Saturday, June 2, 2007

Another Bill - Don't panic !

I used to panic when a bill arrived because we usually didn't have the money in the bank and had to pay by credit card. By the time we paid that bill off the next wave of bills arrived. No more thanks ! We sat down and tried to work out the best way to put aside money for our expenses without spending it before the next expense needed clearing.

Firstly, we pulled out the previous bills for the last 12 months and calculated the totals and divided by 52 weeks to give us our base weekly expense figure. Mainly the big ticket items such as:
  • Water
  • Electricity
  • Gas
  • House Insurance
  • Car Insurance
  • Medical Insurance
  • School Fees
  • Land Rates/Tax
  • Telephone
Once we had this figure $X we added an extra $20 for variation and increases. We then opened up one of those online only, high interest savings accounts and linked it to our transaction account where our wages are deposited. Each week after our wages were deposited an automatic transaction transferred a set amount into the high interest account.

The money was moved straight away so we didn't miss it as such. Now bills usually come every quarter so this savings account has the chance to build up enough money to cater for the expenses and also earn a nice rate of interest before the next bill arrives. When it does arrive now I don't panic. I simply transfer the precise amount into our transaction account the day before payment and clear the expense online.

This savings account also provides us with a buffer in case of unforseen or additional expenses. We don't withdraw anymore than what is required and if we have enough in our transaction account to clear a bill I won't touch the money at all. The automatic transfer of the money straight after we're paid is what really helps us save. Scared of bills no more !


PF101 said...

This is a great way to do it. I do something similar but I take it to the next level. I take advantage of the fact that with ING Direct you can have sub accounts with custom names so I transfe the money for each line item to each sub account. Then I have less to keep track of when it comes time to figure out how much money I have available for X expense. It's lazy accounting and I love it!

I've made this post a Post of the Day

Moneymonk said...

Having money saved also limit the amount of times you need to touch that credit card

Anonymous said...

We love saving. We always heard people say how you had to pay yourself first.

Only when we read did we find out HOW to pay ourselves first without killing ourselves.

Where would the money come from. Well, they answered that. We started with just 1% of our income. We have boosted it every month. Now we do well.

All thanks to some good advice.


Lora said...

You write very well.