How frequency of pay affects behavior

Written by
Peter Dunn

Most Americans get paid 26 times a year. As a result, we’re hardwired to think about our money—and how to budget that money—according to our 26 payments. Even at 26 predictable amounts, many Americans have difficulty creating and adhering to a budget. Those who do stick to a budget based on 26 paychecks become anchored to thinking about their money in two-week increments. And it can be hard to pull up an anchor, especially if it’s had time to settle deep in the sand.

But what if your company decides to start paying monthly? Let’s say you make $75,000 (if this is a stretch, think about it in terms of combined household income). At 26 predictable payments, you would make $2,884 every two weeks. Monthly, you would make $6,250.

Now imagine a scene: It’s payday, and you just got off work. You check your account balance. Instead of $2,884, you see $6,250. Do you think you would be more or less likely to spend money on things you don’t need? Would it be easier or more difficult to stick to your budget?

It depends on the individual, but the majority of Americans would be more likely to spend money.


If your company is in the process of switching to a less frequent pay schedule, be prepared to deal with the rewiring of your brain’s paycheck/budget connection. In fact, it would benefit you to get out ahead of the curve and begin thinking about ways to ensure that you set aside the appropriate funds so that you stay within budget and continue to meet your financial priorities.


If you decide to change the frequency with which you pay your employees, be prepared for some financial growing pains. Have a professional financial planner available to help answer any questions your employees might have about budgeting under a new pay frequency. It would also help to have financial wellness training scheduled for the day that you announce the switch so that your employers are equipped to deal with the financial rewiring that’s about to occur.

Together, employers and employees should make a concerted effort to increase financial wellness to the point in which, if a change in pay frequency does occur, everyone is equipped to successfully manage the transition. In an ideal world, employees would be knowledgeable enough to budget for an entire year based on a single, annual sum (in our case, $75,000).

Sound crazy? Someday it won’t.

Step up your financial wellness game.

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