RSS Feeds
Facebook
GRS Twitter
Andy sent me a tip by e-mail the other day. This isn’t long enough to be a reader story, but I think it’ll be useful advice for some GRS readers. Andy says he’s learned that if he pays his bills as they arrive, he feels a lot less stressed than if he puts them off to the end of the month.
When he got his first credit card, Andy made a habit of paying his bills when he got them in the mail. But: “Then I got laid off. I didn’t pay my credit card bill until a day or two before it was due. I waited as long as I could because I needed that money elsewhere.”
Even after he got a job again, Andy kept paying his bills just before they were due. And he kept feeling stressed. Why? “Because I still am struggling to pay off my credit card bill each month before the due date. I have the money, I’m not carrying a balance or paying any interest…but instead of being ahead of the game I’m trying to base-slide in that home run at the end of each month.”
Andy writes:
I recommend that people do two things. Even if you’re carrying a balance on your credit cards, send your payments as soon as the bill comes due. Then you’ve got a buffer of about 30 days if for some reason you can’t make the payments immediately. If something does happen, do everything possible to get back your buffer ASAP.
Andy says there’s a real psychological difference that comes from paying his bills early: “That 30 day window makes me feel more secure.”
Long long ago, back when this blog was young, I wrote about my own personal discovery of this technique. When I was living paycheck-to-paycheck, I always waited until the last minute to pay my bills. Four years ago, I finally realized there were several advantages to paying my bills as they arrived:
- It saves time. Rather than spend half-an-hour batch-processing bills, I can take a few minutes at a time to pay just one bill.
- It saves worry. I’m no longer concerned with late payments. I know my bills are mailed on time.
- It saves mistakes. Sometimes I would forget to pay a bill. If I pay the bills as they arrive, this can’t happen.
- Most of all, it saves money. When I got paid, I used to buy my fun stuff first, and pay bills out of what was left over. Now that I pay bills first, I’m more inclined to invest any remaining money instead of spend it.
Even if you live paycheck-to-paycheck, you can profit from this advice. Try it for a month. You may not be able to pay all of your bills this way (your mortgage, for example, might have to wait), but you should be able to pay most of them. See if it doesn’t take a load off your mind!
After having used this technique for four years, I can’t imagine doing anything else. In fact, I barely remember that I used to struggle with paying my bills on time. But I did. Amazing how far I’ve come! And it’s amazing that smart personal finance is made up of regular small habits like this one.
This article is about Basics, Money Hacks Thursday, 4th February 2010 (by J.D. Roth)
February 4th, 2010 at 5:08 am
I keep telling myself that I am going to start paying the bills as they come in but so far it hasn’t happened. I just feel like I should hold on to my money as long as I can as earn a few more pennies in interest. I usually pay my bills 1-2 weeks early and I still hate doing that.
Thinking about it again though, the few pennies in interest is not worth the peace of mind of knowing the bill has been paid.
February 4th, 2010 at 5:26 am
I disagree with the notion that this method would save you time. So would people who have read 4 Hour Work Week. If you batch your tasks you save time over doing them as they come because of set up times.
Say it takes 2 minutes to prepare for paying a bill and 3 to actually pay a bill. And say you had 5 bills to pay in a month. If you pay as you go you spent 25 minutes ((2+3)*5) that month paying bills. If you find a day in that month that you can batch all of your bill paying you would have one set-up of 2 minutes plus 5, 3-minute bill pays for 17 minutes spent on paying bills that month.
The more bills you have, the more time you save. Obviously these times are just examples but it works if you can stick to a specific day to pay your bills/ set up automatic payments.
February 4th, 2010 at 5:26 am
Yes, this is awesome! I receive my cell phone bill to email, and as soon as I get that email, I pay it! It really helps keep me organized.
Great tip, Andy!
February 4th, 2010 at 5:30 am
Have you thought of paying using your bank’s on-line bill pay? you can set up the payment immediately, but delay the actual payment until the due date. For that matter, most banks offer an on-line bill option, where the bills go to the bank and you get an email when they arrive.
February 4th, 2010 at 5:35 am
I think this is a great tip for people who are getting control of their finances.
But for me, paying bills as soon as they arrive would lead to confusion and budgeting issues. I pay our bills twice a month, at the end of the month and in the middle of the month. This is also the same time when I review our spending plan (our form of a budget) and auto transfers for savings occur. If I paid our bills at different times during the month auto savings and budgeting would be thrown off schedule.
February 4th, 2010 at 5:36 am
And use free billpay to pay them, forget the mail.
My credit cards are credited the same night I pay them via electronic billpay from checking (even though they are at different banks!)
And if you round up slightly (e.g., pay $80 on a $78.83 electric bill) it makes it much easier to avoid mistakes in reconciling your checkbook register.
February 4th, 2010 at 5:46 am
I usually pay my bills when I get them, as well. It is less likely that one will fall through the cracks and go unpaid.
If it makes more sense to continue paying bills at a specific time all together, some companies will change your bill date, if you ask them. For example, when I worked for a cell phone company that was an option. If your “month” ends at the beginning of the month, you can request changing the bill date so it closes at the end of the month so you get your bill at a time that is more convenient for you. The only thing that may be confusing (particularly for a cell phone plan where your minutes are limited) is that during the change over you may have a prorated period, both for minutes and access charge.
February 4th, 2010 at 5:47 am
I don’t like to pay out too far ahead because my money is better in my account where it is offset against my mortgage, also it messes up my budgetting schedule. But, I also hate the risk of losing or forgetting about a bill, so stressful.
So now I do a mix - as soon as a bill comes in I set it up as an automatic payment from my account a business day or two before it’s due. (Where I live most bills can be paid electronically and the transfer system is very reliable.)
So I get to feel organised and at the same time it doesn’t mess up my bill-paying schedule. It does help that I have a big enough buffer in my account that I don’t have to worry about going overdrawn by a bill.
February 4th, 2010 at 6:14 am
I think it’s more efficient to pay bills in groups versus stopping what you’re doing and paying each bill as it comes in. Just plan to do it at preset times (every 2 weeks or twice a month).
