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Monday, February 13, 2012

Tuesday's Terrific Tip--Auto Pay Your Bills

I had the privilege of working with some people over the weekend who said they were having trouble getting their mail handled in a timely manner and as a consequence they sometimes incurred late fees on their bills.  These are smart, well educated people who are leading busy lives, but this part of life has been something they hadn't mastered yet.  They called me to come and help; yea!  I had a blast, and she thought of it more like a dental appointment, but never mind that.  :)

When I gave my weekend recap on Monday to my friend L she reminded me of the 'kick in the pants' I gave her a few years ago about automating her bill paying process.  Well I didn't exactly address it to her specifically, but when I was working on writing a book a few years back L read it and this was one of her favorite takeaways.  Is that too corporate?  well, too bad.

So to automate your bill paying, first you have to make sure you have a positive cash flow.  Not everyone does, so that's why this should be your first step.

Make a list of all your fixed bills.  I'm guessing there are bills in there for mortgage payment (unless you are lucky enough not to have one of these), utilities (electric, phone, cable/internet, water, gas), car insurance (ok I only know one person who doesn't own a car where this wouldn't apply), any recurring debt payments you might have, or credit card statements etc.

Next compare that total to your net take home pay to be sure there is still extra money for groceries, fuel for that car etc.  If you're short here, you need to go back and read some of those Frugal Friday ideas, or seriously take a look at what you are spending money on.  I've completely been in a negative cash flow before and it ain't pretty, but it is possible to get a handle on it.  I won't address that at the moment.  If people are interested in that, please let me know.  Anyway, until you are in a positive cash flow position, this will not work, please do not follow this method or you will incur NSF fees.  Those mount quickly and make all financial situations worse.

If you are still sitting down with your checkbook and a stack of bills every month, or a few times a month, this is a radical process change.



You might need to look at it sideways to handle the change.

So you have this list of payees, the monthly amount you owe, the date that it is due each month.  It might look like this:


Payee
Amt
Day of Month
Fixed/Variable
Mortgage/Rent
$1,200
2
Fixed
Car insurance
$100
4
Fixed
Fuel
$300
9
Variable
Electric
$150
10
Variable
Cable
$99
10
Fixed
Car payment
$300
12
Fixed
Gas
$35
15
Variable
Water
$40
20
Variable
Phone
$75
28
Variable


For the items that are Fixed (the same every month), you can set up with your bank to pay these bills automatically through their web bill paying system.  For those of you who might classify yourselves as a control freak, the nice thing about doing it this way is that you control the when, the how, and the amount.  The business/people receiving your check aren't any wiser that this is what you are doing.  They keep sending you the same bill they always have.  You put your account number on the check in the bill paying system.

The Post Office is a little hip to it, because you aren't buying as many stamps as you used to.  Or you aren't waiting in line at HEB to pay your bill, plus paying a service fee for that privilege.

For those items that are variable, this is where you just about have to turn upside down to make it look normal.... Gather one year's worth of statements, add them all together and take an average.  Then start paying that average amount every month.  Keep an eye on your incoming invoice/statement to be sure that you are still within the average amount that you pay each month.  If there is a month that your bill is over the average, just send in an extra payment for the difference, or adjust your average.

I will tell you that this makes L, my husband, absolutely crazy.  The idea of overpaying one month even if its a few dollars makes him almost crazy.  But after six or seven years of this working pretty darned successfully  he has either given up, or let it go.  I'd like to think that 'let it go' is his stance.

But if you start this average payment process in the winter, for those of us in the great state of Texas where the summer electric bill can require financing, the electric company is not going to complain.  You'll know about how much to budget/spend every month from a cash flow perspective and you won't get shocked by some outrageous bill in June.

Oh I also know there are some of you who might say you could be earning interest on this extra money that you are sending to the utility company.  If you are getting more than 1% annually on your money, please let all of us know.  The differences here are a pittance, especially at today's rates.

What does this process save you?

  • worrying if your bills were paid on time
  • setting up the bi-weekly bill paying session
  • taking the time out of your schedule to sit down and pay the bills
  • late fees
  • stamp buying 
  • envelope licking 
Anyway, I love it, L at work loves it.  
We thought all y'all might like it too.  Mom, I know you aren't ready for it.  :)

  






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