Getting paid early can alleviate some of your stress if you’re one of the 64% of American workers who live paycheck to paycheck. Depending on your on-demand pay platform, you may have access to your earned wages days before your scheduled payday. It means paying bills, saving money, and avoiding costly overdraft fees.
Avoid Late Fees
While the idea of spending your paycheck a few days early sounds tempting, many companies offering payday advance services charge workers steep fees. These fees add up and make it challenging to keep on top of bills, resulting in a cycle of repeated advances that can leave you with an unsustainable level of debt. If you live paycheck to paycheck, you could avoid these fees by having your bank or credit card company automatically pay all your bills due around payday. It gives you a buffer against overdraft charges and late-bill fees, and it allows you to save your extra income for a rainy day.
Depending on your banking relationship and employer, you can get access to your paycheck up to two days earlier than your typical payday if you use direct deposit. You can learn more about the get paid early feature by speaking directly to your employer or bank. If you require a different bank than your present one, look for one that provides an easy-to-use website and mobile app for monitoring account activity. You can also simplify your finances by separating direct deposits into separate accounts for bills, savings, and discretionary spending.
Save Money
Getting paid early gives you the option to save before you spend. Regardless of your pay schedule—weekly, biweekly, semimonthly, or monthly—saving an additional amount of time can help you save for emergencies, prevent overdraft fees, and make on-time bill payments. Establish an automated transfer from your checking to your savings account each time you get paid. If you do this each time, you’ll develop the habit of paying yourself first before spending the remainder of your paycheck. Plus, as the month progresses, those small transfers add up quickly. You can also save money using an on-demand payment app, which lets you access some of your earnings before payday. While these apps may charge the employer or employee a fee, they can be an alternative to payday loans and a great way to reduce financial stress. However, these services won’t solve the more significant problem of living paycheck to paycheck for those struggling to maintain a budget and afford essential expenses. Ultimately, the best solution is to eliminate as many stressors as possible and make it easier for you to manage your money responsibly.
Avoid Overdraft Fees
Overdraft fees are expensive and can dig a hole in your financial health. Cash is better than a credit or debit card when making small purchases, such as a quick sandwich at a convenience store or a coffee at the drive-through. Another way to avoid overdraft fees is to get paid early. Workers can now access their paycheck up to two days ahead of their regular payday thanks to a feature called “early direct deposit,” offered by several banks, credit unions, and fintech companies. These early wage access (EWA) programs offer a solution to the problem of waiting for a paycheck, which can be a big issue for consumers who live paycheck to paycheck. However, the National Consumer Law Center reports that employees using EWA services often fall into a cycle of repeat advances to fill the gap between the last paycheck and their new one, ultimately leaving them worse off financially. A better option may be to use an existing account that offers early direct deposit. You’ll have more control over your money when it’s in your hands sooner, allowing you to pay bills and boost savings without waiting for a traditional paycheck.
Build Your Emergency Fund
Getting paid early makes it easier to build an emergency fund. Instead of automatically transferring money from your paycheck into your checking account, transfer it to your emergency savings account. You can set up this automatic transfer to happen each payday or even once per month. You’ll be able to escape the cycle of living paycheck to paycheck and pay for unforeseen expenses with the steady income stream it will give you. A portion of employees’ wages can be accessed before payday through early wage access programs offered by certain employers. While these services can help you make it to your next paycheck, they can also be expensive if used frequently. Most people who use these advanced programs take them repeatedly and more significantly each time, getting stuck in a debt cycle. A high-interest savings or money market account should be used to store the money you set aside each payday to avoid falling victim to this scam. Another method of automating your savings is to use direct deposit to move a portion of your paycheck into a retirement account or emergency fund. It will enable you to accumulate more savings and get closer to living a debt-free life.
