A few days ago, I introduced my calendar-based system for organizing my financial documents and monthly bills. Today, I’m writing about how I handle bills that don’t come monthly, but come quarterly, annually, or semi-annually.
For those new to the site or to this series -
Click here for Step 1 – The Introduction
Click here for Step 2 – The Setup
Non-Monthly Bills -
1. You should have 13 folders in your box. 12 of these are labeled with the months of the year. The 13th folder should be labeled Accounts. (There will be more on the Accounts folder in the next bills-in-a-box article.)
2. Go through your folders and mark the dates when annual, semi-annual, and quarterly bills are due. Using the same technique that we used to pay monthly bills, go back 7 days from each due date and schedule your payment dates. If you want, go ahead and write the check for the payment, including the amount of the payment, if you know it. (You can also go online and schedule an online bill payment.)
3. Now, here’s where the calendar-based system really helps. Instead of simply noting the payment date and the due date, you need to backtrack an entire month, and make a notation, reminding yourself of the non-monthly bill. So, if your life insurance premium is due October 10, back up one full month, to September 10, and make a notation. Then, when you are going through your September 10th payments, you’ll come across your reminder and you’ll have an entire month to prepare for the payment. Why is this important? Have you ever sat down to create your budget, “spent” all of your income, and then realized that you had forgotten a non-monthly bill? With the calendar-based system, you setup not one, not two, but three reminders.
4. What if you forget when an annual bill is due? This, my friends, is what makes the bills-in-a-box system so handy. By having all of your bills in one place, organized by date, you can quickly flip through a previous month’s or previous year’s bills. For instance, my wife has an insurance premium that is due twice a year. In the past, I’d forget about the premium until a notice came in the mail. Frantically, I’d search for enough money to cover the premium, and, inevitably, our budget would have to be adjusted, mid-month. But now, I simply take my calendar from the previous year, go through it month by month, and note, on my new calendar, the dates when annual or quarterly bills are due.
Now, you have a system which organizes all of your bills, reminds you of when they are due, and provides instant organization. By combining this system with your checkbook, your online bill pay account, and your budget, you have a way of keeping up with all of your bills – those you receive in the mail, those you receive online, and those that you receive on a non-monthly schedule.
After explaining the system (in the Setup article) – several comments suggested that this system might be too complicated or that it might not be necessary, considering that some people pay their bills as soon as the bills arrive in the mail or that most people pay their bills electronically, etc. I’ll be the first to admit, I’m not sure that I’ve done a great job explaining the “why” of the system. So, here goes:
Even with all of the budgeting software that is available, and all of the advances in modern, online banking, I still need a system for organizing paperwork. I’ve tried a lot of systems, and this one works well for me. I can keep all of my bills in a central location and I can file them as they are paid. And, using the “payment date” and “due date” system, I can maximize the amount of interest that my money earns and still insure that my payments are processed on time. (Instead of paying all my monthly payments at the first of the month, I wait until an appropriate “payment date”, insuring that I earn more interest than I would have, had I paid them all at once.)
To summarize the system, so far -
Label 12 folders, January through December.
Into each folder, place a monthly calendar.
As bills come in, write the due date on the calendar and attach bills to front of calendar.
Create a payment date, approximately 7 days before a bill is due, and make a note of it on the calendar.
Send payment on the payment date.
As checks (or online payments) clear, mark those dates on the calendar.
Move bills that have been paid, and who’s checks have cleared, to the back of the calendar.
At the end of each month, you should see a calendar and behind it you should find, in order of their payment dates, the bills paid that month.
For annual bills, use the same system, but put an additional reminder, a month before the annual bill is due. (The same holds true for all non-monthly bills.)
Any questions or comments would be appreciated.