I read an article years ago (can’t find it now) about using two checking accounts to simplify and automate your finances. After trying to explain it to a friend recently, I decided to write it down.
This financial hack will make it easier to pay all your bills on time without any ongoing effort, thought or stress on your part.
Step one, divide your bills into two categories- fixed and variable. The fixed bills are what are going to be automated. Add up these fixed bills to find a monthly total. My utility company has a program that allows me to regularize my monthly cost even though the usage varies. For quarterly (water & sewer) and annual (car insurance) bills, divide them up to figure a monthly amount.
Your variable bills; gas, groceries, credit cards; don’t lend themselves to this system and will continue to be paid the old fashioned way.
I get paid weekly, so I divide my monthly total by four to figure out how much I need for bills every week.
Create a second checking account for your fixed bills. My employer allows me to split my paycheck into separate direct deposits, so I have my weekly bills deposited into the bill paying account and the rest of the paycheck into my regular account. If you can’t get multiple direct deposits at work, you can probably set up recurring transfers from one account to another at the bank.
Once you have your bills account set up, log onto the fixed monthly accounts and set them on autopay from the bills account.
****Unintended consequence – I get paid 52 times each year, but my calculations were based on 48 pays per year. This allows me to save one month worth of bills every year.
- One extra mortgage payment per year turns a thirty year mortgage into a twenty two year mortgage.
- Or one month of bills makes for debt free holiday shopping
- Or debt free vacation
- Or a guilt-free way to treat yourself for managing your life like a grownup.
Add-on bonus hack – if you have a credit card that offers cash back or points / miles, and an account that will accept credit card payments, you can dedicate that card to paying bills and automatically pay the card from your bills account. Don’t put anything else on this card though, or you’ll end up paying credit card interest rates on your cell phone bill.
You were going to pay the electric bill anyway, may as well earn some miles for it, right.
A credit card that sees regular usage and is paid off every month will also do great things for your credit score.
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