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How to budget by paycheque

Key takeaways

  • The budget-by-paycheck method plans your bills and spending around when you’re paid.
  • This can be an effective budgeting method if you’re one of many Canadians paid more than once a month.
  • There are tools and calculator as well as helpful tips that can help you master budgeting by paycheck.

What is the budget-by-paycheck method?

With paycheck budgeting, you plan your bills and spending around each time you’re paid, as opposed to creating a monthly budget. You assign specific bills and payments to each paycheck to help ensure you’ve always got money available to cover them.

There are many reasons why you may want to try paycheque budgeting, as it can be especially helpful for those who:

  • Don’t get paid monthly
  • Live paycheck to paycheck
  • Have set paydays
  • Are receiving a salaried income for the first time
  • Run out of money before their next payday and/or encounter overdraft fees
  • Are learning to budget for the first-time
  • Are budgeting on a modest income

Here, we look at how to budget by paycheque, starting with covering the essentials.

Budgeting for fixed expenses

First, you’ll need an idea of what your monthly expenses are. Fixed expenses are those that occur on a fixed date each month, and are usually essential bills and utilities such as: 

  • Rent or mortgage payments
  • Insurance
  • Car payments or transit costs
  • Childcare
  • Internet and phone bills
  • Credit card and loan repayments
  • Subscription payments

Once you have this list, you’ll need a blank calendar. You can use the calendar app on your phone, print a blank template, use an excel sheet, or even use a wipe-and-erase calendar that’s placed somewhere you can see it easily and often.

Using the calendar, first input the dates of your paychecks. Then, add the dates your bills are due to the calendar. You’ll be able to see when each payment is due, and therefore which paycheck that bill will need to come out of.

By breaking down payments into 2 separate pay stubs, you can see how much must be paid from each, as well as how much is left over from each for unfixed bills like grocery shopping, eating out, and entertainment. To help stay organized, you could name each paycheque (e.g., paycheque A or B), or you could use colour coding to help you see clearly which payment aligns to which paycheque.

Budgeting for variable expenses

Once you’ve isolated when your fixed payments are due, you’ll need to work out how to cover your variable payments. 

The money left over from your paycheque once you’ve accounted for essential bills is known as disposable or discretionary income. This is used to cover expenses that aren’t bills or payments, but still amount to your overall cost of living, such as:

  • Groceries
  • Entertainment
  • Eating out
  • Gas
  • Clothing
  • Toiletries and personal care
  • Beauty and haircare

You’ll need to budget for these around how much disposable income you have on each paycheque. For example, if most of your bills come out in the first half of the month, you may use your second paycheque to pay for things like groceries and going out. If your bills are evenly split, you may set aside a set sum from each paycheque to cover your variable expenses.

Of course, bill payments and expenses aren’t the only things you’ll need to factor in. Saving by paycheck is also important to help you cover unexpected costs in the short-term, as well as to plan for your long-term financial future.  


Even when budgeting by paycheque, it’s still important to set money aside to save each month.

For example, it’s wise to have an “emergency fund”, or money saved to cover large emergencies that could impact your income, such as job loss or illness. You could also set up a ‘rainy day fund’ which may only have $500 - $1,000 saved to cover smaller, one-time purchases like car or home repairs. 

On top of savings to help you out now, it’s important to make sure you’re saving for your future as well. Products like a tax-free savings account (TFSA) or a registered retirement savings plan (RRSP) are ways to help you save for the longer term.

How much should you save each month?

The amount you should save a month will depend largely on how much money you have left over after you’ve covered your fixed bills and living expenses.

You may have heard of the “50-30-20 rule”, which means you allocate 50% of your take-home pay to your “needs” or fixed expenses, 30% to your “wants” (your variable expenses), and 20% to savings. While it’s a popular method, it normally works best when budgeting monthly, and so may not apply when budgeting by paycheck.

Instead, you can set up a system where you contribute based on how much you’d like to save in total over the year rather than by a set amount per month, or you might set up a recurring payment to transfer money from each paycheque to your savings account as you’re paid, treating it as almost another expense.

However you choose to do it, saving a little is better than nothing. There are many benefits to starting to save early, including taking advantage of compound growth.

Tracking your budget

For your budget to work, you’ll need to track it. 

You can use tools like a cash-flow calculator | PDF 124 KbOpens a new website in a new window  to help you break down your bills and payments, as well as excel sheets that can help you track your spending. You can also match your bank statements to your budget at the end of each month to make sure you’re sticking to your plan as best you can.

Tracking your budget for a few months can also help you identify any areas of problem spending, areas you could save or invest more, and any areas you might want to improve or change.

Tightening your budget

One great advantage of this budgeting method is that it gives you a clear overview of where each dollar from each paycheque ends up. If when you look at these amounts you feel that you need to make changes to help manage your living expenses, clear your debt, or save more, there are some things you can do to help re-arrange your budget:

Cutting back

Look for ways to cut costs from your monthly spending. For example, you may curb eating out or limit yourself to 1 meal out per paycheque, cancel subscriptions you don’t use (or don’t use often), substitute less expensive items when grocery shopping or switch to a different store, and use points where possible to pay for things like movie tickets or shopping. Having a clear idea of where your money goes each paycheque will help you to see where you can scale back.

Consolidating debt

If you’re struggling to keep on top of loan repayments or are finding they take up a substantial chunk of each paycheque, you may look at trying to consolidate this debt into a single lower payment.

Generating additional income

If even after creating a budget you’re still finding it hard to make your money stretch between paycheques, you could consider a second stream of income. You could have a clear-out and sell items you don’t need from around the house, or take on a second job to earn some more money. 

What's next?

  • Paycheque budgeting can help you manage your daily cash-flow but remember to account for long-term savings such as contributions to a RRSP.
  • Look into calendars, templates, apps, and tools that can help you with your budgeting needs.
  • There’s no one-size-fits-all when it comes to budgeting, but you can help set yourself up for success by making a plan that works best for you.

The information provided is accurate to the best of our knowledge as of the date of publication. This information is general in nature, and is intended for educational purposes only.

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