bill-paying system

We recently applied to refinance our mortgage to take cash out for the purchase of 15 acres of raw land. After they ran the obligatory credit report searches, they sent us a copy of our scores with each of the three agencies. I was very pleasantly surprised to see our scores less than 50 points away from the max in every single agency's report. Remember, I was once a notorious spendthrift and I had the credit scores to match.

I attribute much of our credit report success to our bill-paying system. It is one of the easiest systems I have seen out there and it works so well for us that we rarely (less than once per year) overlook a bill. This has allowed us to have credit reports without a single late payment in the past five years. I don't personally agree with most of the criteria used to determine credit scores, such as the enormous emphasis on a long credit history. In my ideal world, everyone would pay cash or trade for everything and credit would be rarely used and therefore, the history would be irrelevant. However, the credit score criteria is absolutely out of my control and is essentially a game. To win the game, you must avoid late payments. Perhaps our system will work for you too.

Our bill sheet is simply a spreadsheet file entitled "Bills2007." I have four columns in the spreadsheet as follows:

Column 1: the bill's due date
Column 2: the creditor or company
Column 3: the amount due
Column 4: the amount paid

I begin each month with the name of the month and then list the bills under it. My husband is paid weekly, so there are four color-coded sections of each month. The bills to be paid from Week 1 are blue, from Week 2 are purple, and so on. Each time I pay the bill, I fill in the amount paid column with the amount and color code just that amount paid column in red. This makes it easy to see what's been paid at a quick glance.

A single entry might look like this:

Column 1: 18th
Column 2: Duke Energy
Column 3: 186.00
Column 4: 186.00

When new bills come in the house, I have a designated spot near my computer where I stash the bills until I go to pay bills again the next week. At that time, I sort through anything new that has come in and update my spreadsheet with the new bills, putting them in the appropriate week with their due date and amount due listed.

On paper, it's very easy for us to see what bills we have during any given month, so if we're looking to cut expenses for awhile, I can pore over the bill sheet to see how we might do that.

It is also a great budget helper. In most weeks, we owe in bills about $150 less than we have coming in. If new bills have come in, it's easy to see which week we should put them in based on how much overage we have that week and when the bill's due date is. Also, once bills are paid for the week, there is an exact dollar amount left that has to be budgeted for gas, groceries, gifts, savings, giving and entertainment. This is the easiest way I have found not to go over-budget.

One final tip I recommend is to make two or more payments on each credit card in each cycle. For example, if your credit card is due on the 3rd of each month and your allocated payment is $60 per month for that card, list it and pay it twice in the cycle: $30 due on the 3rd and $30 due on the 18th. This one method will eliminate all late charges on your card. Since credit cards have the steepest late payment charges of any creditor we've ever had, this can be a huge savings if you get delayed in your bill-paying process during busy months. If you have any other creditors that charge steep penalties for late payments, try to use the twice-monthly method with those bills, too.

Get Moving: If you don't have a bill-paying system that is working for you (i.e...you are not incurring late charges, each bill is paid on time, & you can easily see what needs to be paid each month), take some time to make one. It may take about an hour to set up the initial spreadsheet, but after that, the maintenance only takes a few minutes each month.

Annoying but necessary disclaimer: All information contained herein express my opinions only and are based on my health status & location. Each person's situation, health, and local laws & ordinances are different. By all means, use your own common sense & don't do anything you see here if someone more important than me (like your doctor, your local police, your own conscience) would disagree. If you're easily persuaded by everything you read, and you think I might cause you to hurt yourself or break the law, quit reading my site, please.