It’s Friday night and you just got paid. You’re getting yourself ready to go out with some friends and you walk past your stack of bills piled up from the last couple weeks. Do you tear into them and pay them all now? Nah, you can do it this weekend! You’ll have plenty of time during the weekend!
Fast forward to Monday morning. Oh yeah! Gotta pay the bills! As you’re tearing into them with just minutes to go before you have to leave for work, you realize one of them was due THURSDAY. Crrrraaap! Now you remember that last time you convinced yourself that you’d look for that bill when it came in and pay it right away…but FORGOT TO DO IT! Oh well, submit the payment that takes 3-4 days to get there and hope they process it before they impose a late fee on you. (not a chance)
Any of this sound familiar?
There are many ways to pay your bills, many of which work well, and some that end up with scenarios like the one presented above. The key is to find the one that works for you. So what I’ve done is outline some of the different methods I’ve tried and explained the pros and cons of each so that you can find one that really helps you get in a groove of paying your bills on time.
Method 1 - Automate Everything
There’s a lot of tools out there at various banks that allow you to completely set up your bills to link up with your checking account. This is possible with just about any bills I can think of with major corporations, and it’s possible to set up fixed-amount bills that are the same every month with anyone that has a billing address. Some companies will even allow you to provide your bank information so they can just withdraw the due amounts instead of send a bill.
| Pros: |
- You’ll always pay at the same time each month.
- Very hands-off/convenient because you only have to set it up once and let it go.
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| Cons: |
- Need to have enough in the bank to cover all automated amounts.
- Some amounts for bills vary from month to month. You don’t know if you’ll always estimate or plan correctly.
- One single billing mistake from a company could send you into a downward spiral of non-sufficient fund charges and bounced checks by draining your entire account.
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Method 2 - Pay Everything The Moment You Get It
Probably the easiest way to account for things is to just pay every bill the moment you get it. When the envelope shows up, simply write a check that minute and put a stamp on the envelope. (Or use your web bill pay system from the bank to arrange a payment immediately.) Nothing will ever really be late if you’re paying everything the moment you get your statement from the company.
I think this may be one of the most difficult of the methods to follow because it takes the most discipline, but I also think it may be one of the most stress-free if you can manage to maintain a large enough account balance to pull it off.
| Pros: |
- There’s never a stack of bills needing to be paid. You only file away paid statements.
- You’re always ahead of the schedule. No last minute payments.
- It really feels good not to owe anyone a payment all the time because you paid them the moment you knew of the bill.
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| Cons: |
- Need to have enough in the bank at all times in order to pay things immediately. Quite a large budget buffer would be needed.
- Constant monitoring of this system would be required. If you didn’t check your mail all the time, then your bills don’t get paid right away.
- Going on vacation or an extended trip could really mess up your schedule if you don’t make other arrangements during that time.
- You don’t take advantage of the grace periods at all. All of your companies are earning interest off your money for the few weeks they have your money early instead of you earning that interest.
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Method 3 - Schedule Bill-Paying Sessions
Another method that I find to be the most common amongst the people I know is to schedule regular times every month or payday where all bills that are due get paid. Different pay schedules will determine when you’re able to do this effectively, but there’s two variants that I’ve seen.
- Pay everything that you have in your stack of bills that’s due before the next payday.
- Pay everything that you have regardless of when it’s due.
If you’re on a bi-weekly pay schedule like me, then every payday you’d sit down and figure out what you need to pay to keep current. The next payday you do the same thing. If anything is due immediately after the next payday, you can just pay it now and make sure it’s not late.
| Pros: |
- With schedule intervals every payday, you know you won’t miss something that’ll go an entire month before getting paid.
- No constant monitoring. You only need to do this a couple times a month.
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| Cons: |
- Need to have enough of a budget buffer in the bank to cover all expenses you may have in a two-week period.
- You may not have time on THE day you get paid to sit down and do this.
- If you’re an unorganized person, stacking bills up for weeks may allow you to misplace a bill before you need to pay it.
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What I Do
So which method do I use? Well, I actually use a combination of methods 1 and 3. Don’t forget that the above methods aren’t the ONLY methods! There’s many variations in between them too. I’ve automated all of my non-variable payments from my checking account web bill pay system. For example: mortgage, student loan, credit cards, some utilities, etc.
Next, I’ve got my budget spreadsheet listing all of my bills due-dates in one column. This is something I refer to as I’m planning which bills I need to pay every payday. If the date falls within a pay-period, or even a few days afterward, I’ll make sure to pay it by the payday before that. Aside from what goes in my envelope budget, I use this for everything that’s not automated. For example: medical bills, electric bill, gas bill, annual bills, etc.
I find that the combination of automating things I know won’t change and scheduling everything else works best for me. I only have to worry about the things that fluctuate from month to month, and I can work on minimizing those expenses where possible.
So what kind of system are you using? Are you tired of paying late bills, or do you have a tried and true system you’re willing to share? Let us know about it in the comments!
Debtbeater