They say with investing that out of sight out of mind is a great idea or you’ll end up spending your money. When it comes to paying monthly bills, it seems that the ‘out of sight out of mind’ philosophy is taking hold of how young people are managing their monthly bills. It is really a good idea to pay your bills via autopay? Here are my pros and cons of the management of doing your bills through an electronic process.
- You help save the environment- Paying bills on line can do a lot to help save the environment. It not only saves money, but saves trees, water, and many other resources. The additional cost of making paperwork come from your bank may invariably cost you more if your bank has to add extra cost over time. In fact, I think you’ll eventually see all banks charge for paper statements over time. So, you could be doing yourself a favor by paying bills on line and not taking paper statements from either the vendor or the bank.
- You save yourself time – Nobody to this date and time enjoys that Sunday once a month where they saddle up to their home office desk to begin writing out bills. Not only is this time emotionally draining, but it can physically take you an hour or more per month to pay out all of bills, address all of the envelopes and do what you have to do with your checking account. If you are in a relationship where you pay some of the household bills and your partner/spouse pays other sets of bills, you may also have to engage in a monthly discussion about where the finances are at based upon inflows and outflows.
- It works best with recurring bills- If you generally have 4 to 8 recurring bills that come up such as cable and mobile phone, those bills that come in at the same time of the month and generally carry the same bill cost each month can be an excellent idea to put on to this type of system. Of course for things like gas and electric you need to pay attention to the seasonality of the bills, but I like the practical point of paying the basic recurring bills on line each month.
- You stop reading the detail of each and every bill - Systems like credit cards and electronic bill paying have certainly made paying bills a heck of a lot easier. However, most people have an idea in their mind every month on what the bill amount should be for their mobile phone, gas, electric, and cable. Essentially, the 8 to 10 bills that you pay every month. If the autopay system shows the amount of bill to be within the imaginary field goal posts you have in your head, you are likely to pay the bill. Realize that companies have become wise to this concept and if they increase your monthly costs, they will do it in very tiny increments because they know you won’t likely question the increase. The only time you may actually read a bill is if the amount looks incredibly disproportionate to what you thought the actual bill was going to be that month. It’s important that you read the detail of the bills even if they come electronically into your banking system.
- You let the computer reconcile for you- I remember when I got my first checking account. Each month, I would take the time to reconcile both the credits and debits to my checking account against what I had actually written in my checkbook to make sure the balances matched. Today, I see most young people reconcile their actual balances by either a) waiting to see what the ATM statement says, or b) checking on line and assuming that the balance reported is the actual balance. It’s a little scary because as the CEO of your family finances, you need to be in charge each month to make sure the direct deposits and monthly withdrawals look exactly as you thought they would.
- It works worst with variable bills- You may have bills that come in once a year potentially like a homeowners association dues, alarm system, or life/auto insurance. If you have bills that you pay that come in with less frequency than a monthly basis, I don’t recommend inserting these into the autopay process. Rates could change or the bill may be inaccurate and need your review before payment. It doesn’t mean you can’t pay the bill on line, just don’t have it set for autopay.
Automatic bill payment is another one of those advances in technology that can make our lives easier. However, it doesn’t remove your or absolve your from your role as CEO of your family finances. As one of my first leaders taught me, you still need to inspect what you expect. If you don’t want surprises, read all of your bills and only put recurring bills that have very little month to month volatility on autopay.
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Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc - The Leaders in Gen X & Y Financial Advice
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