How to pay your bills; a smarter method
In 1789, Benjamin Franklin wrote, “in this world, nothing can be said to be certain, except death and taxes.” I’m adding bills to his list of certainty.
There are utilities, fees, phone, insurance charges, and the list goes on. My wife and I used to worry about bills adding up, always forgetting one, and getting dinged for a late payment. But, no more. Here is what we did to not worry about bills again.
1. Make a list of all your payees and how much you pay them
We created a list. After a year of looking at our electricity, gas, water, garbage pickup, cell phone bills, etc. we needed a change. We looked at how much they cost for the year and broke them each down into per month charges. We chose to operate this way since some bills are bi-weekly or quarterly and it made sense to break it down the same way for easy math.
2. Do the math
If your bills were $12,000 per year in total, that means you pay $1,000 per month. Break it down even further, and it’s $250 every week you need to put aside for bills. We took it one step further and added some buffer room in case our bills went up – hotter summer, colder winter, or using too much data on our mobile phone plan. We added an additional 20% for peace of mind. In this example, that’s $200 per month. Take the time to do your own math and add the buffer – more on that later.
3. Setup an account where providers withdraw from and where your weekly deposits go
Your chequing account can become a mess if it’s not managed correctly. All the debits, credits, and fees can make it hard to monitor with accuracy. To clean up the mess, we set up a separate account for all the bill withdrawals. That same new “bills” account has automatic weekly payments going to it from our main chequing account. A place for everything and everything in its place.
4. Contact each supplier and update your payment method
This sounds painful. It’s not. I used the same list I created earlier and contacted each one with a new void cheque. The banks make it simple with a digital copy of the void cheque available online. Some suppliers want a copy sent to them and if so, take a picture of the printed void cheque, or screenshot the digital version and email it to them. Other suppliers just need the transit and account details at the bottom of the cheque. At the end of the day, they just want to get paid.
5. Go paperless
I asked each supplier if they could email me the bill instead of it filling my mailbox, not getting filed away, and eventually shredded due to them piling up. Every supplier is different. I could get emails from some, but I set up Canada Post’s Epost for others. The added bonus is sometimes some savings came along with it since they’re not printing and paying for postage. Also — good for you — you’re saving the environment. Lastly, it makes for simple organization at tax time.
6. Automate the process
Do you argue your utility statements? We don’t. We find they’re pretty accurate or at least remain within 10-20% of the last bill. You used the service, here’s how much it costs, this is how much you pay. We see the account balance moving up and down at a high-level view but unless something drastic changes, we leave it alone. Worrying about bills can be a waste of time. Automating the process means we’ve accounted for our bills and never think about them. They are a cost of living.
The bonuses
Because we have a buffer, we have an accumulation of funds at the end of the year. December is an expensive month with gifts, food for potlucks, other “party” supplies, the list goes on. In December, we can dip into that account with its surplus.
We also look to lower expenses now. For instance, we can shop around for car insurance quotes every year because we’re more in tune with our bills. Being more in tune allows you to review in isolation and take action on changing it. We look at how much we’re spending on electricity and look at ways to lower that cost. Every year now, we’ll do a review of our overall expenses, where before we just hoped we had enough.
Until I started working at Ratehub.ca, I didn’t realize this is just the beginning of a good idea. Why not make the account a high interest savings account? I could use Plastiq for all the bills and earn points on our credit card. When the credit card bill is due, we can pull from this new account.
I think Ben Franklin would be proud. Death, taxes, and bills are certain, but we certainly don’t worry about them anymore. Automating the process allows us to focus on what we can affect like reducing the cost and saving money. How do you manage your bills? Will you try this system?
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