February 4th, 2010 at 6:24 am
I do something to budget that I’ve never seen referenced in any blogs. It may seem weird to other people but it works for me! In an effort to even out my bill paying, if I anticipate an electrical bill of $90 per month, I pay $45 on this pay and $45 on next pay (bi-weekly paydays) AHEAD of time. When the bill comes, it shows zero or very close. If it’s a credit - hey - that’s great. At Christmas time you can use your credit to reduce your bills and have a bit of extra spending money for the holidays! Right now, I pay 4 bills like that - water - natural gas - electricity and cable. All 4 payments come out every payday so my bills when they come always read zero! I love it. I’m not worried about interest right now - it’s only pennies. literally. pennies. My two cents
February 4th, 2010 at 6:28 am
I do both, sometimes I pay the same day I get a bill, other times I put it off for a while, not because I can’t pay but because it would mess with my budget.
I have a detailed budget for each month for a year ahead and I am able to estimate pretty much exactly when a bill will arrive (insurance, phone, electric etc). It’s all written down and funds are reserved for it months in advance so to me it doesn’t matter if I pay the day it arrives or a week later.
February 4th, 2010 at 6:34 am
Most of my bills are paid automatically just before the due date (by direct debit or standing order). I know that some people aren’t comfortable “trusting” companies to take a variable amount of money, or can’t be sure that they’ll have enough float in their account (e.g. living paycheck to paycheck), but it works well for me. I wouldn’t do it with a company that I didn’t trust, or that didn’t give me the legal direct debit guarantee paperwork that is required in the UK, and a make a habit of reconciling the bills with my bank statement every month so that any mistake would be picked up (there haven’t been any). All other bills, like my college fees, get paid as soon as they arrive, by electronic transfer if possible. Like Nicky (#6) says, if I’m worried that I’ll lose a lot of interest, I’ll set up a post-dated transfer for about 5 business days before the due date (to allow for snarl ups). The way my bank account is set up, that takes no more time than an ordinary transfer, but I don’t usually bother unless it’s a very large amount.
Since I’ve only just switched from being paid quarterly(!) to monthly, I’m used to estimating my monthly outgoings and keeping a suitable float in my account so that bills don’t cause it to drop too low.
February 4th, 2010 at 6:39 am
Many years ago I had a job that paid bi-weekly. That’s when I started paying bills on the 1st and the 15th of each month. 20+ years later, I still do it this way, only hubby is now involved.
We each know how much we need to put into the bill account every week. We each know which bills are paid on the 1st and which ones are paid on the 15th. We don’t have credit card balances, so holding money isn’t an issue.
When we got cell phones I asked for a billing cycle that allowed the bill to be paid on the 15th. When we got satellite tv, I asked and got a bill due on the 1st.
The only stress that occurs/occurred is when neither of us are/were bringing in any income and the savings was dipping below the safety zone. This is where we are now, but haven’t dipped below the safety zone just yet - have two more months before that happens and we’re hopeful for an income turnaround in the next few weeks.
February 4th, 2010 at 6:41 am
Does everyone still receive their bills in the mail? I turned paper bills off long ago on all of my bills. My cell phone sends me an email. For everything else, I have a calendar notification on my phone when the billing period ends.
I do what Nicky does. As soon as my notification comes, I go online and schedule the payment. However, I schedule it for a few days before the due date. In my mind the money’s gone.
February 4th, 2010 at 6:48 am
Some companies immediately send out the next bill when they receive payment on the current bill. Paying these types of bills when they’re received means you’re paying a “monthly” bill about every three weeks, or about 17 “monthly” payments throughout the year… great if you can afford it, but tough to do when it’s a mortgage bill.
February 4th, 2010 at 6:54 am
With only the exception of my water bill and my gas bill, neither of which has an automatic payment method and both of which vary from month to month, all of my bill-paying is on auto pilot. I schedule everything to be paid on the due date and not a minute sooner. With credit card companies that move around the due date, I have to use their own Websites so it always gets paid on the right day. For everything else, I use my bill pay service. I love knowing that my money is earning every penny of interest possible while not giving a moment’s worry over bills.
February 4th, 2010 at 6:57 am
I’m with David - 1) a lot of my bills are not paper anymore, so they don’t “arrive”, 2) a few of them are just automatically taken out of my account (like my phone bill, which is the exact same each month) and 3) for others that fluctuate each month, as soon as I know the balance, I set up a scheduled payment for a few days before the due date.
February 4th, 2010 at 6:59 am
I’ve been doing this for several months. It took a couple of months to get the budget timing correct, but it flows smoothly now.
Another reason to think about is that some companies, especially credit card ones, change the normal due date without advance notice. OK, the notice is on a previous bill, but in the small print so they can 1) get away with the change and 2) charge late fees.
February 4th, 2010 at 7:07 am
I pay bills twice a month–I have it marked on my calendar. Two are due about a week into the month and the rest toward the end. I have a folder for unpaid bills so they don’t get lost on the desk. The credit card bill gets a bit complicated, since I have to transfer money from my ING accounts to cover some charges, but it comes early in the month and is due late, so I have plenty of time. I feel like it takes less time paying them in batches, because you’re only getting the checkbook and the stamps out once.
February 4th, 2010 at 7:15 am
I have everything paid automatically… and check on it once a month to see if anything is out of place… less then a hour per month looking at bills.
February 4th, 2010 at 7:15 am
I am still old-fashioned, in that I receive paper bills. It helps me a LOT - I get so much email as it is, that I was afraid of not checking the “bills only” email or for the notification to get lost in the shuffle. I also like having it for my records - I record when it was paid on the bill print-out, as a kind of receipt.
February 4th, 2010 at 7:15 am
I prefer to just have everything possible automatically paid from my checking account at set times each month. But, I do use this strategy for the two bills I get that aren’t paid automatically. For me the main advantage is that I don’t forget to pay them. It also keeps things less cluttered, which is a plus.
February 4th, 2010 at 7:28 am
If you have a balance on your credit cards you should pay them as soon as you get the bill - it’ll be less interest you pay in the long run. I even made weekly payments when I carried a balance, in order to ship away at the balance and finance charges as much as possible.
But with bills (and my monthly paid off credit cards) I write the check and record it in my check book register. But I don’t send the bill until a few days before its due. I write the date I’m going to put it in the mail right above the stamp. Of course this takes discipline as I have to put the envelopes in a noticeable place so they get in the mail. But this system has been foolproof for me for 10 years - never made a late payment and I keep my money as long as I can before having it deducted from my account.
