Sunday, December 29, 2013

Why I Don't Automate Bill Pay

This year has been crazy with our budget. We've had joint finances for over eight years, but this is the first time we have ever had dual incomes! Our annual pull isn't that much different, but steady paychecks that we can rely on is a whole new world. One thing that hasn't changed is how I pay our bills. 

I don't use automatic bill pay.

The reason stems back to how our finances used to be - totally unpredictable. Mike's GI payments for school never showed up with any consistency and neither did his drill checks.  Each had about a week buffer for when they would nonchalantly appear in checking (and that was the months when they showed up at all ...). My income was steady at least, but it wasn't enough to handle all of our bills each pay period and leave us with enough leftover for groceries.  

I simply never had the confidence that we'd have enough money in our account when a bill was scheduled to withdraw. I was more worried about overdraft penalties than late fees!

Even though our income is more steady now, Mike's paychecks still come in irregularly. He gets paid somewhere around the 10th and 25th, but there's no pattern I can discern. December was the 24th and 10th, both Tuesdays. November was the 28th (Thursday) and 8th (Friday). October was the 25th (Friday) and 10th (Thursday). Nonsense, I tell you! And obviously still too risky for automatic payments.

Even if this wasn't the case, I like being hands-on with our finances far too much to cede control to a computer program. It's not a mistrust in technology or companies to handle my payments for me - I simply want to be the one to initiate the process.

I even pay all of our bills online, but I do so by hand. I log into each account, review the charges, determine the payment, print off the receipt and statement, and file away the hard copies. I suppose this is an "ancient" way to deal with bills. I could be simplifying our bills by automating the process and saving transactions as PDFs. 

But I like the accountability of paying bills individually. It forces me to interact with each and every paycheck, debt, and expense line. There is something quite valuable in monitoring money going in and out. It makes you confront your economic reality and take ownership of every aspect of your finances.

That's the problem with automatic bill pay - it comes with the risk of going on autopilot with your money. If you're not keeping tabs on things, the approach can be very passive. And that's the furthest thing I want to be with our budget.

To be fair, I'm not knocking those who use automatic payments. It can be a really useful tool if you need regulated discipline, you're forgetful about bills, or you don't want to worry about late fees. This article from the Washington Post gives a nice overview of the pros and cons. If Mike was the one doing finances, oh man, I would automate everything! Love him dearly, but his memory is not up to the task ...

In fact, we have several bills that we were required to have automated: car loan, internet, water, Netflix, and a payment for disability insurance (picks up where my company's coverage leaves off, if you're curious).

By and large, I don't mind these. The car and internet bills come out the first of the month. This is good because both of those are necessities and having them yanked would be a major disruption. The car loan sends a paper statement so we can see our progress and the internet bill is fixed. Netflix is also static and comes out routinely, as is the $10 insurance payment.   

The water bill is the one that drives me nuts. First of all, it comes every two months. It's our only bill that doesn't come in every month. Secondly, our city only offers two payment methods: check or automatic withdrawal. I'm not mailing a check that takes a week to cash! 

The one that really gets me is the due date is somewhere around the 28th. It's always right before payday when our account is nearly empty. On months the water comes in, I have to remember when I'm paying bills on the 15th to make sure we leave a buffer in checking for that darn water payment. Sigh ...

Everything else - student loans, electricity/gas, phone, and credit cards - are all done by logging in online. Rent is another story, but we pay two months at a time and by check. 

I even have a hard copy of our monthly expenses that I work off of. Every account we have, whether it's active or not, is listed here. Bills are divided up by whether they come out the 1st or 15th of month. It also includes payment averages for variable bills and a blank space to note what they actually were. I also leave some lines for irregular items, like medical bills that pop up periodically. 

Screenshot of our monthly expense sheet
It's a super simple Word doc. It's not even a budget in any sense, just more of an overview of all of our obligations. Nonetheless, it helps to have those ballparks outlined so we always have an idea of what we're up against. And even though my financial brain farts are pretty rare, the printout also ensures that I don't overlook any accounts. 

I suppose I could joke and say that paying bills by hand comes down to control issues, but why wouldn't you want to be in the driver's seat when it comes to your hard-earned money? I've found this method really works for us and it's one I can't see abandoning anytime soon.

How do you manage bill payments?  

1 comment:

  1. Most of our bills require autopay, which is fine because then I don't forget them. 2 always come out on the 20th. The rest vary and keeping track of them just makes me nuts. "On or about the 11th." Riiight. I have a calendar with due dates marked in green and the averages for the payment. I can see at a glance what is due during the next week so I can figure how much will be left for groceries. The two times in the year that are particularly awful are March and September because of property taxes.
    We have been trying to put cash aside for repairs and so forth and sometimes that works and sometimes it doesn't. I hate managing all this, though, it gets my blood pressure up and gives me nightmares.