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March 8, 2011

4

Money Hack #1: Get Ahead of Your Bills and Stay Ahead

Saving money is an exercise in discipline. You make your plan and you stick to it. Unfortunately, building discipline is really hard work, just ask any military person about boot camp.

Like every other skill we pick up in life, savings discipline gets easier the more we do it. But you still have to get over that initial hump before you settle into the routine.

Fortunately, there are tricks you can use to flatten out the hills, so to speak. Automating your savings routine is one of them. In this post, I’ll share another one I picked up along the way.

Getting Ahead of Your Bills and Staying Ahead

Years ago, I had a hard time paying the bills every single month.  The mind was willing, but the checkbook wasn’t able, so to speak.  I tried every trick in the book to hold off the bills until my next paycheck.  I post-dated checks, deliberately sent the electric bill to the gas company (don’t do that, it’s unethical.  And it doesn’t work.) called and asked for extensions, you name it, I tried it.  The only thing I never tried was saving for next months bills.

Ready for a trip to the bank?  Good.  For this Hack, you will need a THIRD bank account.  Once you’ve got that new account set up:

Add up all of your monthly bills.  Rent, car payments, utilities, credit card payments, anything you have to pay every month.  For bills that change from month to month, like utilities, use a higher amount rather than a lower one.

Divide that total by the number of paychecks you receive in a month.

Set up an automatic transfer for that amount from your primary account to the bills account every payday.

If you haven’t already, set up an automatic payment plan with the companies you owe.  Just about every company these days has some way you can pay them automatically.  They really want to help you when it comes to getting you money on time.  If they don’t have a bill pay option, you can usually set up automatic check writing through your bank.  Just make sure the check will get there in time.

Set up another automatic transfer from your bills account back to your primary account one or two days ahead of when the bill will be paid.

It will take some time to build up your account to get ahead of your bills by a month, but can you imagine not having the worries of scrambling to make the bills every month?  You won’t believe how much stress in your life just goes away when you don’t have to worry about the next bill.  Heck, what if you don’t have to worry about bills for the next two or three months?

Obviously, if you want to accelerate the process, round up each bill by a few dollars.

Until next time, keep on saving.

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