Americans who get paid bi-weekly, which means twice a month, will see a third check in March. Shon Anderson, chief wealth strategist of Anderson Financial Strategies, joined Cheddar News to provide tips on how to improve your financial position with that extra pay.

Closing Bell

What to Do With a Third Paycheck in March 

Are you one of the tens of millions of people in the US who get paid every two weeks. If you are, you probably notice two months every year you get an extra third paycheck depending on your pay schedule. This first three paycheck month starts tomorrow in March and this could be a really nice opportunity to boost your savings or pay down some debt. Joining us. Now is Shaun Anderson, he's a certified financial planner and the chief wealth strategist at Anderson financial strategy Sean, welcome to the show. So how can we make the most of this third paycheck? Hi torte is a pleasure to be with you and uh thanks for having me on. Yes. Well when you get paid every two weeks, you do get an extra paycheck twice twice a year. So you can look at it as a bonus. But really it should be an opportunity to really improve your financial position and resist kind of going on a spending spree. So the three the three go ahead, it's going to say that there's three ways that we think that are ideal to use that extra cash. So one shoring up your emergency fund, having at least those 3 to 6 months of expenses in reserves in case there is an economic issue which many are projecting um to paying down debts that are higher than 6%. Which if you look at any floating rate loans, many of those have creeped higher than that in the in the last year and then three using that to contribute to a retirement plan. Either an Ira or 401k. That can help with your tax situation. So the assumption here is that you're actually living on what you earn every two weeks and you should treat this a little bit more as a bonus to do some long term planning. Is that accurate? Absolutely. You know this is a gift really where you have some extra cash flow and thinking prudently about that. How to use that cash flow will make you far better off in the long run. So it's tax season, any smart tax tips for this extra money. So as tax time approaches, many people are looking at how can I lower that tax bill You do have up until april 15th tax day to contribute to an ira for last year for 2022. So that can help lower your taxable income. So this is so important because so many people in the US are living paycheck to paycheck. And so when you get this third paycheck it's a big deal. What should you not do with this extra check? That's a really good question. And uh when it, when it looks and feels like a bonus, you really may be tempted to to buy something or going a spending spree that uh you you've wanted. But um really you should resist trying trying to be unthought fel about spending it. There's nothing wrong with having a little fun with it. However, just make sure you've checked off all those responsible planning items first. That's the words to live by. Have a little bit of fun. But check off all the responsible planning items. Thank you so much Sean Anderson, chief wealth strategist at Anderson financial strategies.