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.
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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! ; )
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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).
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@ 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?
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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.
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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.
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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.
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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!!
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SOLUTION:
AUTOPAY
BUT VERIFY by checking every months statements
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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.
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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.
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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.
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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.
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#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.
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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.
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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.
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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!
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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…
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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
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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…
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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.
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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!
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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….
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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.
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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.
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Just automate the process by paying everything online.
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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.
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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.
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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.
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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.
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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.)
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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.
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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.
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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
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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!
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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..
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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.
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Pay b ills as they arrive?
That’s rich.
ROFL
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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.
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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.
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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.
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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.
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