I have a good amount of experience to back up what I’m about to say.
My guess is that you spend 4-8 hours per month “managing” your money.
I use the word “managing” with plenty of definitional slack.
Today I want to paint for you a world where you put every single possible bill on autopay, you don’t stress on, leading up to, or right after payday, and you cut your money management time by about 90%.
From eight hours, to less than an hour.
From four hours, to less than an hour (there’s a law of minimum-required-effort that you hit…you need to be committed to at least 45 minutes per month for this process).
The Old Way Is the Bad Way
Your old way of managing bills is horrible.
The bill arrives. Let’s get bill R.
You freak out (internally, to protect the children).
You begin the mental exercise of calculating when the next paycheck comes. Hang on for this ride. It goes something like this:
“Let’s see..I was last paid.. 10 days ago…so the next one should be on…oh but wait Monday’s a holiday–does that matter–maybe not. So..yes, Thursday they should go out and it should be in the account on Friday or, at the latest Monday. I’ll pay this bill on Mon–no. Oh right, I have these other three bills due. Bills L, A, M and E are all due at about the same time. L definitely needs to be paid first or it’ll be turned off. Bill A I suppose can wait for a bit…I can definitely put that off until…when would I get paid the next time? Where’s my calendar? There. Now where the HECK is my pen?! Why can I never just keep a hold of one stupid pen? KIDS?! WHICH ONE OF YOU TOOK THE ONLY THING I CARE ABOUT IN THIS HOUSE? MY PEN?!–Oh wait, there it is. The bill stack had fallen on top of it. I should get a file folder for this stuff. Stacking them is precarious at best. So when would the next next paycheck come? The 3rd of next month. So I’ll pay bill A then–ah shoot. The due date is on the 30th. Well, we can swing that probably. I’ll just need to keep an eye on the checking account to make sure there’s enough money for A when that day rolls around. And I’ve got to tell [insert spouse] NOT to spend that money when it’s there! I can’t stand how they just see that balance, and the jeopardize this entire operation with one impulse purchase…so this bill R? Okay, net paycheck is [amount]… L, M, and E all need to be paid with this paycheck. That leaves us with [smaller amount]…that should be enough for this bill R… cool. I can pay that on either Friday or the following Monday when the direct deposit hits the account.”
Unfortunately, two days later, before your paycheck has arrived and L, M, E, and the new (now old) bill R have been paid, you get another bill B (that only comes quarterly so how the heck were you supposed to plan for that?).
The following exercise begins (again):
“WahahahahaHaHaHa! How much do we have in the account right now…logging in…checking… hrm. That’s lower than I expected… WHAT THE HECK is that charge for $46.50 from [insert gender-stereotyped location here: either Home Depot or Bed Bath & Beyond]? No! We needed this for bill L! Okay, we can maybe still pay it when the paycheck comes in, we’ll just need to skip paying either M, E, or R. Or… hrm, E is due first, so we’ll pay that before M. If there’s enough after that, M gets paid. And this new bill B…it’ll just have to wait. We have 30 days. The next NEXT paycheck will take care of that. I just need to make sure I tell [spouse] to not buy ANYTHING unnecessary (Jesse’s observation: big gaping hole here, how are we defining unnecessary? Your spouse doesn’t think they ever buy anything unnecessary)… shoot… I lost my train of thought. Okay, here we go…L, then E. A and M with the next Next paycheck, and shoot.. oh no, R with the next paycheck — that’s right. And then B…B… yeah, B will just wait. We’ll see what happens.
You wake up in the middle of the night to go grab a drink of water from the fridge. You walk past the calendar and see your learning tower of Bills. It spurs the following:
“Why am I even thinking about this now? I have it all under control. L, E… oh wait. Was that right? Yes, L, and E with this next paycheck, which should be either tomorrow or Monday. Then A and M with the next NEXT paycheck on the…whenever that is. Some time during the first week of next month. Then… oh wait…that’s right, B came today and I decided to YAWN…decided to… oh yeah, wait and see. Oh, and I’ve GOT to talk to [spouse] about their purchasing. I swear they are so insane when it comes to money sometimes!”
And guess what? Every time you see those bills, you go through some minified version of your bill planning process. And don’t tell me you don’t, I’ve done this long enough to know that you do. 🙂
I’m going to make this point so big and bold, it will be seared into your subconscious and drive your decision making for the rest of your life:
The biggest money management time drain is timing bills to paychecks.
It adds no value.
Think about it. You’re just timing the payment of the bills. You’re not using some strategy that optimizes some float and scores you loads (feel the sarcasm in that) of interest, or paying early to score some discount. You’re just treading water.
It’s a treading water activity every single time.
Where you’re exerting yourself like Michael Phelps… you’re not really getting anywhere.
Your only reward is that you DIDN’T overdraft. Or DIDN’T have a late payment. Value-less!
Embrace Rule Four.
Get to the point where you’re living on last month’s income.
If you don’t want to do it for all of the intangible benefits. Or the better sleep. Or the value proposition… just do it so you won’t waste so much time on this absolutely meaningless, valueless exercise of timing bills to paychecks.
So, Rule Four again, Stop Living Paycheck to Paycheck. What you earn in March, you spend in April. While you’re spending money in April, you’re earning new money, which you’ll spend in May.
You start the month with a pile of money (YNABers call it their Buffer) and just pay your bills as they come. Or in a batch. Or for the love of all things automated-and-awesome, set them all up on autopay. Consider the following scenario, with a YNABer who’s operating under Rule Four.
The bill arrives.
“Huh, the gas bill arrived. How cute.”
And then this YNABer sticks it in their pile of bills. They know they always pay bills on the 15th and 30th.
Or what about this.
The bill never arrives. It’s on autopay.
That’s right, our YNABer doesn’t feel a thing. The transaction is likely scheduled in YNAB and when they do their monthly import of transactions, it matches up nicely and life moves on. Total time/mental energy invested in that bill: 1 manajoule (that’s a unit of measurement of energy expended to manage something and yes, I made it up. I have full “dibs” on all “rights”.)
Your old way of doing things? We had to measure in kilomanajoules.
And the Relationship Blossoms
All those shots you were firing over the bow at [spouse] during your mental bill-paying gymnastics? They’ll go away. And trust me, it’s not entirely your spouse’s fault. When you explained your plan to them, they only could pick up tidbits because of two reasons:
1) You were flustered, so the last half of words were dropping off and
2) You wanted to talk about it during The Amazing Race, which is your spouse’s favorite TV show on Sundays. Between the hours of 8 and 9 PM Eastern.
The bits they picked up?
“Hey honey, we ne–to———–frustrated———you—–never—-bills—–pen——–paycheck——-I——–BLAME———-you.”
Or something like that.
When both spouses can understand the bill-paying system (and they will, under Rule Four), communication is optimized, blame is reduced, and The Amazing Race can be watched in peace.
Start siphoning off a bit of your money into your Buffer fund. One day in the near future (surveyed YNABers report it takes about four months of awesome work), you’ll be sitting on the first day of the month, you’ll look at your checking account, and you’ll have enough to get you through the entire month. Welcome. You’ll wonder how and why you ever did it any other way.