2012 was the first year I stopped living paycheck to paycheck. I did pretty good not having to worry about shopping on payday or juggling bills to make sure they got paid on time. I have a small emergency fund I could use but that was for emergencies not everyday bills. This became a bigger worry after reading about some of the banking problems in the EU. England had empty ATMs and banks basically blew off their depositors for a week or more saying they were under attack by “hackers” and would not refill the ATMs nor allow withdrawals. Italy had a major bank that froze all funds for 30 days because of “accounting errors”. Spain, Greece and Cyprus all have had banking issues and people could not withdraw money or a limits were placed on how much money a person could withdraw. This is not a sign of a healthy banking system and since I’m making less than 1% interest and losing ground via inflation it seemed a good time to try paying ahead.
Since Nov.2012 I started adding a little extra to some bills or paying smaller bills a month ahead of when they are due. The whole idea for an emergency fund is to pay your bills. So if you get a month or two ahead on bills that will make that emergency fund stretch last a little bit longer. I have lost all trust and confidence in the financial and banking system of the USA. If it is paper I don’t like it and that’s everything from mutual funds to bonds, money markets and 401 k. This my choice! I believe after MF Global and the Libor scandals no financial instruments should be trusted. I’m not a financial adviser or guru so you can do as you wish and evaluate your risks as you see fit. I’m only telling you this so you know what my basic reasoning is for paying ahead and should not be considered financial advice for you and your situation.
Now a few downsides of paying early to be aware of:
- You lose the ability to use that cash and it will have an effect on your “cash flow”. On thing like cable/Sat TV, cell phones and other items that are not needs, you can’t cancel and get that money back.
- You might not have the cash on hand for a great deal/sale see #1
- Some bills may reset the due date if you pay early so make sure the new due date won’t be a burden if you need to go back paying month to month. Dish TV seems to do this to me.
- I have started small on bills that are less than $50.00 and I know that might not be a big deal to many people it’s given me some peace of mind to know that my car insurance is a paid for a month or two in the future.
- Many utilities will let you add a little extra when you pay your bills. In a way you are doing a level pay plan but you retain control if you want to pay ahead if you want or not.
- I hate Auto pay. While I do use online bill pay, I want to be the one who decides when my bills are paid. I would rather pay a small late fee because I’m late with a payment as opposed to a “bounced check fee”.
- If you decide you want to pay ahead on your mortgage, look at the breakdown between what you pay on principle and what you pay on interest on your loan. The difference can be quite large so be aware unless you designate to pay extra on the ” principle” only you might end up paying interest you don’t need to pay!
Power bills are becoming a big deal here in Idaho with this cold snap. The local news is running stories on how people are having a huge energy bill and who to ask for help such as Salvation Army or the local power companies “Project Share”. I did not pay ahead on power, but getting all those other little bills paid ahead leaves me a buffer for the next power bill. So it looks like this little plan of mine is working out!
It looks like the PTBs have decided to play ” kick the can” on the debt ceiling till May so it looks like SS and vets will get paid at least a few more months. So it’s time to get the seeds and things that you will need for gardening this spring along with all your other preps. Getting the first drum of bulk food filled up has me darn excited about the 7 year project. I think my second barrel will be the dry beans as that’s my next weakest food. Once I fill the second barrel with a couple hundred pounds of different beans and lentils I can start the next barrel. It’s going to take a few months to get done but I should be “food secure” for just about anything life can throw at me.