Did you know that if you get paid every two weeks, there are four months in 2020 and five in 2021 when you’ll get an extra paycheck? While it’s not exactly “free” money, that third paycheck could be a boom to your financial situation. However, without a plan for what to do with the extra money, it will most likely disappear rather quickly, and you’ll be left wondering where it all went. What can you do to make the most of that third paycheck?

Prepare and plan

Here are the upcoming months when a third paycheck will occur, for those who are paid every two weeks: 2020: January, May, July, October. 2021: January, April, July, October, December. Now that you have the dates, you can prepare ahead of time to treat that extra paycheck like the bonus that it is. Decide right now to make a plan for those finances that will help you improve your financial picture. Do you have an emergency fund in place? If not, this is a great way to get one started! We recommend $1,000 to $2,000 to start, then as time and life allows, continue to build on that until you have reached three to six months’ worth of expenses. This will give you a wonderful sense of security in the event of a major life event such as a job loss or layoff, unexpected medical bills, or the loss of a vehicle.

Save and/or spend it wisely

Do you have a high interest rate loan or credit card balance? Use the extra paychecks to pay that debt down faster. Perhaps you have one or more small loans that could be totally paid off with an extra paycheck or two. Wouldn’t that feel great? Go for it! Are you saving for retirement or want to start? This is the perfect way to either get the ball rolling on your retirement savings or add to a retirement account you’ve already started. Do you have a big expense coming up, such as new tires for the car before winter sets in? Why not use the cash from the extra paychecks and enjoy the freedom of not putting that expense on a credit card? Has it been a few years since you took the family on vacation? If your finances are in good shape, why not put the extra paychecks toward a trip for you and your loved ones to get away from it all for a few days? Yes, it’s okay to spend money on yourself while you’re getting out of debt!

However you decide to spend your third paychecks, with a plan for that extra income you’ll know exactly where the money went, and feel good about being such a great money manager!