In the last year, we have found budgeting to be such an eye-opening experience. Despite our best attempts to avoid it, it’s pretty much impossible to get your finances in order and reach long term goals without a budget. Today, Shannon Thomas from Mish Mash Mama shares her advice on dealing with bills when making a budget.
If there is one thing my husband and I have learned in 14 years of marriage, it’s that spouses HAVE to talk about money.
Determine Your Monthly Income
This was easy for us, because the military pays equal amounts, twice monthly. If you are paid weekly, or every two weeks, take your total for 4 weeks. During a few months, this will mean you get an “extra” paycheck. (Those are great for padding your savings or throwing at debt.)
If you are paid commission, or paid on an irregular schedule, look at your last 6-12 months of income, and base your budget on the lowest month. This will hurt, but it will make for less worry when times are lean, and more opportunity when your paychecks are larger. Factor in all of your regular sources of income!
Whatever your total is, write it down on a piece of paper.
Track Your Bills
If you are super organized, this will be easy. If you have bills all over the place, be prepared for the fact you might miss one. This is a good time to designate a “bills to pay” spot on your desk, if you don’t have one already.
Make two piles, one for recurring, monthly bills, and one for random expenses you don’t normally have. If you have infrequent payments (quarterly, bi-annual, annual) you can make a third pile for those.
I personally need a physical, visual representation of each bill. For the bills we pay online, I made sure to print out a copy, just so I had something tangible to work with.
The important part is that you take note of ALL your obligations. Go over all of these together! There may be unpleasant surprises, but overall, it’s best just to be on the same page. It can help to have an “amnesty agreement”, where no one is allowed to get angry or self-righteous.
Write down the amount and due date of every single bill, in order, by date. Keep a master copy of this list, in case anything changes.
This is Where We Got Our First Wake-up Call
We were paying for things we didn’t use, and we had a couple of bills that were unreasonably high. There was no point for us to budget around bills we wanted to eliminate, and this was a good time for a break!
Whichever one of you is better being tough with salespeople, get on the phone (or online, if you can.) Cancel all those old magazines, that dusty gym membership, and update your cell-phone plan. This is not the time for big decisions, just the junk you both readily agree on.
While one of you does the dirty work, the other one can cook lunch! Make sure you note any final payments you need to make; then scratch those suckers off your list!
Now back to business. Add up all of our bills.
Every family has their comfort level when it comes to spending. Once you account for all of your bills, what you are left with has to cover groceries, gas, personal spending, and savings, plus any incidentals that come up.
So, without nitpicking, make sure you are both realistic and comfortable with the figure you have after your subtract your “bills total” from your “income total”. (If you look online, you can find nifty breakdowns of recommended percentages for certain categories. Those can be a starting point if you have no idea what is appropriate.)
If you don’t like what you see, it’s time to go over your bills again, and see if you can eliminate or reduce any expenses. This may take a while. You also may not agree on where the reductions need to happen. You may even need to sleep on it. At this stage, compromise is key.
Once you have your “bills total”, make a your plan.
Coordinating getting paid with paying bills let’s you know where you stand, right away, so you can plan the rest of your budget. Because we get paid twice a month, we decided to pay bills twice a month.
We already had all of our amounts and due dates written down, so it was easy to divide them. Bills that are due on the 1st-14th get paid out of our first check. Bills that are due on the 15th-end of the month get paid out of our second paycheck.
If you get paid weekly, pay bills weekly. If you have one pay period that has way more bills than another, find a way to equal it out as much as you can. Some companies will let you adjust your due date if you ask. If you are disciplined, you can roll money over from one paycheck to the next. A really simple solution is just paying a bill or two early, just make a note so you don’t forget!
Write down your bill paying plan, and stick to it. Setting up automatic payments might be helpful, but just a simple notebook will work. Make a habit of paying your planned bills as soon as you get paid. Ideally, do this together, especially if anything has changed.
About extra, unexpected, or unusually high bills
We all have them at one point or another. Medical bills are a big culprit here. Plot them out according to due date, and pay them as soon as you can. If you need to make payments, call the company and make sure you won’t incur any extra fees.
If you’ve allowed enough for savings, you should be able to cover most typical “surprises” by tightening your belt a little. If you get hit really hard, you may need to have another budget meeting. At least now, you’ve laid the groundwork! Good luck and happy budgeting!
Shannon Thomas is a Navy wife and mother of 4 with a passion for sustainable, enjoyable living.