Personal finance

Many Americans are setting financial goals for the year ahead. An extra paycheck could help.

If you are a W-2 employee and get paid biweekly, there are two months out of the year when you will receive three paychecks instead of the usual two.

The months in which you get three checks depends on your pay schedule.

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If your first paycheck in 2023 is Friday, Jan. 6, your three-paycheck months will be March and September.

If your first paycheck in 2023 is Friday, Jan. 13, your three-paycheck months will be June and December.

How to plan for three-paycheck months

Taking home three paychecks in one month can give your financial standing a boost, according to Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California, and a member of CNBC’s Advisor Council.

“If you have credit card debt, that needs to be paid off first,” she advised. As day-to-day expenses continue to rise, Americans are taking on more debt. At the same time, annual percentage rates are also on the rise, making it much more expensive to carry a balance.

After that, consider stashing an extra paycheck in long-term savings, such as a Roth individual retirement account, Sun said. A Roth has the added advantage of allowing account holders to withdraw their contributions at any time without taxes or penalties.

Even if you decide to tap the cash “for a vacation or something fun, that’s OK — as long as a portion still goes toward savings,” Sun added.

“Now might be a really good time to have that extra cash, given the uncertainty in the economy,” said CFP Douglas Boneparth, president of Bone Fide Wealth in New York. He is also a member of CNBC’s Advisor Council.

“If that’s taken care of, it’s a great opportunity to continue investing, whether that’s adding to your portfolio or increasing your retirement contribution,” he said.

Contributions to a traditional workplace 401(k) plan, unlike a Roth IRA or 401(k), are pretax, so the more you put in, the lower your taxable income. Further, companies often offer an employer match, which is essentially free money toward your retirement savings goals.

Still, rather than plan monthly expenses and savings from paycheck to paycheck, a better way to budget is to consider your income over the course of the year to smooth out the highs and lows and then view your cash flow on a monthly basis, Boneparth advised. (Here’s a simple way to make a monthly budget and start saving money.)

The “bonus” paycheck “is really an illusion,” he said.

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