Sunday, February 20, 2011

Bills Bills Bills

Gail - Frustrated with a touch of Awesome

As Destiny’s Child used to say; “Can you pay my bills? Can you pay my telephone bill? Can you pay my automo-bill?” They bring up a great point – can you pay your bills? I read a disturbing article on CBC news about how debt for Canadians has reached an all-time high of 150%! This means that for every $1,000 that you make, you owe $1,500! Isn’t that ridiculous? And this is just the average! That means that there tons of people out there who are terrible with their money. Admittedly I was happy to hear that I am on the lower end of this average (and quickly becoming well below average – whoo!) but I finally got the same feeling that I’m sure Gail feels everyday of her life – frustrated (with a touch of awesome). There are so many people who need a lot of help getting their debt together. The CBC article was followed by another story about how credit card debt is actually on the decline! Wow, are people are finally using their brains and stopping all the overuse of their plastic? You want to believe that this is happening for a good reason, but the real reason is actually incredibly stupid.  The article described how credit card is on the decline due to the rise of lines of credit which are being used to pay off the credit card companies. Isn’t that the dumbest thing ever? Using credit to pay off credit? I think that people get really confused and forget that their line of credit is not actually their money!

I’ve brought up parts of what I’m going to tell you in this blog entry in past issues (yeah, yeah, I’m being repetitive - it’s been a slow week), but sometimes we need a bit of a refresher about why it is so ridiculous to use credit to pay credit. Rule number one that I was always told by Gail is that if you can’t afford something, you shouldn’t use someone else’s money (i.e. the bank) to pay for it.  The other important point from Gail is that a line of credit should never be used as your emergency fund – it’s a scam. Banks have gotten wise to consumer hatred for high interest credit cards, so now they are offering (so-called) low-interest lines of credit, which unlike credit cards, don’t offer you any reward programs. Banks act like a line of credit is a great safety net that will help bail you out of the debt toilet. Here’s the thing, if you just started your own emergency fund or even just sat down and did a proper budget, you wouldn’t need to rely on the line of credit at all. The first thing I plan to do when I have my lines of credit paid off is to get rid of them entirely! I suggest that you start saving up the equivalent of the line of credit in savings to make a real safety net, and then ditch the line of credit altogether.  We rely so much on a line of credit, but what reward does it give us other than another interest payment to make?

Let’s do some recapping, I have two lines of credit: my regular line of credit with a 10.25% interest rate and is sitting at about $4,500 (you think that’s not much, but it’s almost maxed out). Using the magic compound interest calculator, if I only pay this off in 5 years, I will have paid a whopping $2,830.03 in interest! In 10 years, the interest skyrockets to $7,439.84! This is why it is so important that you avoid taking on more credit than you need. When you get to the point in your life that you are looking to get more credit so that you can pay your bills, that’s when you sit down and make a budget.  Now, there are ways to avoid getting to the point where you are have to use credit to pay for credit, and that’s why I’m here to help. Let me tell you how to pay your bills.
Get yourself a sexy calendar?!

Get yourself a calendar. I don’t give a $hit if it’s an old school paper calendar, firefighters calender, playboy calendar, a whiteboard, or even a fancy schmancy electronic calendar. Just get any kind that will grab your attention and keep you on track. The next thing you’re going to have to do is open your bills as soon as you get them – I know that this can be difficult and the risk of paper cuts is high, but believe me I have been there and I’ve survived. Most bills all come around the same time of the month so if you’re missing one, call the bill collector (yes, most will still charge you interest whether you get your bill or not). Or alternatively, get the applications for your bills on your smartphone! Yes, they have those! On each bill, look at what the expected payment is and make note of it. Next, look at the part of the bill that says when the payment is due. With your calendar handy, write down the payment amount 3 days before the bill is due on your calendar. That’s when you need to make sure the bill is paid because it allows time for processing, saves you from paying late fees, and it will make your credit rating shine! If you notice that all your bills are due in the same week and you don’t trust yourself to keep all your money until the week that they are due, pay off what you can as soon as possible. I am definitely the kind of person who likes to use the internet to pay my bills because it’s so full of instant gratification and I highly recommend you do the same. When you make an online payment, the money is auto-magic-ally taken out of your account and it prevents you from running out of cash at the end of the month to pay your bills. The other positive to this is that it keeps your bank balance in the back of your mind so that you always know how much expendable cash is leftover for the month.

Another great tip I can give you about paying bills is to set up automatic payments with your bank. Some bill collectors will give you the option to have all your bills get charged to your credit card – which is fine as long as you are paying off the full balance every month. However, I’m guessing that if you’re reading my blog, you need to learn not to use the credit card. Did you know that you can change the times that bills are due as well? This is an awesomely smart thing to do if you are paid monthly. It can save you from having all the bills needing to be paid at the same time or make sure that you have money in your account which in turn will prevent you from wanting to dip your fingers in the line of credit honey pot. I’ve set it up with my bank so that all my line of credit payments come out on the 1st of the month because I find that day easy to remember, and all my other bills such as my cell phone, hydro, and internet are paid as soon as I get them.

It’s super important to follow up and make sure that your payments are being received as well. All those ba$tard bill collectors that I have encountered have online sites where you can check to see how much you owe, when the payment is due, and when they’ve received your payment. We’ve all heard of someone getting someone else’s money deposited into their account or the bill collectors have received payments from someone else by mistake, so be thorough and check if the bill was paid – if your bill was paid by someone else – cha-ching!! I remember I had a friend who once had $50,000 accidentally deposited into his bank account - I think I would $hit my diaper if that happened to me! They eventually corrected the mistake and took the money back – fyi.

Now, about those credit cards; are you paying off your creditors and noticing that you never seem to be getting ahead? That’s because you’re not paying enough Ms. Stinkypants. The Financial Consumer Agency of Canada (FCAC is the acronym and it sounds like eff-co¢k in my mind teehee) has a sweet-a$$ tool that helps you figure out how to get your bills paid off in a smart way, and shows you how much money you will save, and how long it will take you to pay it off at your current rates. Credit card bills are special kinds of evil (I have my credit card listed as “the Devil” in my online banking) so don't sit around picking your bum and waiting for that glorious day that your credit card bill arrives. Make payments early in the month and as often as possible to reduce your interest charges. This information is all broken down further on the FCAC website so check out their tool and actually use it! Remember, you can always call your credit card company and talk to them about lowering your interest rate. If they won’t, shop around for another company and do a balance transfer to a lower rate – yes this is possible.

Do you have a phone, cell phone, internet, and cable bills that you’re paying off every month? Were you aware that if you have the same service provider for all these services that you can bundle that $hit? What the bundle are you talking about you ask? Bundling is something that saves you muchos deniro. I have my internet and cell phone bundled now which saves me 5% off each bill every month. The savings are significant and they get even greater when you have more services combined. Look into the different ways that you can save with your bills. Some of them will even offer you credits on your bill for switching to a paperless invoice – good for you AND the environment. 

So now you’ve got a routine down, your bills are getting paid off, and you’re not paying for unnecessary charges; this is a good time to take a moment to really review all the services that you are paying for. Do you really need to have a $90 cell phone bill every month? Is that $70 ‘porn plus’ cable package really needed? Are you always overusing your internet downloading porn every month and paying extra charges? Make the adjustments to your plans to match your lifestyle. Like any kind of shopping, make sure that you pay for something that is valuable to you and don’t let the monthly bills get on your nerves, make you depressed and want to lie in the tub getting all pruney with depressing albums playing on repeat.  Keep it up and your bills will disappear from your mind like a fart in a tornado.

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