separate dates throughout a calendar month, receiving bi-weekly paychecks can help ensure there is a new money installment to pay those bills with varied due dates. Although sometimes some loan bills can be rescheduled with a bank, this process generally cannot be repeated. The advantage of biweekly paychecks is that alternative solutions like this are less needed.

Budgeting

Since budgeting involves managing money in such a way that bills are paid on time, and that money is allocated optimally, having a bi-weekly paycheck can also be beneficial to a budget. For example, without bi-weekly pay checks, everything is left to either the beginning or end of the month. This can create a greater workload for which time management also becomes essential. With bi-weekly paychecks, time for budgeting can also be spread out.

Yield

An additional advantage of bi-weekly paychecks is more time for money to compound. For example, $100 placed in an account earning four percent compounded continuously on the 14th of January, and repeated every four weeks throughout the year has two extra weeks of compounding per month. Moreover, the yield earned on those deposits will be higher than it would be had the same amount of money from a monthly paycheck been placed in the exact same financial instrument.