Budgeting In The Era Of Online Bill Pay

Recently, I sat down with my parents and had a lengthy discussion about a lot of financial issues (a separate ball of wax that I’ll deal with in another posting). During one part of this, my parents showed me the way they manage their monthly budget, mostly utilizing a steno pad, a calculator, and their checkbook. When I told them that I basically no longer write any checks and do almost everything online, they basically didn’t believe me until I walked them through my system of managing money in this era of online services.

Given that, I thought it might be interesting to provide a glimpse of how I manage my finances on a monthly basis.

First of all, I have all of my clearly defined payments already set up to automatically deduct from my checking at the appropriate time each month. This includes transfers into my son’s 529, my investment accounts, my student loan repayments, and my rent payment (which will soon transmogrify into a house payment). These all happen automatically, without even a second thought.

How does one do this (if you’re not already doing it)? Get a checking account that has online bill pay (I use ING Electric Orange) and follow the instructions. It takes some time to get things set up, and you need to check that the payments are going through at least the first time, but after that it’s automatic.

What about the undefined payments, like the varying utility bills and other bills? I merely set up online bill pay so that all I have to do is drop in the number each month and forget about it. I usually do this twice a month, going through any unpaid bills like this, and it’s done in just a few minutes.

Because of these two things, it is extremely rare that I have any need to write a check. I literally have not touched my checkbook in months. If I have cash needs, I merely visit an ATM and withdraw cash. When I want to check my monthly budget, I fire up my web browser and my copy of Excel (I use Excel to keep my actual budget so that I know what I can safely withdraw for various purposes).

The whole thing feels nearly automatic. I rarely have to sit down and “pay bills” any more – when I want to get in touch with my numbers, I just do some clicking on my laptop and I can see every view of the information that I want. It does take a bit of startup effort, but once you’ve entered all of your account data and started the routine of having many of your bills paid automatically and the other ones paid by typing in an amount and clicking on “Submit,” you’ll never want to go back.

As for my parents? They’re pretty comfortable with their method of keeping track of bills – it’s worked well for them for thirty years and their system, due to familiarity, is quite fast on its own.

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