Personal Cash Flow and Getting Bills Paid On Time

Newsflash: Paying your bills on time keeps things happy and running smoothly.

OK, maybe it's not a newsflash. You likely understand this and have heard it many times already.

But like most routine adult activities, the right system makes it much easier.

My grandfather's bill-paying activities

My grandfather was an extremely frugal person. He was a teenager at the start of the Great Depression, so this was no shock to anyone.

One frugal habit of his I remember growing up in the 1980s was that he used to walk downtown to pay his bills in full, by check, on the day they were due.

Doing this accomplished several things:

• He paid the bill on time (very important)
• The money in his checking account was earning interest as long as possible (daily compounding)
• He got some exercise

This small amount of organization, along with everything else, paid pretty well over the years. A few pennies here and there for each bill he held off paying for as long as possible added up and compounded.

Other cash-flow games come from necessity

Others I know from a similar era played different games.

It was a game of checking the on-time boxes by mailing payments, but in a particular order, so that there would be time for deposits to clear to avoid bounced checks. It was cutting things close because there was no other practical choice.

Something like this:

• A $150 car payment is due on the 20th, but there's only $120 in the account. Next paycheck comes on the 23rd.
• Mail the check for $150 on the 20th. It gets there on the 22nd, and it's processed.
• The next paycheck is deposited on the 23rd, which brings the balance over $150.
• Processing the check takes a couple of days, so the $150 hits the account on the 24th, and there are funds to cover it. But because it was postmarked on the 20th, it was still “on-time.”

Paying bills in the 21st century

“Checks? What are those?!” you might be thinking. “Mailing payment, is that safe?!”

Today we're less about checks and envelopes and more about ACH transfers, PayPal, Zelle, CashApp, Venmo, and of course credit cards. And even the checks we get now and then, we can deposit them remotely with our phones.

Though it's true that businesses want us to practically forget that we're paying them every month for stuff — everything's a ding-dang subscription! — we can also practically forget that we've taken care of payment for most of our bills ahead of time.

This is where systems help us easily keep on top of all of those bills that our parents and grandparents handled mostly manually:

1. Preauthorized credit card or debit card charges

My internet service lets me know that I have a new electronic bill, but it also lets me know when my credit card will be charged to pay that bill.

The bill gets paid on time each month, like magic. Most of us know about this. Many businesses require that we set this up to get their services.

2. Preauthorized ACH transfers

Utilities and banks may also take credit card payments, but they'll charge a convenience fee for doing so. (Actually, most businesses now can pass the fee on to you as long as they tell you they're doing so beforehand.)

So for our electric bill and mortgage, we've set up a recurring automated clearinghouse (ACH) transfer from our checking account to pay these on time. We only need to ensure the money is in the account when the ACH transfer request hits.

3. Bank or Credit Union Bill Payment

Our water and sewer bill is a bit of a unicorn. There are convenience fees for both credit card payments and ACH payments. This was at least $10-$15 every two months — a big no bueno.

However, there is no convenience fee for payment by check. And up until recently, the payment address was in a different state, which means physically mailing a check. (Now we can drop a check off if we want.)

Ugh … so 1980s.

Thankfully, our credit union has a free bill payment service. I have frequent payees set up with the payment address and so forth. So every couple of months, I log into our account, enter the amount and the payment date, and the credit union handles mailing a check to them.

For free. That's muy bueno.

4. The occasional Todoist reminder

There's a handful of bills that I don't automate. One is paying my business credit card bill. I typically don't keep much money in the connected checking account, and I want to make sure there's enough money to cover the bill when it's due. So I have a monthly reminder to pay this bill, which involves logging in to the credit card account and initiating a bank transfer.

That's the exception, though. Most of my bill payments are automated.

Automation isn't an excuse to ignore, though

Systems are great, and systems often work well most of the time. But it's always a good idea to monitor the transactions to verify they are happening as they should.

Businesses might forgive a slip occasionally, but they aren't obligated to do so. Intent to pay isn't the same as actually paying.

Regardless, it's worth it to look at your current bill-paying system to see if there are ways to make it easier.

Paying your bills on time does keep things happy and running smoothly, but it doesn't need to be a chore!

(This post was written originally in July 2011, and has been updated.)

Header Photo by Mikhail Nilov