February 4th, 2010 at 7:29 am
Just to add my own methods as an example.. I have everything that accepts it set up on auto-pay and no paper bills (email notifications). Do this for pretty much everything other than the one-off bills I get. For those, I go online and tell my bank to send them a check either at the due date or about 30 days following the bill date, depending on the bill.
For everything, I use Quicken. I use the Scheduled Payments feature for recurring bills/deposits to “pre-enter” about 30 days worth of transactions in my primary accounts. Since I have a pretty exact idea of what certain expenditures will be, I can see where my bank account will be over the next 30 or so days, and plan any transfers as necessary (e.g., to move between checking and savings).
Zero stress, as everything is planned well in advance. I have been more vigilant recently to make sure everything in Quicken is up-to-date, so I guess you could say I’m processing the bills as I receive them (electronically). I also save a PDF of every bill, so I have the records to refer to if needed. Now have several years of bills accessible within seconds.
February 4th, 2010 at 7:31 am
I just want to comment on some of the comments if I may. Some people are saying that they have all their bills on autopay. While that’s awesome and I have all of my bills but two on autopay, it’s not always an option. My trash service, I can’t get them on autopay.
But for me my credit card bill would never be put on autopay. I can do it, but i don’t. What’s the point of having a credit card if you don’t leave yourself the option of running a (hopefully small) balance once in a grand while? But the point is if you can’t have it on autopay, or you choose not to, the best practice is to pay it early as possible. Then in a crisis, you’ve got 30 days you can wait and hope for more money to magically come your way, then you can pay it off and not run a balance at all.
February 4th, 2010 at 7:31 am
I do this except I do it online. That way the money leaves my account the day I want it to. I know it might take more time to do this every couple of days vs. once a month, but I would forget or misplace bills if I didn’t do it as frequently. It’s not autopay, I manually go in and pay each bill through my bank’s website. Works for me!
February 4th, 2010 at 7:35 am
I think it’s a great idea to pay bills on arrival when you’re struggling to get ahead of things.
Now that we have cash reserves, though, we prefer the flexibility of waiting to pass along money until we have to. Like many here, we have most bills on autopilot (charged to a credit card, though, not pulling from checking, which scares me). Other bills are electronic and either show up automatically for me in Quicken when I need to act on them, or I enter them into the calendar when they come in.
February 4th, 2010 at 7:44 am
For us, we pay our bills twice a month but then mail them out a week or so before they are due. Basically our bills are either “first half of the month” or “second half.”
At the beginning of the month, I write all the checks for those bills and note on the back of the envelope what day they are due. I do the same thing at the middle of the month.
As I leave for work each morning, I glance at the envelopes and see which ones are due soon. If it is about a week away (depending on where the bill is going), I drop it in the mailbox.
This has the benefit of batching my bill paying duties and also keeping the cash in my checking account for as long as possible.
February 4th, 2010 at 7:52 am
My two credit card bills come at about the same time, so I wait until they’re both ready and pay them immediately. Then all my utilities (electric/water/trash, gas, phone) come at about the same time, so sometimes I pay them as they arrive, and sometimes all at once. At the end of the month I double-check that I’ve paid all five of these bills and not forgotten them.
I used to not want to give companies money before I had to for that little bit of interest, but I prefer the piece of mind. Plus, if I’m able to pay by credit card for free, I earn points on my payment far exceeding any interest I’m losing. And for the other bills, now that my bank has made their on-line bill pay free, I think I can schedule my payment when I get my bill and not send it out until closer to the due date.
Has anyone had trouble scheduling payments for the due date? Don’t computers go down at just the wrong time? Or do you get away with it if you can prove that you scheduled your payment for the due date?
February 4th, 2010 at 7:53 am
What’s the point of EVER paying interest on a credit card!?!?! Leaving a balance on a credit card is horrible advice for those wishing to get rich slowly. How about developing a monthly budget and paying your bills every month, come one, we’re not the government! If you get paid once a month, on the first of the month, then paying the bills as they come in is no problem. If you get paid twice a month then paying bills as they come in would be impossible for some people. Who care when you pay them as long as they are getting paid and you are NOT LEAVING BALANCES ON CREDIT CARDS:)
(See quoted comment below)
Andy Says:
February 4th, 2010 at 7:31 am
Hey JD! Thanks for posting my tip! Glad people are finding it useful!
I just want to comment on some of the comments if I may. Some people are saying that they have all their bills on autopay. While that’s awesome and I have all of my bills but two on autopay, it’s not always an option. My trash service, I can’t get them on autopay.
But for me my credit card bill would never be put on autopay. I can do it, but i don’t. What’s the point of having a credit card if you don’t leave yourself the option of running a (hopefully small) balance once in a grand while? But the point is if you can’t have it on autopay, or you choose not to, the best practice is to pay it early as possible. Then in a crisis, you’ve got 30 days you can wait and hope for more money to magically come your way, then you can pay it off and not run a balance at all.
February 4th, 2010 at 7:54 am
I pay my bills once a month. It works out better for me b/c I get paid once a month. I setted up bill pay with my checking and advised the companies that can to automatically withdraw payments from my account on the first of every month. By the fourth or the fifth day of the month I know how much I have left over for the whole month.
February 4th, 2010 at 8:02 am
We have all our bills on autopay (either debit push/pull or charge to a credit card) except our credit cards, which we pay in full each month manually. One cc is due in the first half of the month, the other is due the second half. The reason for this is we sometimes have to pull from designated savings, because we set aside money each month in other accounts for gifts, personal “escrow” and so forth. I monitor our checking account daily and our savings accounts 1-3 times a week, balance the budget and pay a credit card bill twice a month, and move money to investments once a month.
February 4th, 2010 at 8:03 am
I wait until the last minute to pay my credit card bills; however, I only use two cards (one for general purchases, and another exclusively for gas purchases).
The reason I wait is because I do not feel the need to give the credit card companies 20+ extra days of utility (or the opportunity to earn interest) on my money.
February 4th, 2010 at 8:13 am
I SET MY BILLS UP FOR PAYMENT when they arrive. I deduct the amount from my account balance (I use Quicken). That way, I have the best of both worlds - I don’t have to worry about being able to pay my bills and I also take advantage of the “float” which using a credit card (or any place which bills, really).
February 4th, 2010 at 8:16 am
I tried this and it just didn’t work for me. My solution? I set up all my bills on auto-pay from my checking account. It means even if I leave my bills piled up they get paid, and I also am forced to leave a cushion in my checking account. No more late fees!
