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Saturday, May 26, 2012

Bills Bills Bills

A few months ago a woman contacted me for some help with her finances.  Up until that point, her husband had been paying all of bills and now he had handed responsibility to her.  The big question was how to make sure there was enough money available for when the bills came in.  She noticed (and I have the same situation myself) that many of her bills all came in the same month.  For me that month is December which is really handy (not) around Christmas time.  I also get a second big month in May/June.

The bills I am referring to here are the big ones that we tend to forget about until they arrive.  Things like car registration, services, rates, roadside assistance, insurance, electricity and telephone bills to name a few.  When you get a few of these within a matter of weeks it can really stretch the budget.  So how do we make sure there is enough for all of these bills, and also enough for our usual activities as well.

The short answer is: Save up.  But that's not the slightest bit helpful if you are already living week to week.  So here's a step by step solution that may be of assistance.

The first thing you need to do is find out what all of your bills are.  Have a rat through all of your old bills and bank statements and find as many bills or payments as you can from the last twelve months.  Write down on a piece of paper what these are all for.  Then in a table, also write down the approximate month that these are due, and how much you usually need to pay.  Actually knowing when to expect these bills is a huge step towards being able to pay them on time.

The next step depends on your current financial situation.  If you have a bit saved up and the next bills aren't going to cause you too much stress then the rest is just a matter of mathematics.  Add up the total of all of these bills, divide the answer by 52 and that's how much you need to allocate for your bills each week.  Put this amount into a separate bank account on the day you get paid before other expenses come out.  This will ensure that your provisions are made and you don't have to stress about having enough to put aside at the end of your pay cycle.  Now, when the bills come in, you should have enough to be able to take it directly out of this account to pay for them.  Of course, for the short term, you may have to do a bit of a top up if your big month is just around the corner.  But after that, this system should work, provided you haven't forgotten any bills or grossly underestimated the fees.

If that last paragraph was less than useful because you already have bills coming in that you can't pay, then here's a method that may help.  Many companies have pay-by-the-month plans.  Rather than put off a large bill and be uninsured or something, give these companies a call and see if they'll let you pay monthly instead of annually.  Otherwise, you could prioritise your bills and pay the most important ones first.  For the others, give the companies a call and see whether or not they will allow you to put off the payment for a month or two.  Most people are understanding, but it is better to have communication than to wait for more notices.  Organise some direct payments to get these bills out of the way before your other expenses.  If the payment for the bills does not fit in with your income cycle then put money in a separate bank account on your payday to provide for these, and have your direct debits come out of this account.

Paying bills should not have to be stressful.  All it takes is a little organisation.  If you do this properly the first time, then it shouldn't be too much trouble to keep your bills in check in future, even if you change companies or have increases.  Just don't be afraid to pick up the phone.

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