Pay Down Bills Right Away

Paying bills is not the most fun thing in the world. In fact, some people have described it as going to the dentist with no painkiller.

How do you pay your bills? Do you pay it the second you get it in the mail? Do you wait for minutes before the due date and then scramble to pay it? Or do you only remember to pay the bill after the electricity goes out?

Four months ago, a friend who was in financial trouble asked me for help. I asked him to grab all his bills so we could total what he currently owes. However, he did not bring me his bills; he brought me a bunch of second and third notices from various companies.

What struck me were all the fees he had accrued were due to paying things late. One credit card company had added a $35 fee for missing the payment by 9 days. An electricity company added a $12 fee for missing the payment, and a mobile phone company added a $5 fee for missing the due date of the payment. However what struck me as weird, is this friend had the money to pay all the accounts and them some! But due to a lack of organisation, he just couldn't get around to it.

In fact, my friend and I worked out that over the last twelve months he had paid on average, $32 a month in late fees or $384 a year. Moreover, some of these fees were on personal loans, so the fees themselves would start getting charged interest.

Talking to my friend, I suggested he started paying his accounts right away. Every time he opens the mail and it's a bill, jump on the phone and “B pay” it. He started to give me a long list of reasons why this was not practical to do. The main reason was he was tired when he got home from work and he just wanted to sit down and relax. OK I thought how about we set up direct debit from your bank account. Each bill would automatically be paid on a certain date every month.

Four months down the track, my friend has not missed one payment. All bills have now been direct debited, and most importantly, he has not paid one late fee. A few phone calls and an hour and a half of filling out forms have saved him on average $32 a month. This is not just for this year, but every year going, forward. My friend is kicking himself he did not do this five years ago.

How do you pay your bills? Can you do better? Your aim should be a zero dollar charge a year in late fees from each biller. My wife and I have had no late fees in years. And we will contiune this for the rest of our lives.