Making Life Simple- Part I

Last Friday I overheard my colleague screaming on his phone regarding some over charging by his credit card company. He was extremely mad and loud and forgot that he was in his office and not in a fish market. I do Know that it is very rude to listen to somebody’s conversation but he was screaming so loud that the guy on the other side of phone would have heard him even if the connection dropped. ( OK I exaggerate but you understand J). The problem was that the poor guy has forgotten his credit card due date and next month he was charged a hefty fee and interest.

Each one of have a hundred and one things to do every day. We have commitments towards our job our family, kids, friends, and in some cases society also. Over and above the same we have a lot of bills to keep a track of. Just look a sample list for me:

1. Mobile phone
2. Mobile phone for spouse
3. Credit cards ( 4)
4. Monthly Rent
5. Home loan ( I live in a different city from where our apartment is)
6. Personal loan
7. Electricity bill
8. Internet Bill
9. Kids School fees
10. Insurance payments ( 6)
11. Car loan

May be a few others in your specific case. Well it is very difficult to remember each one of the dates with some payments available with grace period and some not. Let us work on making things a little simple by trying to categorizing the same.

First let us categorize them in broad categories:

1. Loans: This will include credit cards, home loan, personal loan, car loan and any other loan like student loan etc. If you don't pay them collection agents will hound you till you pay up.
2. Insurance Payments. If your policy lapses and something happens to you your family will get exactly zero rupees.
3. Utility payments. (Electricity, water, internet etc.): You don't want to live in dark without your TV?
4. Kids school fees. Now don't tell me we want to be that irresponsible to not pay kids fee on time.

Now let us look at trying to reduce the work for these payments. As a first step go back to previous bills for various items like credit cards, insurance reminders, etc and note down the monthly payment due date from each of the bill. Put these dates along with the name of the bill in a spread sheet and sort them out by date going from 1^st to 31^st of the month. This exercise should not take more than 15 minutes once you have all the bills in your hand.

Now let us see of these bills what all can be assigned to automatic payments. Most of the new age banks like ICICI, HDFC, Axis, Yes etc. and some of the PSU banks like SBI, BOB, Corporation Bank etc also have internet banking facility with an option to make the payment to third party. These services are for 2 kinds of payments.

Regular bills like insurance, utility etc where the bank electronically receives bill and posts on the website the amount that you need to pay along with the payment due day. You can either choose to make the payment automatic as and when it is presented or you can choose to make the payment manually on or before the due date of the bill. I prefer the automatic route for most of the payments. What I have done is I have only 3 active accounts let us say the 3 are:

a) Salary Account

b) Bill payment account

c) Investment account

1. Salary account is my zero balance salary account opened by my employer. My salary comes in this account. First thing I do is transfer a fixed amount to the investment account on the very first day.
2. Bill payment account: This is again a zero balance account opened by my previous employer and I use the same for making payments of all kind of bills online, writing checks, and withdrawing cash from ATMs.
3. Investment account: This is the account I use for making all my investments in stocks, mutual funds, or any thing else. The aim is that any money that enters this account is only used for investments for future and this account is not to be used for consumption or for purchases. This account also holds my emergency fund in form or fixed deposits.

Needless to say most of the services that I need are available online with the 3 banks and I have rarely visited the banks for anything.

Whatever can be paid online I make the payment online and through a single account. This helps me in keeping a track of all the expenses in one place and also helps in preparing my tax return at the end of the financial year.

Currently the only amounts I pay by check are the school fees for my daughter and to the housing society where we live, rest every thing is online for many years now. Actually for most of my routine payments I make money by using my credit card. ( this is a double edged sword if you are not careful). More on this in some future blog. I will write a few more tips that have worked for me in past on bill payments in the next blog in the same series.

Thanks for reading, do leave a comment.