- When Time Flies, So Does Money: Finding a System for On-Time Payments
- Finding the Best Way to Pay
- Less Painful Bill-Paying
Less Painful Bill-Paying
Next I'm going to give you three examples of bill-paying systems. Keep in mind that you can mix and match components from each if you choose, but to be effective, whatever system you end up with should have
A foolproof method for getting the bills into the system. (This is covered in detail in the next chapter.)
A cue for when to pay the bill.
Up-to-date financial data to tell you whether you have the money to pay the bill.
Supplies for paying the bill and sending the payment.
An easy way to check whether and with which method you paid the bill. (I call this a "Did I Pay That?" document.)
Keeping those points in mind, begin with one of the following three options and customize at will.
You'll need list
Your bills and bill-paying supplies: checkbook or bank card, stamps, blank envelopes, and return address labels
Your computer and Internet connection
The income and expense tracking document you created in Chapter 1
Personal finance software such as Quicken or Microsoft Money (optional)
Option 1: An All-Paper System
If you skipped the "Letting Your Computer Do the Work" section in Chapter 2, "Getting the Figures to Match," this is the option for you. Here are the steps you'll follow if you choose to pay and record bill payments by hand:
Receive paper bills via regular mail.
Open each bill and discard the outer envelope. On the return envelope, write the amount and date due in pencil where the stamp will go. Stuff the bill into the return envelope and add it to the others waiting to be paid.
If you don't already have a schedule for paying bills, create one: Consider when you will have money (your pay dates), when you have to give money away (the due dates on the bills), and your temperament (sprinter or jogger) to determine how often you must tend to this task; then write it into your calendar.
On bill-paying day, gather your bills, checkbook and register, blank envelopes, return address labels, and stamps. You'll also need the income and expense tracking document you created in Chapter 1, "Tracking Your Money," or draw up a separate tracking sheet just for bill-paying (see Figure 3.1).
Figure 3.1 If you don't want to record bill-paying in your income and expense tracking document, create a separate "Did I Pay That?" record like the one shown here. You can use any lined paper or a common ledger book. Use one page per month, and write your regularly recurring bills in the same order each month. Add occasional or one-time bills after the regular ones each month as needed.
Write a check for each bill and enter it into your check register and your bill-paying tracking document.
File the statement portion of the bill if you keep them. (You'll learn more about filing systems in Chapter 5, "Here to Stay: Storing Documents for Easy Retrieval.")
Put the bill in the return envelope, stamp it, add your return address, and mail it. If you want to wait until closer to the due date to mail it, don't put the stamp on yet: Set the bills aside in a designated place, in order by the due date penciled in at the stamp spot, and each day choose the ones you're going to mail, stamp them, and send them out.
Special Problem: Medical Bills
One of the most challenging aspects of paper management for my clients is keeping track of medical bills. Often we don't pay a medical bill right away because we're waiting to see what the insurance company is going to do about it or we're not able to pay the entire amount all at once.
Bill-paying might be distasteful, but it doesn't have to actually taste bad. Instead of licking envelopes, use a glue stick to seal them.
This is when the March of the Duplicates begins. It reminds me of a child asking for something: "Can I have it now?...How 'bout now?...Okay, now?...What about now?" Anyone to whom you owe money is likely to remind you about it, but it seems that medical billers are the most frequent.
Chaos ensues when you already have a paper-management problem and you end up with multiple bills for the same service. You might pay part of one of them and even write a note to yourself on the bill and then find another copy of it the next day and wonder whether you imagined what you did the day before!
Don't wreck your health worrying about medical bills; use your new system to keep them organized. Here's the key to solving this problem before it begins:
Whenever you have a medical event, start a folder. Label it with the date, what happened, and where you went for treatment.
When documents begin marching into your mailbox regarding this event, escort them straight into the folder. Add a subfolder for each biller that contacts you, so you end up with, for example, a main folder called Broken Leg, 5-23-04, General Hosp. with subfolders labeled Hospital Bill, Lab Bill, X-rays, and Specialist.
When you receive a duplicate of a bill you already have, staple them together and file them in the correct subfolder. Don't just throw away the older bill and keep the newest copyyou might need to refer to that first one for the original bill date, and newer versions of the bill might contain updated insurance payment information. Sometimes the treatment codes and prices even change mysteriously; you'll want to know that. You might eventually end up with a thick packet of different iterations of the same bill; this is okay.