February 4th, 2010 at 8:24 am
Like elaine, I pay our credit cards online. I like the way I can pay them the weekend after I get them, but the actual payment doesn’t debit until the day before the due date, so I can keep getting interest (piddly though it might be).
I also don’t like auto-pay. We don’t budget, so I need to physically look at the bills every month to make sure we’re on track and to keep us mindful of our spending. We also catch the rare restaurant accidental double-billing that way.
Another nice thing is that once a person has gotten well on the way to getting rich slowly, having a huge emergency fund allows one to stop worrying so much about these kinds of tactics.
February 4th, 2010 at 8:27 am
I get paid on the last day and the 15th, so I hold over the 15th paycheck till the end of the month and pay all the bills for the upcoming month on the last day of the previous month (ie: Feb bills are paid on Jan 31st). Like many folks here, my bills are auto-withdrawn from my account or via checkfree.com, so even if, say my electric bill isn’t actually withdrawn until the 20th of the month, in my register it’s already accounted for and paid. I even include things like groceries, pet food, etc., as a bill, that way I know exactly how much I have left over every month for fun or anything non-essential, and it helps keep me on budget. Savings, btw, is auto deposited into my savings account from my paycheck. If the odd rare bill comes up during the month, I just pay it when it arrives. I used to get paid only once a month and was basically forced to do things this way, and when I moved and got a new job and was paid twice a month, I just kept it going because it works well for me.
February 4th, 2010 at 8:29 am
I get paid once a month near the end of the month, so I just schedule all of my bills to be due near the first and pay them all on the weekend after payday.
It works pretty well for me and really isn’t too much hassle to set up.
February 4th, 2010 at 8:30 am
I never wait to recieve a bill. I get a paycheck every two weeks, and I pay a certain amount to each bill - for my credit cards - which sadly have balances - I pay the old minumum every week. For example, Credit Card A had a minimum payment of $50. I pay that on payday 1 in the month, and again on payday 2. Sometimes even on payday 3. If life gets stressful, and it often does these days, I can lower a payment because I’ve already paid more than enough!
February 4th, 2010 at 8:38 am
I don’t have much trouble paying bills on time. I’ve never been late *knock on wood*. Some people hate the idea of direct debit, but all the bills I can have directly debited, I do that. I used to have them automatically charge to my credit card, but I decided not to do that since I’m trying to use credit cards as little as possible.
A couple of my bills don’t have the direct debit option, but I am signed up with an e-bills thing that notifies me as soon as the bill comes out. I pay these immediately, then I don’t have to worry about it.
I think with the advent of direct debit and direct to credit card charges, people REALLY have no excuse for not paying bills on time.
I’m paying down my credit card debt and should be out soon. I make MUCH bigger payments than the minumum, and I usually make payments biweekly. That way I don’t miss the minimum payment due date (which is possible if I only paid once a month since I get paid biweekly so dates aren’t the same each month). Works for me.
Oh, and for those worried about missing credit card minimum payment dates, you can have it set up so that the minimum payment is automatically withdrawn from your bank account so you’re NEVER late. No excuses.
It’s not hard to keep a float in your bank account and have things directly debited. Don’t need accounting software for that!
February 4th, 2010 at 8:41 am
Hey J.D. and Andy,
This is like David Allen’s Getting Things Done: Personal Finance Edition.
If a finance task enters your life and it won’t take more than a few minutes to accomplish, then do it immediately. On the spot. Get it over with.
Why? For all the reasons you mentioned.
You won’t have the bill on your mind. And you won’t need to re-read it, thus wasting time.
A nice GTD tip that’s universal and, as shown by you two, can be easily applied to rocking your personal finance.
To paying bills as they arrive,
Oleg
February 4th, 2010 at 8:43 am
I am going to jump on the Online Bill Pay bandwagon. It takes just a couple of minutes each morning & I never have to worry about something getting missed :o)
To dls I would say… life happens!! While it is not optimal, it is sometimes unavoidable to carry a credit card balance… I don’t think anyone was advising anyone to routinely carry credit card balances… just recognizing that there are times when it is necessary.
February 4th, 2010 at 8:48 am
RE: dls
A credit card, by definition and purpose, is a way to spend money you don’t have at that exact moment. Carrying a balance isn’t smart and won’t make you rich, but sometimes leaving 50 bucks in your checking account for another two weeks could mean the difference in defaulting on your mortgage.
I think everyone will agree, paying the minimum amount due on a credit card instead of the full balance is better than defaulting on your mortgage. Not everyone who carries a balance on their card does it because they are irresponsible spenders. Credit card companies make the most money off of the irresponsible spenders, and it’s easy to get a debt snowball rolling there, but sometimes it makes more financial sense to pay a little interest here than to default or pay lots of interest or fines somewhere else.
February 4th, 2010 at 8:52 am
We autopay just about everything and batch process the other stuff on the 5th and 20th of the month. That includes: trash, water, Roth transfer, mortgage, credit card and downloading and reconciling Quicken transactions. I put myself on this schedule after finding that I was wasting too much time messing with Quicken when I used to pay bills as they arrive. To each their own I guess.
February 4th, 2010 at 9:04 am
Most of my bills are automated, so I don’t even have to think about them - they come straight out of my checking account.
As to the point of the post, I agree. Peace of mind is critical. I even have my condo association fees paid through “bill pay” where the bank automatically sends a check to the condo business office. They don’t charge me for postage. Why do I do it when I could walk 20 feet to the drop box? Because I used to have a nagging feeling - did I pay it or didn’t I? I was once late because I thought I had paid it but hadn’t. Why worry? Just do it.
February 4th, 2010 at 9:19 am
I don’t worry about the incremental time issue. Sure, if you have 10 bills a month, it will add up in a noticeable way. Right now, I only have one bill (credit card). The highest number of bills I’ve ever had is three (car payment, credit card, and electric). I automated my car payment and just checked regularly to make sure there was enough money in the car account. I pay the electric and credit card as soon as I get them. It’s just how my mom taught me to pay bills. The small amount of interest I might get from putting off the bill means nothing if I have to pay a late fee.
February 4th, 2010 at 9:26 am
The only bills that I haven’t automated are my various credit cards. Everything else is on auto-pilot - and yes I still try to read the bills. I pay the credit cards off each month, and typically have to pay off 3-4 cards every month (different card, different purpose). I always pay them the day after I get paid myself - good routine to keep, I won’t forget. Bills arrive erratically, but I always get paid predictably - so less chance to mess up.
