Monday, December 17, 2007

My "Budgeting" Tips

So, I thought I'd share a few of the tips that have worked for me when trying to create a budget. Ha, ha, ha! Fooled you, I don't have any budgeting tips - not in the true sense of a budget! But here's how I make the money pay the bills around here. But there is a disclaimer: I am not a budgeting expert, nor am I a financial expert. Read what I have to say, and if it makes sense to you, then by all means, try it. But, as The King will attest, I have a quirky way of doing things, and I don't always do things the easiest way. Keep that in mind. :)

First off, we have a separate bank account that is only used for our mortgage. We looked at our mortgage payment, divided it in half, and then rounded up to the nearest ten dollar amount. We use the automatic deposit program to deposit that amount into our checking account each and every paycheck. When the mortgage payment is due, the money is there for the payment. I will admit it freely, I do not always do a good job of making ends meet, so having a separate bank account just for the mortgage gives us a lot of peace of mind. If you can afford to do so, consider boosting that amount by a little each month so that you are half a month ahead of the game.

For example:
November 19th: Bank Account balance equals $1000
November 20th: Payday! $500 deposited, new account balance is $1500
December 1st: Mortgage due ($1000), new account balance is $500
December 5th: Payday! $500 deposited, new account balance is $1000
December 20th: Payday! $500 deposited, new account balance is $1500
January 1st: Mortgage due ($1000), new account balance is $500

I experience true peace of mind when this is working correctly.

By the way, there are many banks out there that offer free checking accounts, so this venture should not be costing you anything, other than perhaps the cost of checks, but many banks will give you your first box of checks for free. Since you are only using this account for your mortgage, those checks will last you for a VERY long time. And, if you are one of those people who would like to pay off their mortgage early, well, then the one box of checks may work really well for you.

Other bills can also be split into two payments - primarily if you have the option to pay them online or over the phone for free. With the cost of stamps these days, you don't necessarily want to double the amount of postage you have to purchase every month. If you aren't already paying these types of bills online, take a close look at your next billing statement and see if the company offers this type of service. Or, consider looking into your online bill pay that your bank likely offers. Be sure to ask about any fees associated with such an account. We have had some banks that charge a monthly fee (I never used this service), and others that have offered it for free. You might find CheckFree to be useful - while I am not currently using it, it was one of my favorites for a very long time. They were very easy to use and very reliable. And, like the name implies, it's FREE!

So, why would you want to split your payment into two payments? Well, for me it is because I work better at remembering to pay everything if I know I have to pay the EXACT same things every single paycheck. I'm a perfectionist, and I found that when I would sit down to pay bills, I would have to check (and sometimes double-check) every bill, EVERY time, to see whether or not I had paid it this month or not. I realized it would be easier just to plan on paying each bill every paycheck. Less headache for me. The only other reason I can think of is that it may help you to even out the cash flow over the month. Some businesses will allow you to change your billing cycle, and if this is the case, you can take advantage of this to balance out your bills but only make one payment a month on each of them. You need to decide which method will work best for you.

The easiest way to start paying bills twice a month is simply starting with the next bill that arrives at your house. Divide it in half, or close to it, and pay the first half. On your next paycheck, pay the remainder. My filing system has folders set up for each bill that we pay. I also have a folder set up for "in process" bills. The bills are "in process" until both payments have been made on the account. It takes a month or two to have the process flowing smoothly, but what should eventually happen is that within 48-hours or so of each paycheck, you should find time to sit down and pay all the bills.

Now, if you are good at budgeting (which I am not), you should be able to designate this money on paper, and be able to pay your bills once a month without a problem.

Hope this provides some insight for you into my crazy money world.


Blogger Deb said...

Okay - so that makes perfect sense to me and I'm thinking, "Why didn't I think of something like this?!"

Thanks for sharing that tip! I will for sure be trying that out come next paycheck!

You're a genius!

12:17 PM  

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