October is a 3-paycheck month for some workers: What to do with that extra cash

"Take a quiet moment to sit down and think ... 'What is a really great use for this extra money?"


If you're a W-2 worker who gets paid biweekly, there are often two or three months a year in which you'll receive three paychecks instead of two. If your first paycheck of 2021 was issued on January 8, October is a three-check month: October 1, October 15, and October 29.

This additional check can feel like a bonus, and many workers treat it that way. Fortunately, there are simple steps you can take to make this extra cash work for you and your financial goals: pay off high-interest debt, boost your emergency fund, or make a contribution to a traditional or Roth IRA.

If you're in the early years of a mortgage, using some of your extra paycheck to make an additional payment can help save on interest, says Janet Stanzak, a certified financial planner and the founder of Financial Empowerment. "We often forget how valuable an extra payment to principal can be on a mortgage," she says. "We encourage a little something extra toward principal every month. But an extra lump sum of a paycheck can be really impactful."

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When you're figuring out which goals to prioritize when you have extra cash, it's OK to let your emotions help guide your decision-making.

"My number one overriding decision would not be the math," Carolyn McClanahan, a CFP and the director of financial planning for Life Planning Partners, told Grow last year. "It's going to be what makes you feel better."

For those of you who received your first paycheck of the year on January 1, 2021, you've got a three-check month coming up in December — plan ahead!

Thoughtful spending can 'lead to a better outcome'

Whatever you choose to do with a third paycheck, there's one pitfall to avoid: taking no specific action, warns Kevin Mahoney, a CFP and the founder and CEO of Illumint.

"It is easy for that money to flow into regular expenses," he says. Or for you to default to spending on things you don't feel particularly strongly about, like takeout or other miscellaneous expenses.

"Take a quiet moment to sit down and think, 'What have I been really trying to accomplish with this money?' or 'What is a really great use for this extra money?'"

This thoughtful consideration, he says, "will almost always lead to a better outcome."

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