February 4th, 2010 at 9:43 am
The second I get my bills in the mail I pay right away. I want to get it over with and not worry and see my money come out of my account right away so I know how to better budget for the rest of the month.
February 4th, 2010 at 9:50 am
I hate paying early so most of my bills are paid automatically by the bank.
I use YNAB every day so any non-automatic bills are registered in YNAB under “scheduled transactions” and when the deadline is up, YNAB tells me to pay the bill.
That way I can forget abut the bill and still pay it in time (online, of course), without the interest loss from early payment.
February 4th, 2010 at 9:51 am
Nearly every bill I have is automated. It used to be that when interest rates weren’t near zero, playing off the float and paying the last minute made sense, but a single late fee today wipes out a years worth of interest or more.
Note for Automated Payers: Be careful on things like cable or mobile phones as they can slip in extra charges and if everything is automated, you tend not to notice little charges.
February 4th, 2010 at 9:52 am
Personally I like to hang onto my money as long as possible and make money off of the grace periods in interest. However, I’m a stickler for NEVER paying late fees or interest on anything so I absolutely want to be sure everything is paid “just in time”.
How did I solve the problem. About 15 years ago I started using Quicken and found a bank that allowed for the electronic payments through Quicken. I set it up so everything was on a the Quicken calendar with reminders and scheduled payments. This has been fantastic. There are several benefits:
- The reminders pop up to remind me a bill should be due - ever have a CC bill get lost in the mail - I have. With the reminder I call them or nowadays just go online and determine the full payoff (always payoff everything every month) and send the payment.
- I can input my bills into Quicken the day they come in (although I usually do it that weekend) and schedule them for payment. This works wonderfully. I always enter the due date a day early and Quicken figures in a grace period anyway. The electronic check always gets there on time. The best part is regardless of when the check gets there it isn’t deducted from my account until the date I scheduled!
- By entering everything this way, including my income I can see at a glance at any moment exactly where I am and where I will be with all upcoming bills and income. This allows me to move my money around for maximum return. I even use Quicken to move money in and out of my money market for just in time funding to provide maximum interest return on my day to day cash flow. I made an additional $3k+ in 2009 on interest by maximizing the flow of my daily/monthly cash!
One note on the autopilot comments. While I can appreciate that approach because it just gets taken care I don’t recommend it. I found when I tried it that I wasn’t near as careful as I had been in checking the bills for accuracy. Since I have learned that at least 2x/year my various CC bills have had errors. This past year I had my CC number stolen 3 times! They were smart only making a few purchases. If I didn’t look those over and compare them to the receipts I would have never caught that. Granted I do have a large volume due to my extensive travel but all the same I would recommend finding a way to make sure you verify every bill in detail. Every year I have saved myself hundreds by finding errors in various bills!
Anyway, I’ve found my approach to be completely worry free - try it you’ll like it! ; )
February 4th, 2010 at 9:54 am
I auto-pay my bills and make deposits to savings (via online banking) on the same day my paycheck is direct deposited into my account. This way, I never even see the money and therefore am not tempted to spend it on frivolous things. This all happens automatically, I never have to think about it.
February 4th, 2010 at 9:57 am
I have all of my bills set up to automatically deduct from my checking account. I set a Gmail calendar reminder (that emails me a few days before and again the day of) so that if any money needs to be scooted around from various savings accounts, I can do so. Mostly I just don’t have to think about it this way.
February 4th, 2010 at 9:59 am
I have always paid all bills as soon as they arrived my whole life (never occurred to me to try and wait until just before they were due, that’s way too much stress for me).
My budget spreadsheet has a regular register and then I do a separate spreadsheet for each paycheck (well a separate tab in my Excel spreadsheet). I know which bills are going to come due when, and most of them are either fixed or (in the case of electric) I can make a good estimate of what it will be based on the time of year. Then I use the spreadsheet to show which bills will be deducted out of which paycheck, and as soon as I get the bill (like most others on here pretty much everything is paperless, I get e-bills and use free online bill pay) then I pay immediately and highlight the cell on my paycheck spreadsheet to mark it as paid. Then I enter the amount on the register tab to track the running total in my account.
I doubt this is the most time-efficient way but I actually enjoy the budgeting process and the fact that I make enough money to cover my bills. Sometimes I open the spreadsheet just to look at it.
February 4th, 2010 at 10:05 am
I haven’t seen anyone suggest something like what I do…
I schedule my bill payments in ING the day I get them. ING then sends the money out on the specified day. That lets me get the best of both worlds:
a) More interest earned on my money
b) Not stressing about remembering to pay the bills.
February 4th, 2010 at 10:08 am
I do not use online banking because with kids in the house, the family computer always got something strange on it and I did not want to compromise our security. I may start this later.
However, since both my husband and I are paid once a month, I save all the bills and have one massive bill-writing session. It may take up to five hours, but is worth it. I can track everything and with a very precise budget can write checks for things that I know will arrive in a week or two; I just hang on to them at my desk. That way, once everything is paid, I know what money is left for other expenditures. This has worked well for us since 1977.
February 4th, 2010 at 10:22 am
It has never once in my life occurred to me to not pay a bill as soon as it comes in.
If I owe money, it’s essentially not my money any more since it’s been spoken for, so I may as well pay it right away and get it out of any other budgeting calculations for the month.
That said, I am very much a product of being born in 1981. I’ve only ever paid ONE non-rent bill using a cheque and the postal service. It was my first cable bill after moving to college. It seemed like a colossal waste of time/energy/money to pay it that way, and I’ve done everything online since then.
I haven’t even received a paper bill for a few years.
February 4th, 2010 at 10:33 am
Electronic Bill Pay.
Rent goes out automatically.
All utilities get paid automatically when they come in (within reasonable maximum amounts).
I get an email when my one CC (don’t you start!) bill comes in, and it takes about 20 seconds to review that and click “pay”.
No paper. Stamps. No fuss.
I suppose I could maximize interest a bit if I paid them at the last possible moment, but it’s easier for me to keep track of my cash-flow this way.
February 4th, 2010 at 10:33 am
I have all my bills set up to auto pay. I don’t do anything at all. Twice a month, on pay day or the day after, I log into my bank to distribute money to my targeted savings and pay off my credit card in full. Never any worries.
