3 Surefire Methods to Paying Your Bills On Time

April 4th, 2008

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!

stack of bills
Photo by pinprick

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:
  1. You’ll always pay at the same time each month.
  2. Very hands-off/convenient because you only have to set it up once and let it go.
Cons:
  1. Need to have enough in the bank to cover all automated amounts.
  2. Some amounts for bills vary from month to month.  You don’t know if you’ll always estimate or plan correctly.
  3. 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.

 

Method 2 - Pay Everything The Moment You Get It

pay your bills
Photo by Earl

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:
  1. There’s never a stack of bills needing to be paid.  You only file away paid statements.
  2. You’re always ahead of the schedule.  No last minute payments.
  3. It really feels good not to owe anyone a payment all the time because you paid them the moment you knew of the bill.
Cons:
  1. Need to have enough in the bank at all times in order to pay things immediately.  Quite a large budget buffer would be needed.
  2. 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.
  3. Going on vacation or an extended trip could really mess up your schedule if you don’t make other arrangements during that time.
  4. 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.

 

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:
  1. With schedule intervals every payday, you know you won’t miss something that’ll go an entire month before getting paid.
  2. No constant monitoring.  You only need to do this a couple times a month.
Cons:
  1. Need to have enough of a budget buffer in the bank to cover all expenses you may have in a two-week period.
  2. You may not have time on THE day you get paid to sit down and do this.
  3. If you’re an unorganized person, stacking bills up for weeks may allow you to misplace a bill before you need to pay it.

 

What I Do

image 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!


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5 Responses to “3 Surefire Methods to Paying Your Bills On Time”

  1. tehnyit Says:
    April 4th, 2008 at 7:26 am

    we tend to use method 3 most of the time. Most of our bills are issued quarterly, so we make an estimated monthly payment into our account. When the bill is received, we usually have to just pay a little bit more to cover any shortfall. This works for our cash flow as well.

  2. Frugal Dad Says:
    April 4th, 2008 at 10:23 am

    I was late paying a water bill the other day because it got stuck to the back of another bill and I forgot to record it in my spreadsheet. The late payment made the $19.22 water bill $22.22 - doh! I know it’s only $3, but it just kills me to pay stupid tax.

  3. veronica Says:
    April 4th, 2008 at 8:23 pm

    I use a hybrid of methods 2 and 3. I get paid biweekly; one check is for bills and general life, and the other is for rent and any small extras (sadly, I live in an area of extremely high rents). When I get that one check for bills, I write its amount in my check/transaction register and then subtract all of the amounts of the bills due payable for the month. I’m lucky in that most amounts are the same (or close to it) from one month to the next so I don’t have to guess at those amounts. If anything, I overestimate, so unpleasant surprises are rare.

    Mind you, this doesn’t mean the bills are paid — just that they are earmarked. So when each bill finally does come in, I schedule an online payment through my bank. Credit card payments are scheduled to be made as soon after the bill is received as I can do it. Bills for the cellphone, cable, electricity, and the like are scheduled to be made no later than a week before the payment is due.

  4. Carnival of Personal Finance #147: Q1 Financial Advice Edition | Personal Finance Blog by Money Ning Says:
    April 7th, 2008 at 9:06 am

    […] Debtbeater from DebtBeater lists 3 Surefire Methods to Paying Your Bills On Time. The way I make sure the bills be paid on time is to pay them when I receive notice of […]

  5. rebecca Says:
    April 27th, 2008 at 4:28 am

    I use method no 2 and do all my banking on-line, i set the payment date on the day the bill is due. This means the person is not earning interest off my money by paying it early. It also means that i can forget about it once i’ve dealth with it. Of course you need to make sure there is a bill buffer in your budget.

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