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
SEARCH FOR RECENT ARTICLES
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.
loading....
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.
loading....
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!
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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).
loading....
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
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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!
loading....
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.
loading....
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.
loading....
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?
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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).
loading....
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!
loading....
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.
loading....
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.
loading....
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.
loading....
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!
loading....
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!
loading....
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
loading....
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
)
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....
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.
loading....