Weekly Payments
My perspective on finances is that I want to automate everything. Bills and utilities on auto pay, direct deposit paycheck, anything that reduces the likelihood that I’ll forget to pay something. The only thing that I want to keep manual is my credit card payment, so I can decide how much of a balance to keep and how much to pay off. And even in that case, I have an automatic monthly payment of my minimum required payment, just so I won’t get hit with a late fee or missed payment penalty.
This generates a problematic situation sometimes, though. My various bills hit at different points in the month, and sometimes I forget about a bill that will be coming out soon. Once before, I paid a substantial amount toward my credit card, but I didn’t leave enough in my checking account to pay our vehicle payments. I postponed those payments until after my next paycheck arrived, and fortunately nothing bad happened, but it was a pretty scary scenario. I take a lot of pride in my credit and consistency with repaying debts.
My solution for a while was to simply leave more in my checking account than I expected to need. So far, this has worked, but it also means that I can’t pay as much toward my credit card as I would like to sometimes. Since I’m leaving more liquid money in my accounts, there is a higher balance on my card, and thus I pay a higher amount toward interest. It isn’t a huge amount, but it adds up over time and I still hadn’t solved my original issue of not really having a good idea of when bills will be coming out.
I pondered for a while that these debtors should let me make weekly payments. This would allow me to schedule payments on a regular pace and have a better idea of how much I need to leave in my checking account. If my weekly payment for all my debts is some given value and there are more weeks before I get paid again, I know exactly how much I need to leave to cover those payments. Sure, I could manually make those payments every single week, but that’s way more effort than my autonomous brain wants to commit to.
Eventually, it occurred to me that I had another solution for weekly payments: my bank offers a bill pay service that will automatically cut and mail a paper check for a specific dollar amount at the frequency of your choosing. I simply add the payee details and set the frequency and value, and the check is automatically sent. Boom, problem solved. I could take my monthly payment for these debts, divide it by 4, and set weekly checks for that amount. This means I know exactly what I’m paying each week, and there should end up being about two extra payments per year over making the standard monthly payments. This means I pay the debts down faster.
The plan seemed fool-proof until I considered how I might switch over to the weekly checks. If I accidentally started sending checks AND making automatic payments, I could end up spending way more than I intended and putting myself in a position where I might not be able to afford my other bills. On the other hand, if I canceled the automatic payment before the checks started consistently arriving, I could put myself into delinquency even if I actually had the money to pay the bill. What a dilemma.
I decided to add payees and start scheduling checks in the amount of $10 per week for each of my debts without canceling automatic payments. This would give me explicit evidence that the checks are arriving and contributing to my balance before I actually had to depend on them. An extra forty bucks a month toward these debts while I make sure the bill pay service is working properly is a small price to pay. Besides, faster payoff. What’s not to like?
Just so that I don’t get myself in over my head, I plan on taking the bills roughly one a month and converting the automatic bank draft to weekly automated checks. That way, if something does go sour and I overpay or I have to make an additional payment, I’m only on the hook for a single bill rather than all of them. Once one bill looks right for a full monthly cycle, I’ll swap to the next.
After everything is finished, I should have a weekly drip of bill payments that is easier to predict and manage. I know how much I need to leave in my account, so I can pay down high interest debts earlier and save on the financing costs. Plus, the debts should be paid down faster with the additional payments over time, and I always round up on these payments so I’m paying more on principal each month anyway.
The one exception to this process is my utilities. Since I don’t owe them anything beyond payment for services provided and they aren’t charging interest, I don’t gain anything by paying more or earlier. Plus, I don’t really know how it would be handled making extra payments if there is no principal to apply to. I figured with those, I can just leave them as is. Eventually, I may end up consolidating all the utility payments to the same day each month so I can expect them better, but even that is icing on the cake. Just being able to take my debts and regulate them on a weekly basis should be an enormous improvement.
This generates a problematic situation sometimes, though. My various bills hit at different points in the month, and sometimes I forget about a bill that will be coming out soon. Once before, I paid a substantial amount toward my credit card, but I didn’t leave enough in my checking account to pay our vehicle payments. I postponed those payments until after my next paycheck arrived, and fortunately nothing bad happened, but it was a pretty scary scenario. I take a lot of pride in my credit and consistency with repaying debts.
My solution for a while was to simply leave more in my checking account than I expected to need. So far, this has worked, but it also means that I can’t pay as much toward my credit card as I would like to sometimes. Since I’m leaving more liquid money in my accounts, there is a higher balance on my card, and thus I pay a higher amount toward interest. It isn’t a huge amount, but it adds up over time and I still hadn’t solved my original issue of not really having a good idea of when bills will be coming out.
I pondered for a while that these debtors should let me make weekly payments. This would allow me to schedule payments on a regular pace and have a better idea of how much I need to leave in my checking account. If my weekly payment for all my debts is some given value and there are more weeks before I get paid again, I know exactly how much I need to leave to cover those payments. Sure, I could manually make those payments every single week, but that’s way more effort than my autonomous brain wants to commit to.
Eventually, it occurred to me that I had another solution for weekly payments: my bank offers a bill pay service that will automatically cut and mail a paper check for a specific dollar amount at the frequency of your choosing. I simply add the payee details and set the frequency and value, and the check is automatically sent. Boom, problem solved. I could take my monthly payment for these debts, divide it by 4, and set weekly checks for that amount. This means I know exactly what I’m paying each week, and there should end up being about two extra payments per year over making the standard monthly payments. This means I pay the debts down faster.
The plan seemed fool-proof until I considered how I might switch over to the weekly checks. If I accidentally started sending checks AND making automatic payments, I could end up spending way more than I intended and putting myself in a position where I might not be able to afford my other bills. On the other hand, if I canceled the automatic payment before the checks started consistently arriving, I could put myself into delinquency even if I actually had the money to pay the bill. What a dilemma.
I decided to add payees and start scheduling checks in the amount of $10 per week for each of my debts without canceling automatic payments. This would give me explicit evidence that the checks are arriving and contributing to my balance before I actually had to depend on them. An extra forty bucks a month toward these debts while I make sure the bill pay service is working properly is a small price to pay. Besides, faster payoff. What’s not to like?
Just so that I don’t get myself in over my head, I plan on taking the bills roughly one a month and converting the automatic bank draft to weekly automated checks. That way, if something does go sour and I overpay or I have to make an additional payment, I’m only on the hook for a single bill rather than all of them. Once one bill looks right for a full monthly cycle, I’ll swap to the next.
After everything is finished, I should have a weekly drip of bill payments that is easier to predict and manage. I know how much I need to leave in my account, so I can pay down high interest debts earlier and save on the financing costs. Plus, the debts should be paid down faster with the additional payments over time, and I always round up on these payments so I’m paying more on principal each month anyway.
The one exception to this process is my utilities. Since I don’t owe them anything beyond payment for services provided and they aren’t charging interest, I don’t gain anything by paying more or earlier. Plus, I don’t really know how it would be handled making extra payments if there is no principal to apply to. I figured with those, I can just leave them as is. Eventually, I may end up consolidating all the utility payments to the same day each month so I can expect them better, but even that is icing on the cake. Just being able to take my debts and regulate them on a weekly basis should be an enormous improvement.
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