At the start of the year, my friend Kacie inspired me to explore new options for simplifying our finances and bill pay process. I’m still working out some of the details for these new systems, but I’m going to share them with you here, in addition to the systems we already have in place for simplifying. Be sure to share your ideas in the comments!
If you haven’t done it already, chances are you think about it every time you open a paper statement and see the words, “Go paperless now!” My advice is to just get it done. To keep a record of statements, open the electronic version when it becomes available and save it as a PDF on your computer. You’ll feel better without all that paper mail bogging you down, and it will simplify your filing system, too.
Automate your budget.
Rather than manually tracking expenses in a spreadsheet or on paper, sign up for a service like Mint.com. Mint will automatically track and categorize your spending. With very little management, you can see a complete picture of your spending and budget categories as well as charts showing you whether you’re on track for meeting your monthly budget limits.
Automate your bills.
Kacie has been working on this herself, and it inspired me to figure out a system that works for us. Right now, I navigate to each bill’s website and pay each bill online individually. I like the immediacy of paying online through the site, because I receive a confirmation immediately, and then it’s done.
I don’t like automatic electronic funds transfer, because it basically gives the payee unlimited access to your account forever. (I learned this the hard way when our previous health insurance company continued debiting our account for 4 months after we canceled the policy despite the fact that I elected to stop automatic debit months before we canceled. I eventually had to file a fraud claim with my bank and have them blocked from my account, at which point they sent us a letter notifying us that they were canceling the policy due to nonpayment. PFFT. FINALLY.)
Check with your bank to see how their automatic bill pay system works. Setting up each individual payee will be a pain the first time, but then it’s done and you can pay each bill through your bank’s website with a single click.
Split your paycheck to even out pay periods.
My husband is paid twice a month — on the 15th and on the last business day of the month. I try to balance our bills so that we’re paying about the same amount in fixed bills from each check, but our mortgage payment really throws that off. If we were extremely disciplined, this wouldn’t be an issue. We could just leave the surplus from the other check alone, and use it in the next pay period. Unfortunately, that’s not usually what happens. What happens is we see that surplus in the first check, and we overspend for the first two weeks of the month. Then at the end of the month after the bills clear, things are really tight until the next pay day. It’s annoying.
Kacie came up with an idea that will remedy this problem, and I’m going to give it a try myself. She decided to add up all of her fixed bills (mortgage, utilities, etc.), and have half that amount deposited from each paycheck into a separate “bill pay” checking account. The remainder of each check will be deposited into a different account for daily expenses like gas, groceries, and other purchases.
For example, to make things simple, let’s say you earn $2000 a month. Your fixed expenses total $1500. Everything else is $500 a month. After paying your fixed bills, you have $400 left out of the first check and only $100 left out of the second check. Under Kacie’s system, you would deposit $750 from each check into the bill pay account and $250 into the daily expenses account. Now you have an equal amount for daily expenses each month, and your fixed bills are covered no matter when you pay them.
It might sound complicated, but I like the simplicity of having the same amount for expenses in each pay period. The symmetry will make budgeting much easier.
Pay the bills on pay day.
To combat the confusion of tracking a million different due dates, pay bills just twice (or once) a month. Every pay day, I go through and pay all the bills that are going to be due in the next two weeks. I have a list that I work from, so I know around what time the bills will be due even if the actual date fluctuates by a day or two. Once I pay all the fixed bills, I know that whatever is left in the account is available for day-to-day expenses.
How do you keep your finances simple?
I have had a separate “mortgage account” for years that I put half our mortgage payment into each pay period. It works out very well!
I’m glad you could make some sense out of my post. It sounds like a complicated concept but it makes sense in my brain!
We are still waiting for the direct deposit stuff to be changed by HR. I hope it won’t take long for this new system to be working.
But YES it’s all about symmetry for me.
I like Mrs Money’s simple solution too, of just putting half the mortgage payment into the account each time. That’s way less complicated. Wish I thought of that!
Great tips! We have gone paperless for every bill that offers it. We’re left with just 2 paper bills (water/sewer & property taxes) and those annoy me, but there’s nothing I can do about that, I guess.
Our finances are pretty streamlined and work really well for us right now. The Hubby is paid weekly and I have organized a payment schedule (roughly based around due dates, but not exactly) so that each paycheck = the bills I have planned to pay + a budgeted amount of cash that is the same each week.
When he was paid twice a month, it drove me insane and I always worry that we will eventually get stuck with that again. If so, I think your plan like splitting paychecks or using a seperate mortgage account like Mrs. Money suggested will work.
