How many times per month do you get paid? The answer, if you’re in America, is probably twice. In Canada, it varies between once and four times. Bills, however, are often due at scattered times of the month, and often don’t correspond with pay dates. What can you do then, to make sure that you are able to pay your bills on time?
The largest bills that households have are housing and transit costs. These two costs can add up almost 50% of your budget and if you don’t plan ahead, you will oftentimes reach the first of the month and realize that the amount of money in your bank account is not enough to pay your rent!
The same story plays out the last week of the month – people around me start to mutter absent-mindedly to themselves about rent being due next week; the same people will also talk about how their beer budget will be affected and how maybe we should all stay in tonight instead of heading downtown. The week after, lines will form at the metro wickets. Students, yuppies and the middle-aged alike will all stand in a line, often 25+ people long at each wicket, to buy tickets to ride the metro.
The solution is simple. Add up your monthly bills, divide by the number of paycheques you have in a month and voila! Put that money aside (in a different bank account) each pay period. When your bills’ due date comes up, you take the amount from the money you’ve set aside, and you use it to pay the bill!
Here’s an example:
As you can see, I have 4 bills due around the beginning of the month (rent, bus pass, RRSP and internet). These bills add up to $1050, which is more than 65% of my entire month’s budget!
In this example, I would calculate $1495/4 (because I’m paid 4x per month) and transfer $373.75 each pay period to a separate “bills” account. Any month I have leftover after the $373.75 transfer is the money that I will spend on groceries, entertainment etc. I do not touch the money set aside, except to pay bills.
By following this method, I make sure that I always have the money to pay my bills each month and am able to, literally, spend my primary bank account down to zero without having to worry about how I’ll pay rent the next day
If you enjoyed this article, please consider sharing it!
I’m so with you on this one! I get paid weekly and my spreadsheet has my pay cheque breakdown showing where everything goes. I literally take all of my expenses and divide them by 4, and transfer those amounts to their respective accounts down to the cent. I never have to worry about not having the money, it’s totally stress free.
I dislike those people because I can’t imagine missing a payment on anything, it just seems so unreliable and flaky, which are not terms I would ever want to be associated with.
That’s exactly how I dealt with it when i realised I was struggling with monthly bills (rent was weekly, but utilities, bus pass were not). And it’s a system I still continue to this day, and have extended this to cover insurance, vehicle maintenance and other such expenses.
[...] How to find motivation to save How to pay your bills on time [...]
[...] pretend that, on January 30th, when my credit card bill was due, I didn’t have enough money to pay my rent and my bill. If I paid the minimum payment of $10, on my next credit card statement I would see a whopping [...]