Best Results Organizing

“There’s always something to be thankful for. If you can’t pay your bills, you can be thankful you’re not one of your creditors.”

~ Anonymous

One of the biggest paper management complaints I get is that clients find it hard to pay their bills on time. It’s not the financial aspect, per se, but a problem of fitting bill-paying into an already overstuffed schedule.

Over the next two posts, we’ll consider multiple solutions to the problem of paying bills on time, and I invite you to review the pros and cons of each to see which fit your individual style. The thing is, no one system is perfect for everyone. Indeed, I think that no one system is perfect for anyone. Rather, Paper Doll believes you’ll find that mixing-and-matching these strategies will help you create a workable system for your own personal lifestyle.

On to the strategies…

1) Pay Bills the Day They Arrive

This simple strategy requires the least amount of advanced planning, and if adhered to, is the least likely to lead to procrastination or late fees. Like clockwork, bring in the mail every day, open the envelopes, toss extraneous junk and “shiny” advertising material and pay your bills immediately. Done!

Paying bills the day they arrive saves time (on a daily basis) because it’s easy to complete quickly, eliminates anxiety regarding whether you may forget to pay, and helps you stick to your budget. If you pay for all of the things for which you have already obligated yourself, you’re less likely to spend on wants before needs.

Yes, this is the easiest system, but it’s also the least-often used.

Certainly, some people skip this option because they lack the funds to pay each bill on the day it arrives. Most of us live on budgets, and if our two biggest bills (for example, mortgage and insurance) arrived on the same day, it might wipe out (or even exceed) our checking account balances, leaving nothing to live on. So, there may be a practical reason for not paying bills as they arrive.

For others, however, who definitely have enough money in the bank, there tend to be psychological or philosophical obstacles to using this strategy. They may think, for example:

“I’m not going to pay this bill until right before it’s due. They don’t deserve my money one minute earlier than necessary.”

This attitude is particularly striking when someone wishes to avoid paying a credit card bill, failing to consider that payment was actually due weeks before, but they opted to use credit to “time shift” the payment. They’ve already written an IOU…the bill is the reminder that the IOU has come due.

If this is your philosophy, consider writing checks the day they arrive, but tucking them into a tickler or calendar page for the day you will mail them. Or use your online bill-paying system as soon as the bill arrives, but schedule payment delivery for the last possible date. Bank of America lets you select the date you want the payee to receive the money and guarantees the transaction. Other banks schedule by when a check or electronic payment is sent; if the payee requires a tangible check, it can lead to delays, so know how your online system works.

“If I pay this bill the day it arrives, what if an emergency pops up and I don’t have the money because I’ve already paid this bill?”

This is a reasonable fear, especially if someone is operating on so thin a margin that paying the electric bill might mean not being able to pay for necessities or emergencies. In this situation, the organizational issue of paying bills on time is not the main concern, but rather the focus needs to be on personal financial management and building an emergency fund.

“I don’t like paying my bills in dribs and drabs. I want to pay them all at once.”

This behavioral preference is similar to not wanting to hang up clothes (or toss them in the wash) as soon as you undress, not wanting to file each piece of paper as you finish with it, or not wanting to wash each dish (or put it in the dishwasher) when done eating.

Sure, there’s something to be said for flow, doing a large project at once and pushing through it to give yourself the satisfaction of completion of a major task. However, the more we let our clothes pile up on the exercise machine, the more we let our filing pile up in the office, and the more we let the dishes pile up in the sink, the more of a behemoth the task seems, and the more likely we are to procrastinate altogether. The downside of procrastinating on those tasks are wrinkled clothes, messy offices and dried-on kitchen yuckiness. The downside of procrastinating on bill-paying? Late fees, increased interest rates and lowered FICO scores.

2) Tickle Yourself With an Organized System

If you don’t do something immediately, you have to do it later. (That’s just a law of the space-time continuum. We still can’t travel backwards in time.) To make sure you do it later, you’ve got to have a system in place to help accomplish it, and that system involves both physical and behavioral elements. Physically, a bill-paying center includes the following elements:

Letter opener
Calculator
Pencil and scrap paper
Envelopes
Stamps
Return address labels
Non-washable gel-ink pens (to deter identity theft and fraud)
Computer or mobile device (though I advise against paying bills while mobile)
Printer (optional)

Next, your system needs to include the following behavioral elements:

–Show up for mail call. Open the mail the day it arrives, toss out the glossy advertising inserts, and if you pay online, toss the envelopes, too. Even if you’re not going to pay right away, process the bill immediately to keep it from ending up on top of the microwave or hidden under an ad from the Franklin Mint.

–Scan each statement to review the charges, note any unexplained fees, and check for new policies and/or errors. (The sooner you catch a billing error, the easier it is to fix.)

–Circle or highlight the payment due date. Then use the elements of the systems we’ll review today and next week to make sure the bill actually gets paid by the due date.

