Best Bills to Set and Forget
Set up autopay for these bills & watch your budget work
For some people, keeping track of when to pay bills can be challenging without a plan in place. There are bills that you absolutely cannot afford to forget to pay such as your mortgage and student loans. It is even more important to pay these bills on time. For that reason, I am a huge advocate of the “set it and forget it” bill pay system. Below is a short list of bills you can and should put on autopay. This bill pay system not only helps you stick to your budget but also helps you avoid late fees and missed payments.
Your Biggest Asset
For most people, a family home is the most expensive purchase they will ever make. Therefore, why allow life’s daily challenges to put you in a position to forget to make a mortgage payment? Late payments lead to late fees and several missed payments can lead to foreclosure. Of course, a foreclosure is the extreme result of serval missed payments, but you should not set up a precedent that could jeopardize your credit and your home.
Set up automatic payments with your mortgage lender before the mortgage payment is due. This will help everyone rest well at night, including the mortgage lender, when they see that you have a plan to pay them regularly and on time.
Even before your first student loan payment is due, you should set up automatic payments. For one, most companies will give you a break on your interest rate if you set up automatic payments. Secondly, you will protect yourself from defaulting on your student loans. Failure to repay student loans does not just affect your credit. It can also jeopardize your ability to buy a home, qualify for a credit card, and buy a car. Also, if you owe federal student loans and default they can and will keep tax returns until your defaulted loans are paid in full. Defaulting will also affect your eligibility for federal student loan repayment programs offered by some government employers. Long story short — pay your student loans and do so with automatic payments.
Your Life Savers (Insurance)
Insurance is the one thing you hate to pay for but should not live without. If something goes wrong, you will appreciate having planned ahead to protect yourself and your assets.
I recommend automatic payments for life, disability, car, and home owner’s insurance. For one thing, life insurance protects and provides for your family in the event they suddenly lost your income due to your untimely death. Disability insurance can cover a temporary loss of income due to injury or other inabilities to work. Why leave this critical expense up to you to remember to pay? Most life and disability insurance companies may require automatic monthly drafts or they may ask you to pay for three or more monthly premiums at once, which many people cannot afford. Monthly payments help insurance remain affordable to you and ensures you are constantly covered. When you get a strong hold on your finances consider saving so you can pay your insurance premiums annually. Companies tend to offer a discount if they only have to collect once a year versus monthly installments.
For most home owners if you have a mortgage, your home owner’s insurance is included in the escrow collected. Mortgage lenders require insurance for a reason — they too want to protect their investment, your home, until your loan is paid in full.
Whatever you do make sure your insurance is always current and the coverage reflects what replacement value you need. Do not upgrade your kitchen with new cabinets and granite countertops if your insurance is only set to cover laminate countertops and basic cabinets. It’s ok to do a kitchen renovation just make sure to let your insurance company know so they can increase your coverage, and this may not always increase your premium. In my home, we finished our basement, I told the insurance company, but our annual premium did not change. It’s important to review all of your policies each year and shop around to make sure you are getting the best deal.
Lastly, in most states, it’s illegal to drive without insurance so just don’t do it! In the event of an accident the fines and additional penalties alone are simply not worth it. Car insurance is also something you should shop around for and make sure you are getting all the discounts you are entitled to. For example, when I started driving, my insurance company gave discounts for good students. Parents see if you can get this discount for your teenage drivers. Also, make sure you mention everything like your zip code, car safety features, etc. My car gets an additional insurance discount because it has automatic lights, and you can get discounts for multiple airbags, and other car features too.
Consider getting all or most of your policies from the same company to get bundle savings. For example, my family saves an extra $150 a year by having one company supply our car and home owner’s insurance.
Your Emergency Fund
Saving is key to preparing for the unknown. The best time to save is anytime that you get paid and automatic deposits into your savings account help you save consistently. As a result, when a real emergency happens you have the funds to cover the expense and do not have to rely on credit cards or borrow from friends and family.
How much you should save really depends on your monthly expenses and financial goals. For some people having six months of expenses saved gives them peace of mind and for others they need a year. I say save as much as you can. To get the most out of your money, put funds you plan to access quickly into a high interest earning savings account. Consider online banks who tend to offer higher interest rates, free bank transfers, and reimbursement of ATM fees.
If you do not think you can save well on your own, join RRD Investments’ Savings Challenge. This Savings Challenge is so simple and you only have to save a dollar more each week. This year, participating savers will save $1,378 by December 31st.
The Big C’s (Credit cards and Car notes)
Car notes are the simplest bill to auto pay because you know the payment and the interest rate are not going to change during the life of the loan. So, set those payments up with the lender or through your bank’s bill pay system.
My rule of thumb is the 20/4/10 rule. Put 20 percent down if you cannot buy a car with cash, do not get a loan that exceeds 4 years, and try your best to drive that car for ten years even after it’s paid off.
My car is a 2009 Ford and I own it. I have not stepped into a dealership because with regular maintenance my car runs just fine and is still perfect for my family. Not having a car note allows my family to save more each month. We still deduct the car payment from our monthly income, but instead of going to a lender that money goes to our savings.
In general, you should pay all credit cards off every month. However, for most people, including myself, there came a time when you racked up some debt on credit cards for whatever reason. I am in what I call the repayment only stage. That means, no new charges. I have looked at the budget and determined what I can afford to pay towards my credit card debt each month. Then I take that amount, set up automatic payments, and watch the balance decline. This is good for my credit and my peace of mind. Eventually my credit card balances will be zero, and as I pay off one card, I shift what I was paying on that card to my others.
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