Oh and like you suggested, I always pay the bills right on pay day. Every Friday morning is my set time to sit down and get it all done. It only takes a few minutes since I already have a plan with a designanted place for every dollar!
This sounds complicated, but once you create it, it’s simple. First I created a budget based on a weekly basis. I took my main “living expenses” such as Mortgage, Electric, Gas, Water, Cable, Car Payment and Insurance and figured out how much each one cost for the entire year….then I divided that number by 52. I now know how much those things cost on a weekly basis, and then I figured out how much we need for Gas/Tolls/Oil – Food – Clothing/Gifts – Entertainment & Medical on a weekly basis. Since we get paid weekly, it is easy to subtract all of the weekly budget needs and the rest goes into savings and vacation funds (retirement fund comes out before we ever see it, so that’s already gone). Now, I use a credit card to pay my all of my non-living expenses (gas/tolls, food, clothing/gifts, entertainment & medical) so I keep a spreadsheet for each category and every morning (or late night) I sit down and subtract what I spent on each category’s balance and add it to the Credit Card Account Sheet’s balance….it’s actually just sitting in my checking account, but tracking it makes it so that I know what’s left, and that the money is virtually “set aside” so that I can pay the credit card off each month. Now, sometimes I might steal from gas or gifts to pay groceries & vice-versa – but I try to never break my budget in any category for the week. Since I only use one credit card (with a cash-back bonus), it gives me a one-month lead time to pay it off, thus the checking account is always flush with funds for bills that I pay as direct debit (like the mortgage). I never borrow from the Living Expense fund (mortgage, utilities, insurance, car payment) so that money is always available. After the first month, you’ll find your checkbook never feels “short.” I set the spreadsheet up so that each category has it’s own sheet, and the front page has each category listed that links to it’s current balance, so I always know how much I have left for each thing at a glance. It takes me about 10 minutes every morning, but I never run short – the credit card fund always serves as a cover, since it’s never due until the end of the following month…gas and groceries add up fast and act as a “float” in case one of our paychecks is delayed (neither of us have direct deposit available and Chicago winters sometimes make us too lazy to stop at the bank on the way home!! lol) I even started using the credit card to pay the utilities that don’t charge a fee to pay them online…I get the card’s cash back bonus, and basically an extra month before I have to debit those funds from my checking account to pay the credit card bill. After a few months I noticed that my checkbook never fell below $2,000, so I actually transferred most of that into savings in order to earn the interest…and I can transfer it back in a click if needed. Sorry it’s hard to explain clearly, but it does work and it’s actually WAY simpler than it sounds here!
I should add that after 2 months, I was able to pay the mortgage and every utilitiy bill on the day I received it….the credit card is the only one that I don’t pay right away…they don’t get their money until the day before it is due (which is what allows it to act as a float/cushion in my checking account). My credit card created a float for me, allows me to earn cash-back on everything, I never pay interest and it basically makes it so that my checkbook only sees 5 debits a month….Mortgage, Electric, Car Payment, Natural Gas & Credit Card (which basically consolidated all of my other expenses into a single payment every month). The trick to this is DISCIPLINE! You cannot overspend, or it will cost you interest if you can’t cover that CC payment!!!
Great tips, Karen. We’ve gone paperless with everything we can. On top of simplifying bill pay, it also cuts down on serious paper clutter. We use our bank’s online bill pay system for everything, too. I feel much more secure without having my account information floating around with every utility in town. I even pay my rent through our bank. It’s set up to automatically mail a check to our landlord to arrive on the first of the month. It’s nice because we don’t have to spend the time to drop off a check and it automatically debits the money from our account, so we don’t have to wait for it to be deposited to be reflected in our checking out. It helps us keep a better handle on our budget.
I have set up a separate checking account and labeled it my “credit card account”.
Each time I make a credit card purchase (for gas, groceries, medical, etc.)….I transfer that amount immediately to the credit card account, as if I were paying with a debit card.
That way, the amounts are immediately removed from my regular checking account (so I know it’s already “spent”), and I pay my credit card bill out of the credit card account.
This gives me the immediate accountability of a debit card, but the security and protection of a credit card. It works really well.
I’d love to hear if anyone has suggestions of alternatives to Mint!
I love Mint and used to use it religiously to track my spending and set budgets by category, etc. But now, I can’t use it because it won’t accept my foreign bank account! So if anyone knows of alternatives — perhaps where you can enter everything by hand (even though that would probably be too time-consuming and I’d just give up)?