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Saturday, September 28, 2013

The Wise Way to Pay Your Bills

Recently I did something quite amazing. Seriously. For me it was really quite something as I am a guy who has made so many bad choices in life that I’m sure that if there was a genius level of mistake making I’ve well exceeded my 10,000 hours of stupidity.

But not in this case. This is one of those rare moments where the spark of wisdom set fire to my will power and lead me to achieving the small but significant financial victory that I am going to share with you.

This may look like a boast, but I assure you it’s not. I’m sharing this for the simple reason that while it’s nice to learn from other people’s mistakes, it’s even nicer to learn from their not-mistakes.

You know that Aesop’s Fable about the ants and the grasshopper? You know, the one where the grasshopper spends his summer soaking up the sun in leisurely nothingness while mocking the hard working ants who were busy storing up for the winter. Well the winter finally came and that grasshopper froze to his miserable death while the ants partied hard in their well stocked and cozy nest. Well, that’s my version of the story at least.

Recently I had the opportunity to learn firsthand the joy of storing up for the winter when it came to my bills.

Nearly three years ago my wife and I had our second child and suddenly became a “one income” family. Over the next twelve months we went through the arduous process of adjusting to ever diminishing savings and bulging utility bills.

I recall well how from month to month I would go through the process of wondering which company would react the harshest if I didn’t pay them the full amount of whatever we owed them and paid them first while letting other bills slip for a few more weeks.

It got to the point when we were slipping behind in almost everything except the most essential payments.

Then my wife went back to work, we breathed a massive sigh of relief and got comfortable again.

But I remembered well the horror of being pestered by companies (who had every right to pester me), the paranoia of potentially having the electricity cut off or the agony of spending my last twenty bucks on baby formula or nappies while knowing there was only a can of baked beans and a box of stale wheatbix left in the pantry to last until next Friday… actually it wasn’t that bad, but as an old school bring-home-the-bacon type guy I remember feeling like I was bringing home pig’s whiskers.

By the time we found out we would be having our third child I realized that I could not visit that level of futility upon our utilities again. I needed to kill the grasshopper inside of me and think like an ant.

This may seem so pathetically simple, to the point where even I can’t believe I’m bothering to write about it but the even more simple and pathetic thing is not many people actually do what I am about to say – store away for the winter!

I suppose “winter” is not a good metaphor for the arrival of a wonderful new baby but when I found out earlier this year that another mini-me was on his way I knew that something had to be done to avoid the financial winter that would follow…

I thought about it, and this is what I did.

Knowing that we were blessed with the artillery of two incomes for the time being I got on the offensive with our utilities – every time a bill came in I not only paid what I owed but I threw on a little bit extra as well. If the Power Bill was $150 I paid $200; if the phone and internet bill was $60 I paid $100! I approached all our utilities this way, showing no mercy until bills started showing up with something I had never ever seen before – credit!

But I ignored it. If the phone bill said I was $60 in credit I paid $100 anyway.

I did that for nine months.

I don’t want to get personal here and reveal to you what the actual outcome was but I will give you the following illustration of how doing the above pays off.

Take my phone bill for example.

Phone and internet with our provider comes to $63 a month.

If we paid $100 per month for nine months then by the time we go down to one income we would be $333 in credit.

This is where it gets fun!

$63 multiplied by twelve months is $756, which means that for the twelve months that I’m the only one bringing home the bacon about 44 percent of our phone bill for the following year has already been paid for! (Please check my math; it’s not my strong point by a long shot)

Put another way if you take the annual figure of $756 and take away $333 you’re left with $423 payable for the next twelve months.

So if you’re working on a weekly budget that’s approximately only $8 a week you need to set aside for your phone and internet.

Of course that’s not the actual figure I ended up with and it varied from one utility to the next but ultimately I ended up with a massive feeling of relief knowing that the next twelve months of utilities, while not paid for, have been dramatically reduced compared to the last time we heard the patter of little feet!

It doesn’t quite end there though… my approach to storing up for winter had two prongs – I took the storing concept literally. Every time I did our shopping (yes, I’m a guy who does the shopping) I bought several cans of baked beans or spaghetti or whatever, some tinned fruit, a box of laundry powder, a bag of dehydrated milk powder… whatever I knew would last a year I bought it and stashed it. Thanks to this process I am glad to announce that I will not have to buy a single box of dish washing tablets for a whole year!

I was going to say “with luck,” but actually with planning and careful adherence to a budget I will not have to worry about what happens when I get down to that “last twenty bucks” again… well, not for the next twelve months at least…

I hope this inspires you to go and do likewise! Imagine if you did this for a year and then didn’t have to pay your bills for six months! The experience has taught me that even if there were no baby coming paying more on your bills leads to a great credit rating, less stress and a sort of insurance policy that actually pays out if some drastic thing were coming round the corner, where at least for a little while you wouldn’t have to worry about bills!

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