February 4th, 2010 at 10:33 am
Er, why is anyone still “paying” bills any more??? It may be different elsewhere, but every recurring bill we have (mortgage, electricity, water, trash, CC) can be set up as an automatic payment. This way, I get an e-mail telling me the amount that will be taken out and when, and another telling me the transfer has occurred. If I do nothing, everything is still automatically taken care of. I can even schedule the transfer to occur when the bill is due, thus maximizing the interest earned on my checking account.
We’re lucky enough not to live paycheck to paycheck, so we don’t have to make decisions about what to pay each month. However, if something happened that put us into that situation, we can easily cancel the payments online. As always, deciding not to pay a bill should be a conscious decision, and this prevents EVER getting charged late fees or interest on anything we pay.
It’s even both ecologically sound (no paper bills, which can’t be recycled due to personal information) and helps prevent ID theft (no paper bills sitting in mail boxes ready to be stolen).
February 4th, 2010 at 10:36 am
@ Caitlin
If you have promised to pay someone $100 at March 1st, then technically you don’t owe them anything today. The money is yours and why not use it on something like earning a little interest?
February 4th, 2010 at 10:40 am
I’m salaried and paid on the last day of the month. I take 30 minutes that day to pay all my bills that are due in the coming month, regardless of their due date. In some cases those bills are automatically deducted from my checking account later in the month, but they get entered into my checkbook on payday. Bills to myself (i.e. savings) are also paid that day. The benefit of doing it this way is that I can see exactly how much money I’ve got left over for the rest of the month and can plan my discretionary spending accordingly. If it’s going to be a tight month, then I can opt to delay purchases or take a raincheck on dining out (or choose a less expensive place to do it at.) If it’s a flusher month, then maybe I can splurge on some music or on the pair of shoes I’ve been lusting after.
I used to be paid every two weeks and now that I’ve spent the last 4 years being paid monthly, I can’t imagine going back. I remember sweating the bills a lot more then because one paycheck didn’t cover all of them and depending on when the paychecks and bills were due it could get ugly.
February 4th, 2010 at 10:46 am
I am paid biweekly; paper bills are thrown in a certain spot, once payday arrives I go through those bills and pay them. So all bills are paid within 1-2 weeks of being received.
February 4th, 2010 at 10:59 am
I pay my bills as they arrive, except for my credit card bill, which I pay online on my payday.
As a back up measure, I have my credit cards set to automatically withdraw the minimum balance from my bank account on the day the payment is due. That way, if I forget to pay one month I at least won’t be hit with late fees. I don’t have it set to pay off the entire statement just in case I have a surprisingly large balance one month and it overdraws my account.
February 4th, 2010 at 11:04 am
Hello All
I agree with #4 - ITGUY - set up the payment online with billpay as soon as it comes in so that it is paid on the date due. I also write on the bill when I’ve loaded it, that way I know it is going to get paid. It takes at most 5mins to log in to online banking and pick the bill pay, amount & date.
We have an expenses account where all the bills, groceries, misc household expenses come out of. Partner & I get paid monthly but two weeks apart and put in the same amount each month to cover all the expected/budgeted expenses, plus some (small emergency type fund growing).
For the mortgage, I also have a separate check a/c that comes out of so as soon as I get paid transfer the months payments to that a/c which gets paid fortnightly so I always know I can pay the mortgage. I always put in more than required - that way I get an emergency fund building up in there which has been handy this Xmas holidays!
Never run into issues - online banking was a great invention!!
February 4th, 2010 at 11:09 am
SOLUTION:
AUTOPAY
BUT VERIFY by checking every months statements
February 4th, 2010 at 11:14 am
Gee, I am feeling like an utter control freak right now! My spending plan is written based on due dates. I know exactly what bills I’ll have and the approximate amounts I’ll have to pay out of each paycheck, as well as savings transfers, etc.
I receive 5 bills per month. Like partgypsy, I put the bills in a specific spot. When it’s payday, I take to work with me the bills scheduled for payment. As soon as I get my DD paystub, I go to my check register and write in the charges that are on auto. Then I go online and authorize the payments for that period. Bingo, done, five minutes.
I check my bank accounts almost daily. Since I use so much online billpay and otherwise use my MC debit card for almost everything, I like to keep track of things.
I work in an office with liberal internet policies, so it’s very easy for me to take two minutes and do this little safety check daily. If it weren’t so easy I’d have to obsess some other way.
I cannot imagine gaming the system and risking late payments over some measley pennies of interest. (btw you know online payments can take up to a week to “arrive,” right?) The only interest that concerns me (while the rates are so low) is my interest in not ever having to worry about whether a bill’s been paid.
February 4th, 2010 at 11:20 am
Everything is auto paid with my credit card. The credit card itself I manually pay on the 1st of the month (way before it is actually due) and I will pay all expenses for the previous month. I don’t auto deduct it because it makes me check my balance and make sure nothing looks weird.
As a previous commenter noted with total automation its easy to miss something like your phone bill going up a few dollars but since I input everything into excel I know that mine mysteriously went from 73.80 to 74.03 this month. Now granted when I go look its probably just the taxes randomly changing again (which one would think wouldn’t happen…) but at least I am aware of the change.
Overall I found that waiting to pay until when my bill was actually due was not worth the extra interest because it made it harder for me to track what was going on in the current budgeting month. I like going back to $0 on the 1st of each month and working from there.
February 4th, 2010 at 11:22 am
I use a variety of methods for different bills.
Mortgage, student loan payment, and IRA contribution come out of my account automatically on the same day every month. I never see a bill.
Trash and water bills still come in the mail (they don’t have an electronic option yet). When I get them I set them up in ING to pay near the due date, and take them out of my check register.
Credit card and utility bills vary a lot month to month, so I don’t like to autopay them. I get them via email, and as soon as I get them I either set them up to pay in ING (credit card) or put them on my Outlook calendar (gas & electric - because sometimes I pay them and sometimes hubby does). In an extreme case these can be paid at the last minute via the biller’s website, which is handy.
I love ING for bill paying because I can set something up weeks in advance, I know it will go out on time, and I won’t forget about it because it shows up as “scheduled” every time I check my account online. Very cool.
February 4th, 2010 at 11:25 am
I like the psychological boost this method gives you. It makes you feel like you’re constantly ahead of the game. Of course there may be times when you can’t make it work but it’s definitely worth it if you can.