Add another subfolder labeled Explanation of Benefits for the statements you'll begin receiving from your insurance company. It would be nice if they would send one EOB per biller, per event, so you could just file each EOB in the appropriate biller's folder, but they usually don't.
Create a document similar to the one in Figure 3.2 to keep track of where you stand with each bill. You can make notes on this tracking document or on separate sheets. If you have to call about one of the bills, write your notes on any scrap paper during the call; when you hang up, add the date and the name of the person(s) you were talking to and file it in the subfolder for that bill.
Figure 3.2 Create a separate tracking document like this to keep on top of medical bills.
When the event is finally resolved and paid for, file the entire folder. You should hold onto records like these for a few years, until you're very sure that everyone was paid and your insurance company isn't going to come back to you for more information.
You can track any special billing situation with a template based on the one shown here for medical bills. This can be useful for any financial event with multiple steps, such as a home improvement or repair project.
If you think this seems like overkill, you must have great insurance!
Option 2: A Software-Based System
If you chose a software product for managing your accounts in Chapter 2, this example will probably be the most appealing to you. Here are the steps you'll follow if you use personal finance software to manage bill payment:
Receive paper bills via regular mail or bill-ready notifications via email.
For paper bills, open each bill and discard the outer envelope. On the return envelope, write the amount and date due in pencil where the stamp will go; then stuff the bill into the return envelope. For e-bills, print the notice. Add the bills to others waiting to be paid.
If you don't already have a schedule for paying bills, create one: Consider when you will have money (your pay dates), when you have to give money away (the due dates on the bills), and your temperament (sprinter or jogger) to determine how often you must tend to this task. Then write it into your calendar. You can also set up reminders in your software, but don't rely solely on this method because the reminders will only work when you're in the software!
On bill-paying day, gather your bills, checkbook, bank card, blank envelopes, return address labels, and stamps, and sit down at the computer.
Prepare a payment for each bill, either by paper check or online using your bank card.
Open your money-management program and record each payment. Note the method you used to pay it (check, debit, and so on). If paying electronically, record your confirmation number in the transaction's memo field. Use the report features in your software to create your "Did I Pay That?" document as needed.
File the printout or statement portion of the bill if you keep them. (You'll learn more about filing systems in the next chapter.)
If you're really techno-savvy, you might have noticed that the latest versions of money-management software such as Quicken and Microsoft Money are capable of communicating directly with your bank via your online banking feature. This means your software can download your transactions and even reconcile itself using information from your bank, with little or no involvement on your part. I strongly recommend that you do not do this if your goal is to be more aware of what's happening with your finances: It might be less work for you, but it might also distance you too far from the details.
For each bill you're paying by mail, put the bill in the return envelope, stamp it, add your return address, and mail it. If you want to wait until closer to the due date to mail it, don't put the stamp on it yet: Set the bills aside in a designated spot, in order by the due date penciled in at the stamp spot; then, each day choose the ones you're going to mail, stamp them, and send them out.
Option 3: A Web-Based System
If you're comfortable with technology, have a reliable Internet connection, and want to pay bills as quickly as possible, consider paying online. Here are the steps you'll follow if you choose this option:
Receive paper bills via regular mail or bill-ready notifications via email.
For paper bills, open each bill and discard the outer and return envelopes. For e-bills, print the notice. Add the bills to others waiting to be paid.
If you don't already have a schedule for paying bills, create one: Consider when you will have money (your pay dates), when you have to give money away (the due dates on the bills), and your temperament (sprinter or jogger) to determine how often you must tend to this task; then write it into your calendar. You can also set up reminders in your software, but don't rely solely on this method because the reminders will work only when you're in the software!
On bill-paying day, gather your bills and sit down at the computer. Open your money-management software and log in to your bank's online banking Web site or each payee's online payment screen.
Create a payment for each bill in your online banking account or the vendor's Web site and set the pay date for each. Record each transaction in your money-management software. Use the report features in your software or your online banking system to create your "Did I Pay That?" document as needed.
If you set up auto-debits, don't forget to record them. It's nauseating to get an overdraft notice due to a legitimate debit you set up and then forgot about.
