Are you struggling to keep up with your bills? Do you find yourself consistently acquiring late fees from service providers or overdraft fees from the bank? If you want a simple way to stay on top of your bills, this post is for you.
Paying bills is a balancing act of debits (your bills) and credits (your income). Once you get an overall view of these two pieces, you will feel much more in control of your finances.
To illustrate the process, we will use a hypothetical scenario:
Mary works at a gardening center. She also walks dogs a few times each week for extra income. Her bills include rent, a car payment, car insurance, power, water, phone and internet.
1. List your income sources, pay periods and amounts for each. To better visualize, it may help to write them out on a monthly calendar page.
Income Source Pay Period Amount
Gardening Center 1st & 15th of the month $1,000 per paycheck
Dog-Walking Last Friday of each month $25 per week
2. List your bills, their due dates and amounts. In the example calendar, Mary's bills are written in red to distinguish them from the income entries.
Bill Due Date Amount
Rent 3rd of the month $650
Car Payment 28th of the month $250
Car Insurance 10th of the month $75
Power 7th of the month $60
Water 22nd of the month $30
Phone 24th of the month $60
Internet 10th of the month $80
3. Determine which paychecks will be used to cover which bills. Start by assigning the bills to the paychecks they come after.
Paycheck 1 covers bills due the 1st - 14th of the month.
Paycheck 2 covers bills due the 15th - 31st of the month.
Because both paychecks cover the bills, the Dog-Walking income can be used anytime.
Paycheck One (1st - 14th) | $1,000 Paycheck Two (15th - 31st) $1,000
Rent (3rd) $650 Water (22nd) $60
Power (7th) $60 Phone Bill (24th) $60
Car Insurance (10th) $75 Car Payment (28th) $250
Internet (10th) $80
TOTAL: $865 TOTAL: $370
4. Determine how much money is left over after the bills are paid. In Mary's case, she will have $135 left from paycheck One, $630 left from paycheck 2, and $100 left from dog-walking.
The leftover amounts will give you a realistic idea of how much money you will have to budget for other expenses (groceries, fuel, entertainment, etc.) throughout the month.
5. Make adjustments if needed. You may find that you have a lot more bills coming from one paycheck, as Mary does. You may find that one paycheck doesn't cover all of the bills due before your next paycheck.
If you are someone who lives paycheck to paycheck, you may want to even out the amount of money needed for bills from each paycheck. In the example, Mary has almost $500 more coming out of her 1st paycheck than her 2nd paycheck. To even out her cash flow from the first half of the month to the second half of the month, she could try any of the following adjustments:
Use her second paycheck to pay the power, car insurance, and internet bills early.
Call her service providers and see about changing the due dates on some of her bills to balance them out.
Pay 1/2 of her rent early, and 1/2 on the due date.
Plan to use the money she earns from dog-walking to help cover expenses for the first two weeks of each month.
If you find that your monthly expenses exceed your monthly income, there are a few things you can do to correct that.
Look for any services or expenses you could cut to free up money (unused subscriptions, daily lattes, etc.)
Call your service providers to see if they can discount your current rates.
Shop around for services from other companies offering lower pricing.
Find ways to do things cheaper (pack a lunch instead of getting take out, go to matinee movies for lower admission prices, bike, walk or commute to save on fuel costs, etc.)
Find a side hussle for extra income.
Work more hours at your current job or ask for a raise.
6. Set up autopay with your service providers or through your bank. This is a fantastic service that ensures your payments go out on time every month. You don't need to worry about stamps, mail transfer time or finding the time to send payments. Refer to your bill payment plan so you aren't caught by surprise when the payments come out and to ensure you have enough funds in your bank account to cover them.
7. Decide what you are going to do with all your extra money. Once you implement your bill payment plan, late fines and overdraft protection fees will become a thing of the past. What will you do with your increased cashflow?
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