February 4th, 2010 at 11:26 am
#62 Lindsey: I just got switched the other way– from monthly to every two weeks. I HATE it. The bills all come at the beginning of the month because I set them up that way but I can never keep track of when the paychecks are coming. I was wondering if it was just me being used to getting paid on the first of the month and I’d eventually figure out how to adapt or if monthly payments are just a better fit for me. It’s interesting to see that someone has made the switch the other direction and also likes monthly better.
In graduate school I got paid 3x a year. Except that the checks were small given how long they had to last, that was pretty cool in terms of planning.
February 4th, 2010 at 11:27 am
A friend uses electronic banking to pay his credit card bills a day or two before they are due so that his savings account is able to gain as much interest as possible. When his bill arrives, he then sets up the payment of it.
Seems to make sense to me.
February 4th, 2010 at 11:45 am
I’m amazed at the number of people who are still paying bills on paper. I dimly recall doing that sometime around 1998 … since then, it’s been online bill pay where you put in the due date of the bill and the bank takes out the money at the last possible moment and guarantees it’s never late. Best of both worlds.
February 4th, 2010 at 11:45 am
Excellent idea. Although I don’t immediately pay each bill as they come in day to day, every Sunday evening I set aside a couple minutes to pay anything that has arrived that week. I have set up autopay on almost every bill that will let me any more, so the number that I have to handle is minuscule. A lot of the time that number is actually zero, so that makes for a pretty quick bill paying session!
I hated having to deal with checks. Or figuring out where the wife has hidden the stamps. Or finding an envelope for those bills that don’t include a self-addressed envelope. But what I really hated was when I would miss that bill I had set aside, and instead find a nice service charge ding when the next cycle would begin. Anything that can get you away from that problem is worth a little of your time!
February 4th, 2010 at 11:47 am
I pay any bills that arrive by mail the next work day (so I can take them to work for the mail-out-tray which is safer than placing them at the apartment mailbox and more convenient than going to the post office). Online bills (most of them) I pay on the 20th of each month. This minimizes the amount of time I spend on bills and stressing about bills.
I think spreading bill paying over many days per month is like doing your laundry as soon as its dirty… Effective, but not efficient.
Also just thought about how weird it is that there just aren’t any obvious mailboxes anywhere near where I live or on my way to work…
February 4th, 2010 at 12:51 pm
I actually pay my bills each payday. The day before we get paid I sit down and set up bill pays for the day after we get paid to go to every bill due before the next time we get a paycheck. I also pay off our credit cards at this point so we pay off the card every two weeks.
This has been working great fo rme
February 4th, 2010 at 12:58 pm
I used to pay the bills as soon as they arrive. But once I got a Rewards Checking account, to ensure I make the 15 transactions in a calendar month, I wait till 1st to pay those bills and I forget some times. My solution - I listed all the bills I need to pay in a google spreadsheet in rows and months in columns and I fill it each time I pay a bill in the corresponding month. I have a reminder setup that alerts me 15th of every month. I check my spreadsheet and pay any remaining bills I forgot.
Of course, it helps that I don’t depend on paycheck to pay the bills. I pay it from my Savings account. Since I am pretty disciplined on what is spent, the new pay check goes into savings too. That way it works out well so far…
February 4th, 2010 at 1:14 pm
I pay my bills as they come. I pay everything online, super easy, normally just set it up so that it is scheduled to be paid a couple of days before it is due.
February 4th, 2010 at 1:15 pm
Batching does not save time. If you have your bills set up in a way that you don’t ‘pull them out and set up’ you can do the bills as they come in and not waste time. I use to hate Sunday nights (bill night). I took the emphasis off sitting down spending hours doing bills once a week to doing them as they come in. I don’t even think about it. And now that I finally have a bit of a savings I don’t worry about how the cash flow is either!
February 4th, 2010 at 1:23 pm
I’m with #55 pay via ING bill pay. I take all my regular monthly bills (power, gas, water, mortgage, cable, etc.) times by 12, then divide by 24 bi-weekly pay checks and have that put into ING. Since I actually get 26 pay checks a year, I create a bit of float and pay an extra mortgage payment at the end of the year (or actually pay 1/12 more per month).
When a bill comes I schedule it in ING and it shows me the date the company will be paid. I send it one day before the due date, because the 0.15% interest ING is paying me to keep that money there is better than what the gas/power/cable company pays me to get it to them earlier….
February 4th, 2010 at 1:42 pm
Similar #10 Nancy, I have my online bill pay set up for recurring payments of approximately how much my monthly bills are. My CC is set up to pay $600/month, electric $100/month, etc. If I know I’ve majorly overspent/underspent a particular month, I’ll check the bill, cancel automatic recurring payment, and pay the actual amount.
For the electric, I usually just rely on the recurring payment. This helps me not feel the fluctuations in the bill, since my bill is $100 in the winter.
February 4th, 2010 at 2:16 pm
I get paid weekly, so I pay all major bills weekly also. For example our average monthly bill for electricity is $160 so I pay $40 per week. It’s higher in the summer (North TX) but I continue to pay $40 a week regardless and my account ‘catches up’ with itself in the Fall. And no, my electricity has never been cut off for not paying the full balance for 3-4 months in the summer.
February 4th, 2010 at 3:16 pm
Just automate the process by paying everything online.
February 4th, 2010 at 4:05 pm
Being a divorced mom, I used to have everything set up via email and ebills automatically online. Then one day I came down with leukemia and cancer and within days I spent 65 days in the hospital, plus many other days in the hospital. I lost income and was unable to quickly stop this automatic process. Make sure you have someone who can keep tabs on your accounts in case of emergencies like this. Most bills now come through snail mail again for this purpose.
February 4th, 2010 at 4:43 pm
I didn’t read the rest of the comments (so many!), so this might be a repeat. I think this tip works a little better if you combine it with the tip for putting all your bills at the same time. I pay all my bills online, at once, 1-2 weeks before they’re due. This is a lot easier with an online bill pay system because you have a list of all your bills right in front of you; you don’t forget any of them. You’re also paying them early; if something goes wrong, you have time to correct it (you have to wait until you actually have all your bills though). I personally don’t like automatic payment systems because I like to know how much I spend, and this method makes it easy. I don’t worry about forgetting, and I type in every amount myself so I see exactly where my money is going (my bank also provides what the last payment was, so I can see what the difference was). The online bill pay also gives me the option of sending a check, so I can still pay the bills that aren’t set up for electronic payment (though it takes 4 business days, so the early payment is important for these). This is also a great time to go over all your statements in detail, and in general makes you look at your finances at least once a month and think about them.