File the printout or statement portion of the bill if you keep them. (You'll learn more about filing systems in Chapter 5.)
Electronic and Automatic Bill-Paying
If you're considering paying your bills in ways other than the old write-a-check-and-mail-it routine, it's important to know the difference between electronic bill-paying and automatic bill-paying.
Many companies now allow customers to pay their bills online or by phone via electronic funds transfer. This can mean using a credit card (you're probably used to that) or authorizing a debit from your checking account (a somewhat newer phenomenon). Many banks offer online bill-paying services, so you never have to write a check again.
The distinction to understand with any electronic transaction is whether you are sending the money or the payee is coming into your account and taking it. If you use a bank's bill-paying service, even if you authorize recurring payments to the same payee, each payment is issued by the bank to the payee and you control the date the payment is sent. If, on the other hand, you sign up for automatic bill payment through a company's Web site, the company then has the authority to come into your account and take its moneyand many do not remove those funds exactly when they say they will. It could be a few days earlier, which could wreak havoc with your account management if you maintain a low balance.
Sticking with Your System
By now you've heard me say over and over how important it is to make your system work for you and not the other way around. You now have the best system you could possibly build for yourself with the information you have available to you right now. If, going forward, you find that something's not working the way you had hoped, change it! Don't get caught up in blaming yourselfrefine your system until it's comfortable, efficient, and effective for you.
Remember that it takes time to change behaviors. We are creatures of habit, and that can work both for and against us. Give yourself a few months to transition through that awkward stage of moving from old habits to new. Do whatever works for you to remind yourself to keep on top of money management, whether it's writing your bill-paying days on your calendar, setting an alarm in your PDA, blanketing your space with sticky notes, or mentally attaching the task to another one that's already ingrained (for example, if you always remember to take out the trash, start paying the bills just before or after). If you keep at it, eventually your new system will become second nature.
A Completely Passive Bill-Paying Option
There is something you can do to make the entire bill-paying process go away: Pay someone else to do it.
For a fee, many accountants and even some banks offer bill-paying services that cover the whole process from start to finish: You change your billing address so your bills go to your bill-payer; they receive the bills, pay them from the account(s) you've designated, pay themselves the same way, and send you a summary once a month.
This premium service is not only for the wealthy. Those who travel extensively are often unable to retrieve their mail for weeks at a time, meaning bills would go unpaid without this assistance. And some folks are simply not able to get a grip on the money management process, or they spend many hours at it that could be put to more productive use. In these situations, a service like this is a better value or even a necessity, but certainly not a luxury.
If you're willing and able to pay for such a service (check around; it's not always as expensive as you might think) and you regularly have enough funds in your account to cover your bills, you can offload the chore of bill-paying onto someone else!
If, despite your best efforts, you still find yourself not using the system, give some more thought to why that might be. Is it truly as refined as it could be? If you're sure that the mechanics of the system are as good as you can make them but it's still not enough, consider consulting with a professional organizer who can evaluate your system with a fresh eye. Are you forcing yourself to do something that's really not your forte? Are there emotional issues that make this difficult for you? Consider talking to a therapist who can help you work through the thoughts and feelings that might be holding you back.
Check Your Credit
Now that you're avoiding late fees and overdrafts, you should also review your credit report for accuracy on a regular basis. Check in with each of the three reporting agencies:
Equifax800-685-1111 or http://www.equifax.com
Experian888-397-3742 or http://www.experian.com
TransUnion800-888-4213 or http://www.tuc.com
You should review your files with all three agencies; the information they have on you often varies.
If you visit their Web sites, poke around until you find the free or nearly free options: You can pay extra for immediate online access, enhanced reports that provide more information or a more readable format, combination reports that give you all three agencies' data plus your credit score, and services that promise to monitor your report and alert you if anything goes awry. These services are the ones displayed most prominently on the Web sites; just be aware that you can have a no-frills, yet complete, copy of your credit report mailed to you for $10 or less. Under some circumstances, for example, if you have been the victim of identity theft, the fee is often waived. Check each reporting agency's Web site for details.
Also know that the credit reporting agencies will sell your contact information to mailing lists; if you don't want them to, find their opt-out procedure and complete it.
If you do find an error or evidence of fraudulent activity in one of your reports, call the agency or go back to its Web site for instructions on what to do next.