Bills-In-A-Box: The Stress-Free System For Organizing Your Finances – The Setup (Step 2 of 5)

Yesterday, I introduced you to the Bills-In-A-Box system.  Today, I’ll outline the setup and go over the basics for how you can put together your own Bills-In-A-Box system and start using it to manage your monthly bills.

The Setup –

1.  Label your folders, January for folder 1, February for folder 2, and so on, until you have 12 labeled folders, January through December.  Label the final folder (folder 13) Accounts.  (More about folder 13 later…)

2.  Create a calendar for each month of the year.  Be sure that your calendar has enough space, in each date-block, to make small notations.  (As I mentioned in the introductory post, feel free to download and use the calendar that I designed for my own Bills-In-A-Box.)

Once a week – (or as often as is necessary)

3.  Gather your stack of bills.  Sort them by due dates.  (Since it’s July when I write this, we’ll use the month of July as our example month for the rest of the steps.)  You’ll also need your budget, so you won’t forget any of your monthly obligations.  If you don’t have a budget, I recommend You Need A Budget Pro.

4.  Going through your bills, make small notations on the calendar for when your bills are due.  For instance, if your electric bill is due on July 19, write something like “electric – $125.78” in the date-block for July 19.  Do this for all of the bills in your stack.  (Don’t worry, we’ll get to paperless bills and auto-drafts in a bit…)

5.  Let’s assume that you decide to send payments 7 days before they are due.  Backtrack 7 days from each of the due dates that you just noted, and write something like “pay electric – $125.78“.  Now, you have a list of payment dates and due dates.

6.  Guided by the payment dates, write out and entire month’s worth of checks.  On the calendar, write down the check number that corresponds to a particular payment date.  Address and stamp your envelopes, as well.  Put the checks (and bill stubs) in the envelopes.  Remember to sign the checks!  (If you don’t feel comfortable pre-signing the checks, you can wait until you actually mail them.)

7.  If you use online banking, login to your bank account and schedule payments.  (This is what I do.)  On your calendar, be sure to note that you have scheduled a payment.  My bank provides a confirmation number for each online payment.  I write these numbers on my calendar.  So, July 12 would read “pay electric – $125.78 – #34882“.

8.  If you receive e-bills (paperless bills) – the system still works.  Simply note due dates and payment dates.  It works the same if you have auto-drafts.  Simply write “electric – auto-draft – $125.78” for the date when the auto-draft is processed.

9.  Now comes the organizational secret of the system.  Until the payment for a bill has cleared your bank, the bill for that payment remains attached to the front of that month’s calendar.  Once the check (or payment) clears, you then move its bill from the front of the calendar to the back of the calendar.

I hope you can see how this system helps.  When a bill arrives, instead of throwing it into a pile, you simply open it, make a note of its due date (and create a payment date), and then attach it to the front of the calendar.  Once a week, you write out your checks and address your envelopes – for all of the bills that are attached to the front of the calendar.  Then, mail the payments that you scheduled the previous week.  The next week, you can login to your online account and verify that your payments have cleared.  Then, move the bills that have cleared the bank to the back of the calendar – and make a notation on the bill for when the payment cleared.  (If you don’t use online banking – wait until you receive your monthly checking account statement – and move your bills at that time.)

Instantly, your bills are organized.  If six months from now, someone calls you about your electric bill for July, you can go to your July folder, see that it was due on the 19th, payment was sent on the 12th, and the check cleared on the 17th.  And, the bill will be filed, right behind the calendar, in the folder marked July.

As with any system, you’ll want to tailor this one to fit your life.  Personally, I like to pay all of my bills at the same time, so I send all of my payments at the first of each month.  Then, as checks clear, I simply move bills from the front of my calendar to the back.  (Please note, you don’t have to actually attach the bills to the calendar.  You can simply set the calendar in the folder, and stack uncleared bills in front of it and cleared bills behind it.  Personally, I print my calendar on bright green paper so that it stands out from the bills that are in each folder.)  Also, if you want to get fancy, you can color-code your calendar notations.  I use red for due dates and blue for payment dates.  Remember, our goal is to create a simple-to-use system that we’ll actually use.

Tomorrow, I’ll write about how to deal with bills that are due once a year and how this system can help you manage your cash. The next day, I’ll have some ideas for managing fixed-payments and how the system helps me save for future purchases.  Finally, I’ve produced a video how-to, detailing how I use the system.

If you haven’t already done so, consider subscribing to the RSS or Email updates – and be sure to check out tomorrow’s post – step 3!

If you have questions -or suggestions – feel free to leave a comment.  I’ll try to answer your questions in the upcoming posts.

Click here for Step 1 – The Introduction

Click here for Step 2 – The Setup

Click here for Step 3 – Non-Monthly Bills

10 thoughts on “Bills-In-A-Box: The Stress-Free System For Organizing Your Finances – The Setup (Step 2 of 5)

  1. I really respect your ideas, but with all due respect, this is the most complicated bill payment system I’ve ever seen, especially when software like MS Money and Quicken is available. You can schedule each bill you have, enter how often it repeats, whether it is a fixed amount or if it varies (the programs will estimate based on previous occurrences). You can have reminders that bills are upcoming. You can have the transactions automatically entered into your check register.

    Not that I have everything figured out, but I just put my bills in a folder and when the program reminds me to pay them, I do. This folder method seems like a huge time suck. I spend 5-10 minutes a couple of times a month paying bills. Dates are kept track of for me. Much simpler.

  2. Thanks for this series. As someone who is just starting to get her finance ducks in a row, I really appreciate the step-by-step guide to get organized. I’m looking forward to the rest of the series.

  3. JR.. I hope you’ll stick around for the video tutorial.. It’s very difficult to explain how the system works… and, remember, it’s designed to manage your paperwork, and works well along w/ Quicken or Money or whatever… plus, there are many people who are uncomfortable w/ software solutions, etc…

  4. I guess this is a little complicated, and if you don’t have a lot of bills to pay it might not be worth it, but it’d help keep everything organized and make it easier if there were questions about your bills later.

  5. @Jon… The setup takes a little time, but you are correct… It’s not just a ‘bill paying’ system, it’s a complete system for managing all of your financial documents… Over the next few days, I’ll better outline all of the system’s features. And, even those who have just a few bills will have receipts, EOB documents from insurance, etc. Again, I hope you’ll stay tuned!

  6. Thanks for the post. I really like this organization system. I have a binder that I keep most of my financial statements in but it is still hard to keep organized.

  7. Wow, this was great for us. We have used electroniic billing and it has been a disaster. We had paper bills, online automatic bills going every which way. I told my husband we need to go back and do everything on paper and have some sort of record of our payments. This might sound complicated, but it’s actuallly a very organzied tickler system and one of the best we’ve used.

  8. Very interesting system. I was hoping to see another couple of installments of the “bills in a box” system, but I will just have to wait.
    I will place you in my bookmarks.
    Thanks a bunch!

  9. @marC – I’ll have post #3 in this series on Tuesday!!! Thanks for the patience…

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