February 4th, 2010 at 6:06 pm
Also, paying the bills on time and FEELING GOOD about doing so sets up the energy coming back to you. When you delay payments, ever notice how others delay paying you on time? AHA. When you feel good about paying bills right away, notice how those paying you begin to feel good about paying you; and when you pay in a timely fashion, people return the favor.
Yep, that IS how it works. You absolutely MUST put out the energy you wish to experience in your own life.
February 4th, 2010 at 6:06 pm
I’m in the pay ‘em when you get ‘em camp, though the only bills not automatically debited to my checking account or charged to a c/c are my two c/c bills. I pay those online the day I receive them as both allow me to schedule the payment on the due date. I still get paper copies of all my bills as I like to support the USPS and like to have a physical copy of my bills on their nickel rather than using my own printer/paper/ink.
February 4th, 2010 at 6:54 pm
I don’t think it matters when you pay the bills, it is just nice to feel like you make that choice based on what works for you and not because you have to do what works for those sending the bills in order to avoid a late charge. It has always irritated me when variable-amount bills arrive and have to be paid relatively quickly, as though I were at the beck and call of the bill collectors!
I like to pay my bills at my convenience. At the moment, that means paying them once a month because that is what is convenient to me. The result of this is that some bills get paid early and some get paid on time. If a bill hasn’t come yet I estimate it, pay a little more, and figure the credit the next time around.
One “trick” I do use is that for those bills which allow it I have them paid automatically from my credit card, then I have my credit card set up so that the minimum balance auto-debits from my checking account if and only if I don’t pay the balance in full (but I always do.) I see this as just a couple of extra layers of protection for my credit score… if something were to happen to me and prevent me from staying on top of the bills on the scheduled date most of them would get paid without any unexpected charges to the checking account and would buy me a few weeks of time. (Not that I want to be paranoid but the last thing I’d want to be thinking about if I found myself in the hospital is whether the cable company has dinged my credit or whether my account was overdrawn.)
February 4th, 2010 at 9:01 pm
To me, this is all part of the transition out of debt and into a debt-free lifestyle. I pay my bills as they come in–with pride.
And I also remember the days of stressing out about them till the last minute–and I never want to go back to those days.
February 5th, 2010 at 5:23 am
You people aren’t paying bills online by due dates?
Every pay day (every other Friday), I subtract pending payments for the coming 2 week period and sometimes beyond. Pending payments include automatic savings deposits as well. I can travel without a passle of bills, checkbook, and stamps this way too.
February 5th, 2010 at 7:46 am
As with everything in personal finance, this is a very personal decision.
The most significant improvement I have made in this area is automation. For me, this reduces stress and virtually eliminates most of the time I used to spend paying bills. Here is how I do it:
1. I pay every bill possible automatically by credit card and have the monthly statements sent to me via email for review.
2. I get an email reminder to pay the credit card and I pay it off each month. The balance accumulated by paying the bills is generally within $50 month to month (maybe a bit higher in the summer months due to electricity usage in Texas).
3. I automate paying bills that I cannot pay by credit card (primarily my mortgage and car loan) so that the money is withdrawn shortly after a paycheck goes in.
I get rewards/miles for using the credit card and I really only have to think about paying one bill each month.
Caution - It’s important to carefully review your statements each month to make sure you are being billed correctly.
Wayne
February 5th, 2010 at 8:42 am
It is important to pay bills on time! Try to automate the whole process or just write down the deadline - just don’t forget that!
February 5th, 2010 at 4:34 pm
I have two types of bills: 1) utility bills that paid automatically on a specific day by withdrawing funds from my checking and 2) Credit card bills
So the first kind is taken care of automatically. And I schedule credit card payments online and put that in my blackberry. Electronic payment always.
I don’t ever write a check for regular bills anymore..
February 5th, 2010 at 5:41 pm
I agree with some of the posts above. Automating in my opinion is much easier. Many bills will allow you to automatically pay for your bills. This makes impossible to miss bills so long as you manage your checking account balances.
February 5th, 2010 at 8:06 pm
Pay b ills as they arrive?
That’s rich.
ROFL
February 6th, 2010 at 2:29 am
borrowed the idea from jerrold mundis’ “how to get out of debt, stay out of debt, and live prosperously”. been doing this successfully for several years.
i have a bill paying station in my kitchen, book ledger, checks, stamps, etc.
I collect the mail on my way in from work, drop the purse, keys, go potty, and then back to the kitchen, sort the mail, and pay the bill or two that very moment. It takes maybe two - ten minutes. off to the mailbox and done.
i refuse to set up autopayments because i have seen friends get really messed up by autopayments.
February 6th, 2010 at 8:08 pm
do what works for you. when it comes to black and white opportunity costs, it says you should delay paying as long as possible unless you are accumulating interest, in which case you should pay as soon as possible.
We technically pay the bills as we get them, because when we get the bill we set up automatic billpay one or two days after our pay days. the only autopayment we have is if the payment is charged on our credit card rather than withdrawn from our checking/saving account. I also prefer to push payments rather than have payments pulled from my accounts.
February 8th, 2010 at 4:49 pm
We pay bills, mostly as they arrive, although I have done it every other week with sucess.
I’m completely paper, despite being a web designer and here’s why:
1. As noted above, getting everything shut off in emergency is extremely difficult. No one has regular access to our accounts but us. (We do have one-time pushes to 1 account we specifically desginated as the “electronic” account.)
2. Also as noted above, “online” billing paying can involve the bank cutting a check and putting on a stamp. That takes me all of 5 minutes (print checks and put on a stamp) because we’re organized. By leaving that to a disinterested 3rd party, I’ve created another layer to deal with when an issue comes up. Long term, it’s just as fast to be able to say, “I sent check so and so on this day” because I know it happened.
3. Ultimate control over my money. If I’m not happy with a service I can easily withhold money until the situation is rectified. If I tell the electric company/phone/etc company to just go ahead and automatically pull whatever charges they come up with, it’s very difficult to have leverage.
February 10th, 2010 at 1:00 pm
I write the checks for my bills when they show up but I don’t mail them out until later. I put the date that they need to be mailed on the envelope. That way the money is in my acct a little while longer.