–Glance at the calendar to make sure there are no weekends or federal holidays on or around the payment due date that might present delivery obstacles.

–If the due date is consistently inconvenient because of your cash flow pattern, ask the vendor to change the date to a more convenient one.

–Put your bills in one place, at your bill-paying center, and arrange them in chronological order by due date. Alternatively, use a tickler file and put the bills in slots at least 7 days in advance of when they’re due.

3) Don’t Worry, But Be Alarmed

Alarms and alerts are the perfect way to ensure tasks get out of your head and conquered in the material world. For example, most banks’ online bill-paying systems will allow you to set up email or text alerts to let you know when a bill has become available to pay, as well as at various increments (7 days prior, 3 days prior or on the day) before the bill is due.

Similarly, you can set alarms or alerts on your computer (through your task list or calendar) or cell phone (via regular alarms or smart phone apps) to create a fixed schedule to pay either each individual bill that is due or to get you on a regular bill-paying schedule…for example, every Tuesday evening at 8 p.m. or Thursday morning at 10 a.m.

The only problem with alarms and alerts is that if you tend to internally rebel against authority (even something as simple as a “Don’t Walk” sign), then repeated alarms might seem like pestering, against which you might rebel by refusing to acknowledge them…even if you set the alarms yourself. If that’s the case, I encourage you to read the chapter on the Defier Procrastinator in Dr. Linda Sapadin’s book It’s About Time for a greater understanding of how you can conquer this procrastination style.

I also urge you to consider making the alarms fun. Instead of creating an alert that says “Pay the electric bill”, make it say “If the electric bill doesn’t get paid, all the yummy ice cream will melt!”

4) Set Up Automatic Payments

If you prefer to “set it and forget it”, consider one of two ways to accomplish setting up automatic payments.

A) Go to the web site of the vendor (utility, credit card company, insurance agency, etc.) and set up a recurring automatic payment. In addition to vendor account information, you’ll have to provide your bank routing number and account number. Some creditors (like your mortgage company), may require you to sign a document in order to complete the process.

or

B) Go to your bank’s online bill-paying center and within your account, create a payee for any vendor whom you want to pay on a regular basis. Provide payee data and the day of the month your prefer ongoing payments to be made. For fixed amount bills, set the dollar amount. For fluctuating bills, it’s a little more complicated because, on its own, your bank has no way of knowing how much to pay a vendor whose charges change from month to month. Your bank likely has a paperless bill option that allows the vendor to send paperless statements, which trigger your bank to alert you and enable you to authorize payments.

Automatic payments have many distinct advantages. You don’t have to pay for postage, you can skip writing checks, handling envelopes and going to the post office, and you can largely forget about paying bills.

Automatic bill payment is not for everyone. If you have a strong need for control (or have ever been called a micro-manager), you might feel more comfortable using an online bill-paying system (strategy #5) to manually schedule payments. If you’re too hands-off and lack funds in a particular month such that you won’t be able to pay until after a bill is due, unless you manually cancel the auto-payment, you might overdraft your account. Thus, a system you put in place to allow you to “set it and forget it” will lead you into trouble if you actually forget it completely.

Also, just because payments are automatic, doesn’t mean that your financial management can also go on auto-pilot. It’s still essential for you to monitor your statements — whether via monthly paper statements, or, preferably, via weekly viewing of your account online — to make sure there are no computer or human errors.

Further, automatic payments tend to make people less aware of their spending patterns. If you have to sit down to write out a check to the phone or insurance company on a regular basis, you might be more inspired to check competitive rates more often, but if you never see your bills, you might become complacent about what vendors are charging.

Remember to cancel automatic payments if you no longer want or need a service, or if you relocate. Gyms and certain telecommunication companies are famous for not ceasing billing when they are obligated to do so, and only your diligence can ensure that billing — and the automatic debiting of funds from your account — will cease.

Finally, maintain a list of which bills are debited through automatic payments and which are paid manually (by check, phone or ad hoc online payment). Make sure you enter automatic payments in your check register so that you (and your spouse or significant other) can verify payment. If you neither keep a register nor reconcile your account, consider keeping a payment chart in your tickler file and checking off a monthly column as individual payments are verified.

Next week, we’ll review other on-time bill-paying strategies and see how you can:

5) Use Online Bill-Pay — to reap the rewards of going digital while maintaining the control that automated payments lack

6) Bill Everything to One Rewards-Earning Credit Card (But please, don’t even think of attempting this until you read next week’s post!)

7) Outsource Bill-Paying to a Specialist

Next Monday, May 30th, is Memorial Day, a federal holiday in the United States. The banks will be closed and the U.S. Postal Service will not be running. So, if you have any bills due early next week, be sure to arrange to pay them (by check, phone or online) so that you’ll be credited for an on-time payment.