Making Bills Easy
There are a few things that I use to make paying bills easy easier.
- If I can set something up on an auto-pay, I will. I prefer the ones where it’s my bank doing the pushing to the other company, but I do have some companies that pull money from our accounts. This is even the way that we tithe to our church and support missionaries. (I know some recommend actually physically writing the tithe check each month as an act of worship, but this is how we do it). I’ve been doing auto-pay going on 10 years and they’ve never once missed a payment.
- If I can set something up on a level payment plan, I will. Our utilities are on those – regardless of how much heat and water and gas we use in a month, we pay the same amount. Once a year, they figure out the difference and we’ll either get a refund, a payment amount adjustment or we’ll need to make an additional payment. Yeah, I pay more some months than I need to, but some months I pay less than I used.
- If something isn’t naturally a fixed amount, I figure out what the max is likely to be and pay that amount. Examples: our cell phone plan is usually $73.00/month, but it’s varied before if I call 411 or someone sends us a text message. So, each month, I have an auto payment set up for $75.00. Yes, it means that I’m overpaying, on average, by $2.00 each month. That’s not a big deal to me – they just credit our account.
Keeping all these payments fixed and regular means that it’s really, really unlikely that I’ll miss a payment. It also helps our budget because the number rarely changes. When the bill comes each month, I just open it up, make sure that the amount isn’t wrong or changed, that the due date didn’t change, and then I throw it in the “to shred” pile. I’ve already got the plans to pay for it – no need to keep looking at it.
Set a budget and honor it
Jeff and I have a budget that we target each month. When we first got it set up, it took a few months to get it ‘right’, but now it rarely changes from month to month. Each month, I import our transactions into Quicken, it prints out a report of the spending we did in each category and I enter those into an Excel spreadsheet. As long as Jeff and I don’t need to talk about anything, I’ll just email him the Quicken transaction report and our spreadsheet. That way, he always has a copy. We did just do a bunch of updates to the amounts, but that was because it’s a new year, we have a baby on the way, just moved into a house and we have more information on our habits than we did when newly married.
Automate Savings
I also use our bank’s Auto Pay feature each month to transfer money from checking to our various savings accounts. We have 4 different accounts:
Account #1: Future expenses savings. Each month, this account has a fixed amount transferred to it, say $300. My bank is set up to just transfer the money on the 20th of the month. It represents the amount we need to set aside for future bills like auto insurance, car title and registration, vacations, future car purchases and my life insurance - based upon our budget. If I have an expenditure in those areas in a given month, I just transfer the money back to the checking account. A simple spreadsheet tells me, of the given balance in that account, how much is allocated to each category. I made a pretend spreadsheet with some made up numbers to show you how this would work:
Things to note in this example:
- Each month, we’re putting in $90 into our auto insurance fund. But in November, the balance went down. Why? We paid the insurance bill. The same thing will happen this month (January 2012) to our Auto: License/Taxes account as my plates need to be renewed.
- In October, the Auto Maintenance budget didn’t go up the full budgeted amount. Why? We had some maintenance expenses. Looks like it was probably for $54.76 ($150 that it should have gone up minus the $95.24 that it did go up). Looking at the Quicken transaction report would tell me for sure.
- We haven’t spent any vacation money nor paid my life insurance (since it’s paid yearly each July) during those 4 months, so those accounts are accumulating as they should.
Account #2: House savings. This account is a separate savings account for our mortgage company to pull our monthly payment from. Each month, our bank is set up to transfer our house payment from checking to this savings accounts, then our mortgage company pulls from there. Again, it guarantees that we have the money available for a payment and it prevents the mortgage company from messing with our checking account. They can’t do that much damage to us even if they tried. Considering that I’ve had 4 different mortgage companies over the life of my 1 loan (10 years old), that peace of mind is nice!
Account #3: Car replacement & emergency fund savings. Each month, we transfer our car replacement money to this account. Our plan is a “replace one of our cars every 5 years” plan. Since we just got a new-to-us vehicle in early 2011, we don’t think we’ll need to touch that money until 2016. Our cars are in good shape. In fact, I hope to outgrow my car before we outlast the car!
Our emergency fund is fully funded, so we don’t put any more money into this account for that purpose. But if we were in the process of building it up, we would be moving money there.
Why seperate savings accounts? The reason that the emergency fund and car fund is in a seperate savings account from the future expenses account is because:
1) This isn’t money we think we’ll touch any time soon.
2) This account is the highest interest rate account we could find (without moving banks each month) – which isn’t much these days.
But really, they could be all in one account and it wouldn’t bother me. For the other savings accounts, we don’t really care what the interest rate is. The car replacement and emergency fund money isn’t immediately accessible and it doesn’t need to be. It’s the other savings accounts that we’d tap into first if bad stuff happened.
Account #4: Checking account. This is the account that feeds all others. Our paychecks are deposited here. Any other income is deposited here. Our bills are paid from here. We transfer money from here to their various savings accounts. Doing our savings this way basically means that our checking account grows each month with the funds that we haven’t spent, don’t need to dedicate to future spending and aren’t related to the mortgage.
Paying off the mortgage early
Our big financial goal right now is paying off our mortgage as quickly as possible. So, when we have extra money, I send that extra to the mortgage company. How we do that: when we get to a certain balance in our checking account, I’ve been paying the extra to the principal on our mortgage. I know others that always pay extra each and every month on their mortgage (say an extra $50), which I’ve done before, but this is the easiest way for us to do it now since we’re hitting that threshhold every other month or so.
Example (made up numbers): Based upon our spending, I feel comfortable having a $3,000 minimum balance in the checking account at any one time. That’s enough to pay for any bills that will pull from there through the month with some buffer for unplanned things like auto repair. (Any huge emergency expense, we’d transfer money from the emergency fund to cover.) But once we end a month with a $5,000 balance, then I’ll make an additional payment for $2,000 to the mortgage company to get back to the $3,000 minimum that I’m comfortable with.
Note: Every person will have a different threshold that they’re comfortable with. (Besides, every number I gave is a made up number).
That’s how we manage our finances. It’s not super simple with the different accounts and spreadsheets, but it works for us and it’s evolved that way over time. You could make it even simpler by having 1 savings account and keeping more in cash envelopes. This is what we’ve evolved to.
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