Another “how to” post, part 2 of bill paying systems. I hope by now, you’ve answered the questions from my first blog post because they are crucial to setting up YOUR system, which fits how you think and work.
I am not a financial planner or money management coach, so please take this organizational advice and pair it with that of a financial expert. I`ve given you a Resources section at the bottom of this post.
My purpose here is the first step - to set up, untangle or understand someone’s bill paying process. You may have taken it over from your spouse who had different ways to organize from the way your mind works. Or you’ve decided you will figure this out together. Or you’ve done this for yourself, but now you have a family or are handling finances for your parents.
Your Bill Baying System: How to Create or Untangle Yours
#1 Gather Your Bills
Start with gathering what you have. One small step at a time.
Incoming dates: When do you get paid? If self-employed, what`s your average weekly pay?
Outgoing: for each bill, when is it due?
Monthly bills are the bulk of this, but also write down quarterly and less frequent bills.
If you have any vendors which are on auto pay – where the vendor takes money from your account each month - make sure these are part of the picture; also if any of your bills are already in online banking and on a recurring payment, track those down.
#2 Create the Whole Picture
Map these dates onto a blank calendar, paper or pc, but keep it simple. The point here is not to create your system but to have a consolidated picture of all that you need to know about. A system needs all its pieces like a jigsaw puzzle or you won’t get the right picture.
#3 Decide on a Home for Incoming Bills
For paper bills: where do you open the mail? What special container can you use to identify ONLY your bills, separate from the mail? Or having the container in your home office wo
rks, too, if you walk to the office and put them there right away.
For e-bills or auto pays: So that you remember these as you pay the other bills, make up a paper note or print out the notification you get and keep it in your bills container. Again, you need that consolidated picture.
#4 Schedule a Time to Pay & Discuss Bills
You need a frequency and a method. Frequency, because when you look at your consolidated picture of due dates, you`ll see that dates will naturally group together.
Remind yourself of when you need to sit down and pay: a note on your paper calendar, a reminder on your phone/PC calendar, or tie bill paying to an existing habit. You may want the reminder to be visible to both of you, so that neither of you is “the nag” to get bills paid; make it a calendar invitation for online calendars or write it on the wall calendar if you both look at that.
Also consider how often you want to be thinking about bills. Separate the action of writing out or scheduling a bill payment from when it is actually due, e.g., you can schedule once a month for all dates or you can write bills each week just for that week.
You may want to completely outsource your bill paying if you have trouble with this. Start with your accountant’s or financial planner’s recommendation.
#5 Keep or Toss Guidelines
Know the record retention guidelines from the IRS so that you don’t keep bills longer than you need to. Also consider what makes YOU feel comfortable.
If you do want to keep paid bills, consider how often you return to look at a paid bill. That determines the level of organization you need for the `paid` file. Maybe you just need two files: first six months of the year/second; or by year. Maybe you only want to keep the main bills to track your spending. Maybe nothing because you want to track in Mint or Quicken/QuickBooks.
Couples need to share the bill paying process. It’s emotionally easier to do it together. You can discuss your financial goals, wants and needs at the same time. If you are untangling things, it’s painful to do it alone, so use each other’s strengths. If one of you does the actual bill paying, figure out ways to involve yourself, so you are aware of your financial picture. Do not abdicate this responsibility. You can sit alongside, or organize and review the bills as they come in. You can be the one to track expenses in software or on paper, even if you are not doing the one who physically pays the bills.
All kinds of ways to maintain awareness.
My Pinterest Board has more articles about “Your Money Life.”
If you need to work out what your own system is, I work in person or virtually on this. In person, we’d go through what you have and set up the system together. By phone, we’d figure out your roadmap and you’d work at it on your own, perhaps with some accountability calls scheduled, to act as your safety net.
Contact me: Sue@OrganizeNH.com or call 603.554.1948.
Liz Weston, author of my favorite money book – check it out or subscribe to her blog.