Do you ever look at the people around you and think, “Wow these folks are so disorganized; it’s no wonder their finances are a mess?” You know the people I’m talking about. You go to their house and they misplace their remote, their keys and their credit card in a five-minute time span.
Have you ever looked in their bill basket? I’d be willing to bet that it’s a mess. How do I know? Because I used to be one of them.
When I was in $30,000 of student debt, my financial life was a disorganized mess. Don’t get me wrong, I always paid my bills on time, but I wasn’t always sure what my balance was and I had no idea how long it would take me to pay off my debt in full.
Translation: It’s hard to be motivated to pay off $30,000 in student loans when you don’t even know how much you owe.
What I later learned about myself, is that having a clean and orderly bill basket is just as important as having a clean and orderly home. With bills strewn around the house or carelessly tossed in my bill basket, I wasn’t in control of my finances.
When I finally organized my bill basket, it changed my finances and ultimately my life. Here's how I did it:
1. Dump the junk. If you have a physical bill basket, get rid of all the non-bills. If you track your bills electronically, organize all of your files and spreadsheets and delete all the non-bill-related items. When I cleaned out my bill basket I found expired coupons, playing cards, last year’s W2s, old greeting cards and miscellaneous other items that had, “no business” being in the basket. The only items I left in the basket were bills, envelopes and stamps.
2. Pay bills as soon as they arrive. The longer you procrastinate, the more likely you’ll be to forget the bill or pay it late. For an added visual reminder, I write down when each bill is due on my calendar. If you’re technologically savvy you can set up reminders on your phone or iPod.
3. One statement, one folder. As I pay my bills, I file the statements into labeled folders. Each genre of bill has it’s own folder (electric bill, mortgage bill, cable bill etc.). When I make a payment (online or check), I write the date I made the payment, the check number (or electronic confirmation number) and the payment amount on the statement. If I’m paying electronically, I keep this information in a spreadsheet.
4. Keep “paid in full” letters. When I finish paying off a debt I keep a copy of the “paid in full” letter in the corresponding bill folder. This is particularly important for large debts like your mortgage, medical debts, student loans, car loan etc. I plan to keep these letters forever. You never know when a company or creditor will make a mistake and you’ll need proof you actually paid your debts in full. I typically keep proof of payment for smaller bills for a year.
5. Pay bills online. Many big companies and even some smaller companies offer online bill payment. It’s quick, easy and a surefire way to make sure that your bills are paid on time. It also saves on clutter in the bill basket and good for the environment. My Verizon bill is set up to auto-pay itself each month using my credit card. If you’re not responsible with credit cards, you can have your bills automatically deducted from your checking account.
What systems do you have for paying and organizing your bills? Have you noticed a correlation between disorganization and debt?