If you spend time each month “paying bills” like they show on TV, you may be doing it wrong. We’ve set up a system so getting the mail is actually fun again.
What did we do? We automated it and here’s how you can do it too.
Find all the bills that you pay monthly that stay the same amount or can be put on a budget to make them the same each month. Some examples include cell phone, cable, internet, natural gas, electricity, mortgage, car insurance, and life insurance.
Take the monthly amount for these bills and add them together. You then multiply it by 12 to get the yearly total of the bills. After you’ve woke up from the shock, divide that total by the number of paychecks you get in year. Check out this example.
Cell phone – $50
Internet – $35
Natural Gas – $70
Monthly Total – $50 + $35 + $70 = $155
Yearly Total – $155 * 12 = $1860
Paycheck Amount (bi-weekly) – $1860 / 26 = $72 (rounded up)
You now know how much you need to hold out of each paycheck to pay the bills you’ve selected. Now, what do you do with that money?
I’ve talked before about being a fan of online banks. The reason I’m such a fan is because of the flexibility. I can start a new account in a matter of minutes without having to go into the bank. On top of that, they’ll mail me a debit card. That being said, the next step is to start a separate account to use to pay these monthly bills.
You’ll need to fund the account with one month’s worth of money so you aren’t overdrawn. In the example above, that would be $155 that you would put in on the first of the month. If you don’t have that much extra, you can always start with fewer bills and add more later as you get the funds.
After funding your account for the month, you’ll need to set up automatic transfers (online banks also make this very easy) to occur the day after you get paid for the Paycheck Amount you calculated. This will make sure that the money for your bills is not spent on other things when it shouldn’t be.
Finally, you need to set up bill pay for each of the places that need to be paid. You can either do that through their website using the debit card or routing and account number for your account, or you can use the bill pay service provided by your bank.
That’s it! While it may sound like a complicated process, it’s actually very easy to do and definitely worth the trouble. When we’re away on vacation, I don’t worry if the bills will be paid on time. If a bill amount ever changes, we rerun the math and update the amount that gets transferred each month to our bills account. (Hint: Using spreadsheet software makes calculating the Paycheck Amount very easy when it needs to change.)
What do you think? Are you ready to automate a bit of your life? Leave your comments below to let me know what you think. If you have any questions, you can leave those there as well.
Bonus: If you’d like to get started using this method and need a little help, send me a note through the contact page and I’ll help you get started!
Featured Image courtesy of nuttakit / FreeDigitalPhotos.net