I'm sure there's been a study on this somewhere, but I think it's interesting how spending patterns differ based on how frequently you're paid. The difference between getting paid monthly, bi-weekly, or weekly can be huge. From my experience, weekly paychecks lead to a steady stream of smaller expenditures, while monthly paychecks facilitate larger purchases.
Lets say, for the sake of simple arithmetics, that I get paid 2000$ a month. I can get that either in 500$ installments per week, 1000$ every two weeks, or a huge sum of 2000$ each month. If you were looking at a balance graph comparison betwen weekly and monthly payment schemes, the weekly graph would be a much smoother one, while the monthly one would fluctuate a lot every month.
In the first scenario, I've got a constant stream of (relatively) small amounts. This is probably good if I am constantly needing cash flow to pay bills, buy drugs, etc; but at the same time I don't have to watch my spending too closely because I know the next paycheck is just around the corner.
With a monthly payment, I get very large sums at a time. This gives an immediate feeling of wealth. There's nothing like a 2000$ injection into the chequing account to tempt me into buying big ticket items. That xbox 360 seems much more affordable right after a monthly paycheck than it does after getting 4 smaller paychecks, having spent some odd percentage of them, and trying to save up. With 1 monthly paycheck, it's like the saving up part was done for you! This leads to the problem that, while I would feel rich after getting paid, by the end of the month, I would wonder where all my money went off to.
So the point is that, I think, there is probably a case to be made for people earning lower income and those with higher incomes to get paid at different frequencies in an attempt to control their spending habits.
Replies: 2 comments
I'm first!
Posted by dAN @ 06/06/2007 12:49 AM EST
I think all of your theory goes out the window when someone becomes a credit card spender. When using a credit card I can pay for everything at the end of the month, so getting paid weekly, bi weekly or monthly it wouldn't matter.
Posted by Mike @ 06/08/2007 08:02 AM EST