This post may contain affiliate links. This means that if you click and make a purchase, I receive a small commission at no additional cost to you. I only recommend products I use and love, or that I would recommend to my mom or best friend. Please see the disclosure statement for additional information.
Do you forget to pay your bills? Are you struggling to keep track of which bills are due when? Have no idea what your monthly expenses are and how you should be budgeting for them? You’ve officially been thrown a lifeline!
Tracking and paying bills doesn’t have to be a crazy, stressful experience. I’m going to show you a common-sense method for getting your bills paid on-time, and in the correct amounts. Plus, a free printable!
You need a system
Late payments stink. They mess with your credit, make you look bad to creditors, and make you feel like a loser.
What you need is a bill payment system. Something that allows you to easily see what you owe, when payments are due, and how you’ll cover the payments.
Take control of your bills by using a bill payment account and bill payment worksheet (I’m sharing my bill payment worksheet with you down below – for free!).
Set it up
This is a super-simple system. You’ll be up and running in 6 easy steps.
A few quick notes:
First, this system is intended to be used on a month-by-month basis. Duh, since that’s how most bills work, right?
Second, this system is designed to be updated twice per month – or every time you get paid (Hund-os in the bank, baby). This means that you’ll sit down and go through the steps below every payday.
Create a bill payment account
First, open a new checking account at your bank. You’ll use this account for bill payment only.
Many banks now allow you to open an additional account online with just a few clicks, so it’s a snap. You’ll also probably want to get a debit card for the account (More on that later).
Establish a buffer balance
Next, deposit a buffer balance. $250-$500 is good to start, but even $100 works too. Whatever you can afford.
The buffer balance acts as a little extra money in the account in case a bill is more than expected, or you forget about a bill. It’s a buffer between the amount you’ve deposited to pay your bills, and the amount that’s actually deducted for your bills.
List your income
List all sources of income, the deposit date, and the deposit amount.
Include your salary, spouse’s salary, any rental income, alimony, etc. If you’re paid it, write it!
For payments that you receive more than once per month (Such as a bi-weekly salary deposit), list them separately. For example: Paycheck 1 and Paycheck 2.
List your bills
Next, list all of your bills, their amounts, and their due dates.
You may not yet know all of this information for all of your bills. That’s ok, because you’ll come back later in the month to fill it in once you receive the bill.
If you have a bill that isn’t on a monthly cycle, list it as many time as you pay it in a month.
For example, if you make bi-weekly mortgage payments instead of monthly, list each payment as a separate bill.
For bills that occur less than monthly, list them anyway. If the bill isn’t due that month, list the month it was last paid.
For example, my trash collection service is billed quarterly. If I last paid it in April, and it’s now May, I’ll write “last paid in April” where the due date would normally be.
Additionally, include one-time or non-recurring bills on your list.
Let’s say you have a dentist bill due this month (Did you get a free toothbrush at your visit? Woot!). You need to pay the bill, so you need to write it down! You’ll take the bill off your list next month, since you (hopefully) didn’t have to go to the dentist 2 months in a row.
If you set aside money for savings or investments each month, include those amounts as well.
What not to include
What NOT to include in your bills list: Anything that is deducted from your paycheck before the paycheck is deposited. This may include 401(k) contributions, insurance premiums, or money that is automatically deposited into a different account.
Why? Because the purpose of this system is to set aside money for your bills that need paying – not the ones that have already been paid prior to deposit.
Determine the payment source
It’s important to note here that the month in which you receive a deposit may not be the month for which it is budgeted.
For example, let’s say you receive a deposit on June 23rd. You won’t get paid again until 2 weeks later, July 7th. However, you probably have several bills that are due prior to July 7th. Rent or mortgage payments are a great example – they’re typically due on the 1st of the month (Bone Thugs? Anybody with me on that one?). Therefore, the deposit you receive on June 23rd will be used to cover your checks for the first half of July.
Label your income
Label your paychecks with a 1 or a 2 (Or however many paychecks you’re working with), depending on whether the deposit will cover bills for the first or second half of the month. In the example above, the June 23rd check would be July’s paycheck 1.
If you’re working with more paychecks, add more numbers. For example, If you and your spouse get paid on opposite weeks, you can add 3 and 4.
Label your bills
Compare the due dates of your bills to the deposit dates of your checks, and determine which check will cover each bill.
