Work and Money
One Simple Trick for Avoiding Monthly Bill Sticker Shock
Bills. They sneak up. Rack up, too. Quickly.
We all have a lot to keep track of every day, so let’s face it. At the end of every month, it’s a mad dash kind of scramble. There’s always some level of panic as you get ready to face the unknown, hoping there’s enough in your account and that all the itemizations are correct since you have no time to double-check them all before they’re due. You open that credit card bill with all of your utilities and discretionary spending laid out, with your heart in your throat, prepared to be appalled at the figures around the taunting comma. The dream? That you can pay it off and still have money to cover rent or your mortgage, and maybe save a buck or two.
But what if we told you every month doesn’t have to end with that same feeling of dread? That with one simple trick, you can lower your anxiety about opening your end-of-month summary, budget your spending better, and make sure you always have enough?
Because that’s exactly what we’re saying.
All you have to do is pay your bills twice.
I’ve been doing this since my first full-time job over 15 years ago, and man, has it simplified my life and reduced my billing statement stress.
How Does It Work?
The majority of companies pay on a biweekly schedule, which means every other week, you receive a paycheck. Most Americans will drop that in their bank accounts and leave in anything they don’t cash out. Then they wait for their bills to hit.
What few people know or even realize is that today, with so many payment systems automated, it’s easy to create your own installment plans. And it’s as easy as actioning every paycheck toward your bills, which will break your monthly totals into two installments.
For example, you know your car payment is $300 a month. You know your rent or mortgage is $2,000. While your credit card bills may remain a wild card, many utilities like gas and electric provide you the option of stabilizing your bill across the year by predicting your use and charging you the same rate per month. (Don’t worry — if you overspend, the difference won’t be charged until the end of the year. But play your cards right and you may be entitled to a refund.) Let’s say that’s $150 a month, together.
Instead of waiting for all of it to hit and looking at scarily big totals, just treat every pay day like it’s due day.
As soon as your check clears, move $75 toward your utilities, $150 toward your car payment, and $1,000 toward your housing. Pay whatever balance is on your credit card that is manageable, zeroing it out if you can.
If there’s money left over, great. Shift some into your savings. If not, no worries. You still have the rest of the month to underspend on your credit card to better your odds of putting away a little something at the end of the month.
Plus, in the months that there are three pay periods, you’re actually getting ahead. You can put what you’d normally budget out of that check — like your car payment or half your rent — directly into your savings as a bonus. This way, even if you’re not paying somebody, you’re paying yourself and keeping your spending in check.
Setting It Up
This simple system has been made easier than ever with today’s technology. Nearly every bank has its own app now, and a built-in bill-pay system. I use Chase, which I love for the fact that it will send paper checks at no additional cost to me to vendors who don’t accept credit card or electronic payments or will charge a fee for them, such as my HOA.
Keeping all of your banking and financial accounts in one app also makes it easier to track all of your spending history in a single place, so you always know when the last time you paid something was.
Once you set up your recipient list, it’s only a matter of moving the money from your checking account to your payees and — in best cases — your savings.
You may have to take yourself off an auto-pay system or two, but alternatively, you can just account for that surge when you do your mid-month touchpoint. For instance, my cellphone and internet can’t be split up into partial payments, so I just keep half of those bills in my checking account, essentially paying myself, to make sure I won’t be caught unawares at the end of the month.
Why It Works
Training yourself to pay your bills as soon as your earnings come in is a fantastic way to never miss a deadline and therefore never pay a late penalty. That will help you build or rebuild your credit, as well as goodwill with lenders and service providers. A history of paying early makes you a more valued customer so that one day, if an extenuating circumstance keeps you from making their date, they’ll be more inclined to remove a penalty fee as a gesture of goodwill.
This practice also creates a built-in checkpoint mid-month, helping you take the temperature of your current finances.
Do you have a lot left over, enough to treat yourself to an upgraded pedicure or maybe even that bag you’ve been eyeing? Go ahead! Were you not able to move anything into savings when half the bills have been taken care of? Now you know it’s time to buckle down for the next two weeks. No Starbucks tomorrow. Either way, you have time to course-correct rather than be taken by surprise by a potential overdraw on the 30th.
Also, because you won’t be in a mad rush to pay the bills by the skin of your teeth, this will allow you five extra minutes a month to examine your credit card spending and make sure all the charges are correct. You might be surprised to see what fees or forgotten subscriptions pop up that are quietly costing you money. And half a month’s charges are far less daunting to scroll through than a full month, and believe you me, the mere visual of a shorter list automatically gives you a stronger feeling of financial control and supervision.
This will also contribute to your mental well-being, reducing economic anxiety as well. You may only be tricking yourself by looking at smaller numbers every time you pay the bill, but sometimes, it’s great to be gullible. It’s mind over matter, and definitely a self-psych-out, but let’s be honest: Life feels a lot less overwhelming when you have to shell out $600 to close out your credit card charges than when you have to double that, adding that stress-inducing comma.
So avoid the panic and fear of opening up those end-of-month statements. Save yourself the trouble of itemized budgeting and stress of worrying if you’ll have enough in your account to cover everything. Skip the unnecessary penalty fee expenditure and credit hit of missing a deadline. Do away with the frightening grand totals that make digging out of debt seem hopeless. And most importantly, feel in control of your finances and your future.
By breaking up your bills into more digestible two-parters and using your pay schedule as a reminder to catch up on them, you’ll be building good habits for good credit, all of which are necessary for financial confidence and success.