When we went from being a two-income family to a one-income household with a baby, the days of easily paying the bills on time, let alone paying off debt, seemed like a distant memory. Instead, we were looking for ways to save money on bills. Finally, I got fed up with feeling out of control and I figured out a bill pay hack to make the same monthly payments but actually save money on interest every month.
If your monthly budget looks anything like ours, you have at least one week where it seems like all of the big bills are due all at once. Some weeks, it seemed like we had plenty of money left over. If we weren’t careful though, we could easily be left with no choice but to dip into our savings on that one week a month when so much was due.
It finally occurred to me that if I could just divide up our payments, we wouldn’t have to risk going in the hole every month. On paper, it looked like we had enough coming in to cover all of our minimum payments plus a little left for gas and food. If we were careful with our expenses, my husband’s income was enough for us to make ends meet.
Here’s the thing:
Every month we went through the same thing. We’d have those weeks where it looked like there was a lot left over after the bills were paid, so we’d go out to dinner or over spend on groceries. Then, that one week would roll around and suddenly our bills demanded more of our money than we had in our bank account to offer.
The Bill Pay Hacks That Worked
Finally, I decided enough is enough.
Some of our creditors gave us the option of moving our due date, but this wasn’t enough. What finally worked for us was dividing up our payments and scheduling them to be automatically deducted from our bank account.
Initially, I was worried about giving companies access to our bank account. After trying to pay all of our bills weekly and realizing I had missed some (even incurring late charges a couple of times) I gave in and scheduled everything to come out of our account automatically.
My reasoning was that if we had a $200 minimum payment due once a month, we should easily be able to afford $50 per week. We decided on weekly payments even though my husband gets paid every 2 weeks.
I made an Excel spreadsheet of all of our minimum payments and due dates, but you could easily do this using a paper ledger like this one. Then, I made a separate column and divided the total due by 4. So that $200 minimum payment meant 4 equal payments of $50 could be made weekly to meet our minimum.
I did this for all of our minimum payments and realized it would make our lives SO much easier to pay an even amount of money every week.
I called the Discover card company to tell them my plan and to ask a few questions about how our interest was calculated. It turns out, paying our bill weekly like this instead of just making one payment every month would actually save us in interest charges.
This means that even though we’re paying the same amount of money every month and doing it in a way that makes our finances easier to handle, we’re actually SAVING money.
This works perfectly for credit card bills, personal loans, car payments, and even utility bills.
I also use this method to pay off recurring monthly charges to make sure they don’t add to our debt load.
For example, our Netflix, Microsoft, and Groovebook accounts draft monthly from our Discover card. Instead of forgetting about these charges like I used to do every month and letting them add to the debt on the card, I simply added these to the minimum payments that are being auto-debited from our bank account.
These charges add up to roughly $50 per month, so instead of just paying the $200 minimum payment on our Discover card monthly, I take $250 divided by 4 weeks in a month, and pay $62.50 per week.
If you want to try this method, take these steps:
- Make a list of all of your bills, due dates, and minimum payments
- Take each minimum payment and divide it by 4 (for 4 weeks in a month)
- Check your calendar and make sure there are at least 4 weeks before your next due date before starting this method! If not, either wait until just after your next minimum payment posts to start, or adjust your payments accordingly. For example, if your next due date is only 2 weeks away, divide your minimum payment by 2 and make two weekly payments of half of your minimum payment. THEN be sure to go back in after your due date and change your payments to a quarter of your monthly minimum payment afterwards. Make sense? It gets confusing, so I just set up automatic payments to accomplish this for me and kept diligent notes.
- Next, unless you’re incredibly organized and have lots of time to dedicate to paying bills every week, go into your bank account and schedule automatic weekly payments for each bill (except your mortgage)
- Finally, make sure to keep good notes and go into each of your accounts for a couple of weeks to make sure everything is clearing your bank account and posting to your creditor’s accounts correctly. Believe me, the time you spend getting this right now will save you tons of financial headache after you get this set-up. It will run on auto-pilot and you can just sit back and enjoy a much more stable budget all month long!
Where This Method Won’t Work – Mortgage Payments
A word of caution: DO NOT, I repeat, do not try this with your mortgage. Without going into too much detail, here’s why that’s a terrible idea (I learned this first hand):
When you make a payment to your mortgage company that equals less than a monthly payment, one of two things will happen. They will either take your extra money and move it into a “suspense” account where it waits for a set amount of time until you make another payment(s) that equal a full payment. That amount of money will then be moved from the suspense account to cover a monthly payment.
Or, as in our case, the extra payments were sent straight to principle. We ended up behind on our monthly payment, but with two monthly payments worth of funds applied to our principle balance.
I know, I was annoyed (and kind of shocked) when we started getting phone calls that our mortgage was behind.
It took numerous phone calls, e-mails, and chat sessions to finally get this cleared up. Take my advice and don’t go down that road.
It IS possible that your mortgage company offers a biweekly payment option.
Unfortunately, ours doesn’t.
Give your mortgage company a call and see if they can work with you. If not, you can always transfer 1/4 of your mortgage payment to savings every month and then move the full amount back to your checking when it’s time to pay the mortgage payment. If you’re organized enough, that is definitely an option. We decided to just leave the mortgage out of our weekly payment plan.
For our little family, this method works perfectly! We pay each of our bills weekly (except for that dreaded mortgage) and we don’t have to worry anymore about having a crazy expensive week and blowing our budget. This helps us to stay organized, pay all of our bills on time, and even schedule small extra payments to help pay down debt.
Since I originally wrote this article, our financial situation has changed a lot because of this blog. It now brings in a significant income for us every month, but we do still make weekly payments to each of our creditors (and we still don’t pay our mortgage weekly!) If you think you might have what it takes to start a successful blog, check out this post and join my e-mail newsletter for bloggers!
Do you struggle to make the minimum payments on your debts? Do you think this method will work for you? If you have any questions, be sure to let me know in the comments!