What does it mean to pay your bills on time? When you think of bill payment and people who are successful with money what comes to mind? Majority of people will answer with the words dependable, prompt, not late, not delayed, on schedule. These are all words that are associated with people who pay bills on time because they denote a proven track record of good money management or financial wellness.
Simply put, paying bills on time is being on schedule with your bills and never missing a payment deadline.
What’s better than paying your bills on time? Paying your bills in advance or Prepayment. This is because paying your bills in advance gives you peace of mind. It also provides an extra cushion in cases where your income fluctuates from month to month.
Why Should You Pay Your Bills on Time?
Here a few critical reasons to pay your bills on time:
- Avoid fees and charges – most vendors or service providers will penalize you for late payments by charging you fees for bills not received on the due date.
- Take advantage of savings and rewards – financial institutions and service providers tend to offer savings perks, bonus points and rewards to individuals who always pay their bills on time.
- Boost or maintain credit score – your credit worthiness or financial credibility takes a negative hit when you are late with your bill payment. Payment history accounts for 35% of your FICO credit score.With this in mind, late payment can destroy your credit score and hurt your chances of accessing more financial opportunities in the future.
- Dependability – missing a bill payment deadline is not a good look on you because you’re seen as less dependable with money. You can damage your financial reputation by not paying your bills on time.
- Stress reduction – late payment fees or penalties can lead to financial stress and worry especially when you’re already on a tight budget. Therefore paying your bills on time can help reduce your stress and improve the overall quality of your life.
- Build good financial habits – bad habits are easier to form but harder to break. To be a good steward of your money you need practice on-time bill payment. Poor money management practices like late payment will only bring you more financial ruin than good.
Which bills or expenses should you pay on time?
Short answer is pay all bills on time. However, when it comes to monthly expenses or regular bills, the biggest question is which ones should be prioritized? Examples of regular bills include rent, mortgage, electricity bill, water and sewer bill, gas bill, internet bill, phone bill, cable/streaming bill, insurance bill, gym membership bill, and even credit card bills.
Some financial experts recommend prioritizing bills that can cause you particularly serious problems if you don’t pay them as a way to effectively manage your monthly bill payment.
Rule number one to financial wellness is spend less than you earn so we will continue assuming that this is the case for you. But if you’re still struggling with living within your means you need to take care of rule number one. Review the section that discusses needs and wants.
How to Pay Your Bills on Time and Avoid Late Payment Penalty or Fees
Step 1: Organize your bills
The very first step to take is gathering all your bills and organizing them in a way that matches payment due dates (and grace period). A few actions to take include:
- Make a list of your bills
- Prioritize your bills
- Know your billing cycle
- Sign up for bill alerts or reminders
Step 2: Plan your bill payment
- Identify payment method – this necessary because depending on the method of payment, you may need to pay additional fees. This additional fee should not be confused with late payment penalties instead this fee is for using a select payment service and usually less than late payment fees. A few payment methods to plan for include:
- Payment via phone
- Payment via paper check
- Online payment – credit card or debit card
- Third-party bill pay applications/solutions
- Factor in arrival time – when scheduling or making payment you want to allow adequate time for your payment to arrive. This could be anywhere from seconds to days depending on your payment method. For paper check, you want to ensure that there’s enough time for mail arrival to your creditor.
- Allow for processing time – even though you may have a receipt of payment notice or check delivery confirmation, in some cases it may take a few days for the payment amount to be processed and withdrawn from your bank account. So part of your planning should be to ensure that you have enough funds in your payment account for the payment to finalize.
Step 3: Make payment
This step involves executing the payment to your creditor. Here a few ways to do so:
- Manual payment – this could be a daunting process that requires your full involvement and comes with a higher risk of missing a payment due date. With the manual payment option you have full control and are not giving up access to payment information to any third-party. Although you have to set reminders since any payment past deadline will be met with negative consequences in the form of late fees or credit score drop.
- Schedule payment – scheduling your payment ahead of time for a draft date in the future reduces your chances of forgetting to pay your bills and getting punished for late payment.
- Automate payment – alternatively you can enroll in automated payment assuming your creditor or service provider offers this option. With this option you’re relinquishing control of your payment account info to the creditor and giving them the authority to withdraw payments at a specified due date. You also have to ensure you have sufficient funds on the specified payment due date to avoid fees or penalty for insufficient funds.
Step 4: Monitor and track your payment
Checking that your payment has gone through is the primary requirement. Track your bank account to ensure that payment has been successfully processed. At this stage, you should be reaching out to the vendor, creditors or your bank for any error or glitch that may occur in the payment process.
Step 5: Get payment confirmation
This is the last phase of your bill payment. In this step you want to validate payment delivery. It’s not uncommon for a check to bounce due to insufficient funds; neither is an undelivered due to credit/debit card error unheard of.
Tools that can help you pay your bill on time
Start now by taking a positive step to avoid late payments. Here are some applications or solutions that help you avoid late payment fees:
BOTTOM LINE:
- Paying your bills on time is very critical to managing money effectively
- Prompt payment of bills can be beneficial to your mental health and overall wellbeing.
- Late payments can destroy you financially and steal future opportunities away from you
- To avoid late payment penalty or fee, always follow the five step process of bill payment – organize, plan, execute, track and confirm.
Be sure to check out the 99 rules of money if you want to master your money and maximize your chances of building wealth as well as attaining financial freedom at some point in life.
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