Recently, I tried some new tactics to help me stick to my monthly budget. My pay cycle had changed, which meant that my bills were now coming in during a time of the month when I had the least cash flow. I wasn’t prepared for this huge change so I called up my major creditors and asked to change my billing cycle dates. To make sure I was keeping with my new pay cycle, I also decided to sign up for auto-pay instead of continuing to pay by mail.
Changing my billing cycle and switching to auto-pay ended up forcing me to pay my essentials right away, deposit into savings, pay down debt and then know exactly how much money I had left over for fun and “extras” every month. Here is how these two simple changes will benefit your financial future.
1. Eases the impulse cash crunch
When you align your billing cycle dates with your pay dates, you reduce the risk of impulse purchases cutting into the cash you need to pay non-optional monthly expenses (mortgage or rent, car payments, insurance, groceries, gas, etc.).
- How this helps: Your bills are paid as soon as your paycheck comes in, and you can even put extra cash into savings before you get your hands on it for impulse purchases you haven't budgeted for.
2. Saves money
If you send in payments through the mail (instead of using auto-pay) then you’ll continue to spend money on envelopes, stamps, paper, bank checks and gas to drive to the post office.
- What you save per bill when you pay online: $0.02 envelope + $0.49 stamp + $0.02 paper + $0.05 check + $0.32 gas = $0.90 per bill paid via U.S. mail. That’s about $0.90 per bill that you could be saving each month. Why should you be paying extra to pay your bills?
3. Keeps you safer
While there is always some amount of risk when transmitting sensitive financial data, the risk is greatly reduced when you cut the paper trail out of the mix.
- How this helps: Auto-pay offers you the added layers of safety through data encryption and keeps sensitive data out of your trash can (where the unscrupulous may discover it and steal your identity).
4. Heals your credit score
If you have any dings on your credit score due to past missed payments, converting to auto-pay and aligning your billing cycle dates with your pay dates will eliminate this risk in the future.
- How this helps: The more timely you are about paying bills, the better your credit score will become over time.
5. Increases credit card rewards
Sending in your payments by check doesn't help you accrue any type of reward. But when you convert to auto-pay and choose a rewards credit card to pay with, you accrue reliable rewards each month. However, these rewards are only valuable if you don't cancel them out with interest from carried balances!
- How this helps: Aligning your billing cycle dates with your pay dates can ensure you always pay off debt before impulse spending cuts into your monthly cash flow.
6. Saves yourself time and stress
When you align your billing cycle dates with your pay dates, you only have to spend time paying bills once per month.
- How this helps: This naturally eases your stress—you’ll no longer feel like you’re always getting hit with another bill. It also saves you time because you can take care of all your bills at one time and then be done with it until next month. Finally, you don't have to spend extra time on the phone trying to talk your creditors out of charging you late fees for unpaid bills.
7. Helps you take control of your finances
If you’re unaware of when your bills hit each month (because they all hit at different times) it becomes easier to accrue overdraft or insufficient funds charges (which can range from $10 to $30 per transaction!).
- How this helps: Once you align your billing cycle dates with your pay dates, you can easily keep track of when you get paid and when you should be paying your bills, which ensures that you always have funds in your account to cover your bills as they fall due each month.
Need more budgeting tips? Make sure to keep up with our Budgeting Survival 101 series: