It’s common to think you have your monthly expenses in order, only for a surprise bill or car repairs to throw off your account balance. An estimated 25 percent of Americans do not pay their bills on time, whether due to forgetfulness or lack of funds. Rather than find yourself perpetually in this situation, understand how to better manage your monthly bills.
Establish a Budget
Although it can be easy to estimate, you should know exactly how much money is coming in and going out for expenses. Between these figures, financial experts advise that bills should account for no more than 50 percent of your budget. Also set aside an additional 20 percent for any loans or debts outside of a mortgage – for instance, buying a car or paying off loans.
To create a more reliable budget for paying your bills on time:
- Define your essentials. Generally, these “needs” include housing, utilities, insurance and groceries. If these expenses continuously exceed half of your budget, either make a plan to decrease “wants” to less than 30 percent of your budget or try to lessen what you spend on “needs.” This may entail clipping coupons or refinancing.
- Determine your true after-tax income once you deduct insurance payments and 401(k) contributions.
- Anticipate potential emergencies and what you would need to stay afloat financially. Create some flexibility in your budget for these surprise expenses.
- Start automating certain processes – for example, auto-paying fixed-rate bills and moving funds to your savings account – and monitor your budget for frivolous expenses that could set you back.
- Reassess your budget every six months or whenever you face a new expense.
Make a Schedule
While autopay eliminates the need to mail a check or pay online each month, this system is not recommended for variable expenses. Consider scheduling bill payment reminders during the month, including when and what needs to be paid. Further take into account quarterly and biannual expenses, like renewing insurance policies or taking your car for an oil change.
Also mark the days when you expect to receive a paycheck. Especially if you’re working with a tight budget, consider making payments right when funds are deposited, and know which bills can wait for the next pay period.
In general, many people opt for a single date during the month to pay all bills or set aside one day of the week to focus on select expenses.
Organize Your Finances
In addition to establishing a schedule, create a system for organizing and reviewing bills:
- Keep all paper bills in a designated drawer and a folder in your email box for online notifications, including autopay receipts.
- Open your bills when they arrive, so you have a better idea of monthly expenses.
- Consider setting aside a separate pile for late notifications, unexpected payments and service or account changes that affect what you owe.
- Set calendar notifications for all bill due dates or write these deadlines in a planner, and check off the event once paid.
- Have a filing cabinet for invoices you want to hold onto and shred older documents.
- Think about how you’ll pay each bill. With check scams on the rise, prioritize online payments, including through the service provider, autopay or your bank’s online bill pay feature. Autopay can be ideal for bills with a consistent payment amount to reduce the risks of an overdrawn account.
Learn how Ion Bank can help you manage your bills and monthly budget! Explore online tools like Bill Pay, iMoney and eStatements to get your expenses in order today.