Entries for archive: 2009-05

Found 1 entry.

Paying Bills per Month Rather than per Year

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There are two trails of thought in my head these days. Firstly, the idea that I will retire at 40 once I am financially independent.

The second is that of simplifying and downsizing my life and my needs.

The funny thing is, sometimes these ideas aren't quite orthogonal and one influences the other, sometimes to it's detriment.

Paying Bills per Month

Recently, I changed banks. I did it for a few reasons, one of which was that I could do more of my banking online or over the phone. I rarely - if ever - need to go to the bank now and in fact they don't even have premises since they are physically inside Post Shops.

This bank switch has made my life simpler and easier and I like it.

Whilst I was switching though I also decided to change a couple of other things too. The main one being that where possible, I decided to change from paying some bills quarterly or yearly to paying them monthly.

The reasons for doing this I will come on to in a second but firstly, let's see why this is now a disadvantage.

Going Against My First Plan

Becoming Financially Independent means being careful and clever with your money. Yet paying for things monthly may go against the being clever bit.

For example I have to pay my rates quarterly. They are due at the start of the 3rd month of each quarter, therefore the money for the first two months sit in my account earning money for me. But by changing it to monthly payments means that I no longer get that advantage.

Also for other bills that are paid yearly, I may have to pay everything up front but usually you earn a slight discount for doing it that way.

Therefore in both of these cases, switching to a monthly payment plan is probably not the best thing to do financially speaking.

Going With my Second Plan

Overall however, paying these bills monthly makes things a lot easier and therefore makes my life simpler.

That is, instead of putting money aside into a Freedom Fund and having to calculate how much to put in it each month and then paying it at the beginning of each year I instead have a Bills Account which receives the correct amount every single month.

I know that a Freedom Fund isn't the hardest thing to do and I still have one for those bills I can't pay monthly but I also like the idea that I'm paying for something as I need it.

In Conclusion

Whilst paying for some bills quarterly or yearly may have a financial advantage, the ease and simpleness of paying them monthly outweighs pure monetary gain.

This may or may not work best for you but how do you do it and why?

Labels: budgeting, banking, spending

Inserted: 2009-05-12 21:18 (2 years, 9 months ago)