A Smarter Way To Pay Your Bills

  Photo courtesy of s_falkow

Bills, like death and taxes are unavoidable. None are more unavoidable than utilities and housing.  If you have a steady income or even not so steady (freelancer, part-time employee, etc) read on to find out how to decrease the time spent paying bills in particular and messing around with your money in general.

1.  Automate

Many businesses now offer direct deposit to their employees.  Instead of a paycheck, your salary is deposited directly to your bank. If you haven’t already done so you should sign up for this service.  Depending upon where you live this service is free or has a nominal charge, considering what you’ll be saving, it’s probably well worth it to pay the monthly fee.

Banks also have bill paying features embedded in their websites.  Once you enter the name and account number for a bill whether it be for electricity,cable, internet, water or rent, it can be paid online without the hassle of writing and mailing a check or standing on a line forever.

The following is a step by step guide on how-to tame your monthly bills.   I’ll explain some basic concepts and then give a walkthrough of my electricity bill which like everyone’s  fluctuates from month to month.

Dollar Cost Averaging

A)  Dollar Cost Averaging –  Find the monthly average for each utility bill that fluctuates in price.  For example fluctuations in the price of oil causes spikes and dips in the fuel surcharge, on top of which, energy usage goes up dramatically during summer. Even if you did not turn on the air-conditioner, your electricity bill would be higher since your appliances pull more energy.
By paying the average amount on your bill, you build up credit during the winter months when your house is using less energy and that credit is put on the bills you incur during the summer months or vice versa if you spend more on heating.  Even if by paying the average you leave an outstanding balance, no need to worry because it will disappear as the price of fuel drops or it gets cooler.

Using this method, my electricity bill for the month of August was $26.06. Yep, read it again, Twenty-six dollars and six cents.   Despite the fact the A/C in my bedroom has been in use every night since the beginning of May.  My average monthly bill is $96, which I pay plus an extra $5 to be on the safe side.

Benefits

This where it gets sweet.  Some banks (though not those in The Bahamas) will deposit a specific amount each month to any utility or account of your choosing.   Set up a direct deposit account and then have that account send a set amount to your retirement fund, investments, savings, utilities, rent, etc.  Total set up time for all of this should be under 5 hours, or 1 hour per day for only one week.

After that you can go months without opening utility bills or worrying about saving money for future purchases. Anything left after money has gone to your bills, savings and investments is yours to play with.

Bonus points for sitting among your friends with a placid smile while listening to their agonizing  money stories.  Now you can get on with LIFE.

Keep In Mind

This only works if you’ve been smart enough to create a budget.

The hardest part will be tying accounts together and creating passwords.   This post will explain how to create and manage passwords.

Do you have any ideas or tips on how to further automate your finances, please leave them in the comment section.