Wednesday, July 21, 2010
I want to share some ideas for paying bills. This will be quick and easy and (almost) painless. I will start with regular expenses, then move on to delinquent accounts. This is a basic guide for regular payments. This is not about getting out of debt. However, I will also share with you how to handle creditors when you are in a financial crisis.
1. The Checking Account - I will share the basics and then tell you why I dislike checking accounts.
If you have a checkbook in your hand, it is far too easy to spend money on impulse. These are often small amounts of money, but it will add up far too quickly. You might think, "Well, those snacks are only $6.00. I'll write a check." or "I am going to buy that bedding set, it is on sale."
What about special offers which come in the mail? A magazine Subscription? Write that check for $14.00. Or a new book? Write another check for $12.50. It doesn't really seem like money when you write those checks. It is not painful enough. It is too easy and then you are broke! (*I will explain an option for paying bills without writing checks in a moment.*)
If you have cash in your hand, and a specific budget in mind, you are less likely to overspend.
To keep your checkbook balanced -
It is important to write down every single transaction in the checkbook register. You will need to record deposits, withdrawals and checks you write. You will also need to keep this register balanced. You should always know exactly how much money is in your account, by looking in your register...
Do I have to say this?.... Calling the bank to get a balance will not be accurate! . . All transactions do not go through your account immediately. Some checks will not clear for a few days. It is your responsibility to do the math every single time you use your checking account in order to know the exact balance.
If you fail to do this - you may be charged overdraft fees as much as $30 each. You may also be charged $3 a day for every single day your account is overdrawn. This can add up to an enormous amount of money.
To avoid this - keep detailed and accurate records. You must also balance your account by using the worksheet on the back of your monthly bank statement. If your account does not balance, double check your math and find the mistake! You must balance your account every single month in order to avoid costly fees.
If you have a debit / ATM card, some banks charge you a $1.00 - $2.00 fee just for doing a balance inquiry!! Take a look at your monthly statement to see if this is happening to you!
If you enjoy bookkeeping and math - you will not have a problem. If, however, you want to simplify your life, I have another idea:
The Money Order -
Some banks allow you one free money order each day, if you have an account with them. If your bills are very simple, you may only need 4 -- 6 of these per month.
If you have to pay for your money orders - the Post office charges between $1.10 and $1.50 per money order. From what I understand, Wal-Mart sells money orders as well.
If you have trouble maintaining a checking account, switching to money orders to pay bills is an excellent alternative. You will also have to hand over cash, making it very real, when you buy them.
If you have to go through all the trouble to get a money order before you pay a bill, order a subscription, or mail in an order for clothes, you are less likely to spend on impulse. I believe Money Orders will save you some serious money!
How to simplify your bills -
1. Cut down to the basics - mortgage (or rent)/ electric/ insurance/ phone/ heat/ and trash removal.
That would be 6 bills to pay - 6 money orders to purchase.
2. If possible, in order to simplify your life, get rid of costly cell phone bills/ internet/ cable/ subscriptions, etc.
3. If you pay using money orders, you will not need to balance a checkbook. How much time did that just save you?
4. Use a budget each week, on payday, to plan exactly what to do with your money. Use envelopes or a bank bag to keep the cash until you buy money orders, do grocery shopping, etc.
5. If possible, spend money (or pay bills) on only one or two days each week. Remember the old days, when the family took a trip to town once a week? They certainly did not spend money every single day!
6. Get a savings account, at your local bank, to keep cash. This will make it harder for you to spend on impulse. It will also help your money earn a little bit of interest. How many people even have savings accounts anymore?
7. If you have automatic payment for your bills, consider having the payment come out of your savings account, rather than a checking account. You can also have more than one savings account - one for your bills, and one for your savings plan.
8. If you must get a debit card, use a checking account ONLY for debit transactions and be sure you record every single expense right when it happens. Ask the bank for a checkbook register so you can keep excellent records.
Delinquent Bills -
If you are in the middle of a financial crisis, I have some suggestions for paying your bills.
1. If you have a credit card account and the payment is already overdue, you could be charged an additional late fee, and possibly an over-the-limit fee if you don't pay it quickly. If you must pay by phone, here is what you need to know:
- You can pay (by phone) using a checking account. They will ask for your bank's "routing transit number." This is on the left side of your check. Or, you can call your local bank to get this number. You will also need your bank account number.
- The credit company will charge you a fee for an over the phone payment - often $10.
- You will need to have your credit card statement in front of you. You need to tell them your account number, which can be found right on your statement.
Please pay your credit card bills on time, at least a week before the due date, in order to avoid additional fees. I would also be delighted if you canceled your account and cut up your card! You can just make payments until that account is paid off. Please don't charge anything else on it. If you don't have cash to pay for things, you are risking your financial future by borrowing from the card sharks.
2. Overdue utility bills -
Have you ever received a shut-off notice from your electric or telephone company? You can negotiate a small payment plan, depending on how much money you have available. You do not have to pay an entire overdue balance at once. As a matter of fact, you should NEVER pay off an overdue balance at once, unless you have plenty of money. I do not want you to go hungry. I do not want you to run out of gas for your car. I do not want your children to go hungry or not have medical care. You must have some cash available for regular life.
- Depending on how much you owe, you can offer $10 - $50 extra per month, in addition to your regular monthly fee, until you pay off the overdue balance. Make sure they understand that you are more than willing to pay your bill and will take care of it as soon as possible. Then make sure you pay as agreed!
3. Overdue repair bills, and other delinquent accounts -
- Make every effort to pay these in a reasonable amount of time. Sacrifice personal spending, sell something, whatever you need to do in order to get control of these overdue accounts.
- If you are being harassed by phone, get an unlisted number. Bill collectors are trained to keep you on the phone and threaten, scare and coerce you into making promises you probably cannot keep. Some of them even ask for your bank account number so they can do an automatic withdrawal each month. Please do not agree to this! Obviously, if you don't have much money, how will you afford those automatic payments? You could be setting yourself up for bank fees because of an overdrawn account.
- Next, write a letter to your creditor letting them know you are having financial problems. Tell them how much you can pay each month and include a check or money order for your first payment. As long as you are making every effort to pay this bill, and you pay consistently at the same time each month, your creditor will be happy.
- If you receive a large amount of money, such as a bonus from work, income from an odd job, or a tax refund, please pay off these old bills promptly and thank them for their patience. Remember, they need to earn a living too!
Where to find help -
1. Every bank is more than willing to sit down and talk to you about your bank accounts. They are happy to show you how to balance your checking account, how to write a check and how to fill out a money order. As a matter of fact, I know a very wealthy man who goes to his banker every single month with a stack of bills and visits while the banker writes out the checks to pay his bills! It is not just the poor who struggle with paying bills!
2. Crown Financial Ministries is an excellent organization. They have several resources and information to help you get control of your finances. They are a Christian Based company founded by the late Larry Burkett.
3. If you are in debt and looking for help in obtaining financial freedom - Dave Ramsey is the place to go!
Here are some outstanding books on Financial Management (these are all older resources, but classics!) -
1. Your Money or Your Life by Vicki Robin and Joe Dominguez
2. The Complete Guide to Managing your Money by Larry Burkett
3. Debt Free and Prosperous Living Basic Course by John Cummuta.
- What are your favorite resources for simplifying your financial life?
- What do teenagers today need to learn about money before they can successfully function as adults?
* Join me on the 1st of each month for Our House Account Monthly check -in. *
Subscribe to The Legacy of Home