Hint: It’s usually the paycheck closest to, but not on or after, the due date.
Write a 1 or a 2 (or 3, 4, etc) next to each bill, based on which check you’ll use to cover it.
For bills due after the deposit date of the first check of the month, but before the deposit date of the second check, write a “1.” For checks due after the deposit date of the second check, but before the deposit date of next month’s first check, write a “2.”
Make sense? Good!
Oh, almost forgot – if you’d rather color code or use symbols instead of numbers to label your deposits and bills, do that! Do whatever works for you.
Determine the transfer amount and transfer funds
Add up all of the bills marked “1.” Write down the total, and label that amount “Paycheck 1 Transfer.” Transfer that amount into your bill payment checking account. Do the same for bills marked “2” with the “Paycheck 2 Transfer” box, once you know the amounts and due dates of all the bills for the second half of the month (And once your second paycheck is actually deposited). Do this for all of your deposits.
Shuffle if needed
What happens if the bills for one half of the month are more than the deposit for that half? Simply shuffle some bills around and use money from the prior check to cover a bill or 2 that would normally be paid with the current check.
For example, let’s say that you receive a deposit of $1,500.00 on July 7th (This is July’s “Paycheck 2”).
Your bills for the second half of the month total $1,700.00 (“Paycheck 2 Transfer”). Yikes! That’s $200.00 more than the deposit. But, you only have $600.00 in bills to pay from your June 23rd check (July’s “Paycheck 1”).
Simply switch a bill or 2 from paycheck 2 to paycheck 1. The money to cover the switched bills will get transferred earlier, that’s all. Easy fix!
Now, if your bills exceed your deposits for both checks… sounds like you have some budget cuts to make!
Pay those bills!
Now, you know which bill is due when, and in what amount. Go out there and pay those bills!
There are a few options for paying:
- Send a check (Really? If this is your jam, then go for it. I won’t judge… much)
- Pay bills manually online (Using that handy dandy debit card we mentioned waaaay up at the top of this post!)
- Use your bill payment account or its debit card to setup autopay on your bills (This is my preferred method)
I switched almost all of my bills to autopay a few years ago. It has made life so much easier.
I simply use my bill payment worksheet to determine how much money from each paycheck to transfer into my bill payment account, and that’s it.
Okay, that’s not totally it. I do a weekly verification to ensure that any bills that were due actually got debited out of the account, and in the right amounts. But that’s it.
On the fence?
You may be uneasy about some of this, and that’s okay. It can be a big change! Let’s address some potential concerns.
Still not convinced you need a bill payment account?
Let me tell you why I decided to separate my budgeted bill money from the rest of my money.
When all my money was being deposited into one checking account (And staying there until I saved it, spent it, or paid my bills), I had no idea, at any given time, how much money in that account was earmarked for bills, savings, or discretionary spending (Aka fun money).
The solution? I pull my bill money out of my general checking account and place it in its own account. This safeguards it against shiny object syndrome. In other words, I isolate it so that it won’t be accidentally spent on other (Shiny, pretty!) things.
Still not convinced you need a debit card for your bill payment account?
Trust me, the debit card comes in handy.
Some websites won’t allow you to use ACH drafts to make payments (Where you provide your account’s routing and transit number and account number). In fact, most websites actually require a debit or credit card for one-time or recurring payments.
The debit card is also nice for bills that you still pay manually. I have a few recurring monthly payments that don’t offer autopay, and my debit card works great for those. Additionally, it is useful for one-time payments, such as a dentist bill.
Still not convinced autopay is right for you?
In all honesty, it may not be. Everyone’s different. For me, it ended up being a great choice.
I used to manually pay all my bills each month because I was obsessed with ensuring each bill was paid on time. I gave autopay a shot and loved it, and I haven’t looked back.
Relinquishing control over manually paying bills was totally worth it. I save the stress of having to pay everything manually every month. Plus, I’ve found that autopay systems are generally reliable.
Wrap it up
Paying your bills on time is important. Without a system to track and pay them, you’re destined to fail. Using a dedicated bill payment account, bill payment worksheet, and reliable payment method (Preferably autopay) is a great system for finally taking control of your bills. Have a seat each payday, run through the 6 steps above, and you’ll be well on your way to paying those bills.
What system do you use to track and pay your bills? Have you tried the method above? Let me know in the comments below!