How to Foolproof Your Finances and Get Rid of Fees
Posted on March 30th, 2010
Kelly Whalen is a freelance writer and blogger, and mom to four. She has appeared on the Today Show, The 10! show on NBC Philadelphia, and has been interviewed for publications such as Money magazine, Woman’s Day, and USA Today. Her blog, The Centsible Life is about family, finances and fulfilling your dreams on a budget. You can find her on Twitter, attached to her iPhone and sipping coffee most days.
It’s embarrassing. No one talks about it. It’s not a badge of honor. We try to pretend it didn’t happen, or worse try to hide it from our spouse or partner. What causes such shame, guilt, and humiliation?
Fees. Fees cause us so much stress, pain, and “hand on the forehead moments” that it’s no wonder we don’t want to talk about it. In 2009, 15 percent of American adults made late payments, and another 8percent missed a payment entirely.*
Credit card fees for 2009 topped $20 billion dollars!** That doesn’t even account for late fees on mortgages, rent, utilities and bank fees.
How can you create a financial system so that you never pay late fees again?
I can show you in five easy steps how you can create barriers to late fees and overdraft fees so you never pay another one again.
Step 1: Get Current
This can be tough if you are behind on everything. If you are behind, call everyone you are late with and talk to them. Work out a payment plan to get caught up or cancel unnecessary services.
If that still doesn’t give you enough funds to get current, sell whatever you can, take on a second job, consider a radical change like taking in a roommate or moving to a cheaper area.
Step 2: Make a Payment Calendar
Take a look at when things come in and when things are due. Remember to account for the lag some bills have in posting. Some companies take online payments instantly, some require you to pay by check and may take up to seven business days to post.
For spending money, figure out what method works the best for you. Cash is great for keeping some people on track. For me, cash is spent way easier, so using a debit card works much better. Credit cards should only be your preferred method if you plan to pay it off in full at the end of the month, EVERY month.
Now call all the companies you have monthly bills with and see if you can change your due date so all the due dates fall in the same week. Direct Loans (who service many student loans) even has an option to change your due date online!
Step 3: Set up a Bill Center
If you pay with checks and stamps, use a box (no you don’t need to buy one) to put all your bills and relevant bill stuff in.
If you’re an online banker, setup BillPay from your bank and create a spreadsheet with all your account logins on it. It’s recommended that you secure it in some way, whether by using a website that offers that service, or encrypting it. I also highly recommend you print out a copy and keep it with your important documents in a fireproof box or safety deposit box.
Now when you receive a bill you have a dedicated spot to put it until it’s time to pay your bills. Or you can use online statements, so you never have to worry about finding a bill again. We have a separate e-mail for bills, so that both my husband and I have access, without having to dig through our inboxes.
4) Set Up Barriers
You can use these tools to help avoid overdrawing your account and set up barriers to prevent late payments.
- Utilizing overdraft protection at your bank. Be sure to set your account up so they do not allow you to use your card if you have no money.
- Set up reminders that bills are due using your calendar, e-mail reminders from your credit card companies or sign up for Mint.com to get reminders in your inbox.
- Create e-mail alerts from banks or credit card companies that email you when your balance dips, or your limit is getting close.
- Start an emergency fund so that you have money in case of, well, an emergency.
- Automate your savings. Have about 10 percent of your pay automatically put in a savings account that is attached to your checking account. That way you can access it quickly if you need to offset an expensive bill or you overspend.
Step 5: Get Ahead
The goal now that you are all set up is to create excess money so that you are paying your bills ahead of time. Ideally, you should reach for the goal of using last month’s money to pay this month’s bills. Set smaller goals like getting a week ahead, until you reach a month or more. Being a month ahead is ideal, so that you don’t have to worry about the next paycheck coming in.
It won’t happen overnight, but by following these steps you will make your finances fee free in no time.
*Source: National Foundation for Credit Counseling, 2009 Financial Literacy Survey, April 2009 with thanks to CreditCards.com for the info.
**Source: R. K. Hammer, a consultant to the credit card industry from New York Times, September 2009
Penalty fees from credit cards will add up to about $20.5 billion in 2009, according to R. K. Hammer, a consultant to the credit card industry. (Source: New York Times, September 2009)
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