Debt-Free Forever by Gail Vaz-Oxlade (best english books to read for beginners txt) 📗

Planning to spend $600 this month on everything from groceries to gas to your sister’s birthday present? Cut that in half and challenge yourself to live on less.

Before you throw your hands up and say, “Ridiculous,” just try it. There’s no failure here. It’s an experiment. It’s to see whether it can be done. After all, even if you miss by $150, you’ve still spent much less than you thought was possible. Hit the mark and you’ve experienced living modestly and saving money at the same time. Double whammy!

ALIGNING YOUR CASH FLOW

Even with a perfectly balanced budget, sometimes you can run into trouble if your cash flow isn’t properly aligned. Sometimes people’s cash flow is out of alignment because of how often they are paid. Sometimes it’s because of when their bills hit their bank accounts for auto payment. Mostly it’s because people don’t take the time to sit down and plan when the money goes out based on when it comes in.

The first thing to do is to make a Bills to Be Paid List of what you have to pay by date. If your mortgage comes out on the 5th, and that’s the first bill of the month, it goes at the top of your list. (This assumes you have enough income to cover all your bills. If you don’t, you’ll have to find a way to make more money.)

When you’re managing your bill payments, remember that you can’t wait until the due date on the statement to pay your bills. While some companies have a grace period, if you try to pay on the due date using online banking, telephone banking, or a bank machine, and the payment isn’t posted that day, you’ll be charged a late payment fee. Get in the habit of paying all your bills at least three business days before the due date.

Plot when your bills are due and the amounts you must pay on a “month at a glance” calendar. You can photocopy any month from an agenda or datebook and use it as your template. You can now quickly see when the money needs to come out of your account.

Time to put in your paydays. That’s when the money is coming in. Write on the calendar the amount being deposited to your account.

If you get paid on the 30th of the month, that money will actually be used at the beginning of the next month. So if you are paid semi-monthly, you will pay half your bills from the 1st to the 14th with the money you deposited on the 30th, and the other half of your bills with the pay you got on the 15th.

If you get paid biweekly, there will be some months when you get paid three times instead of twice. You need to determine how many months of the year this happens, so you can allocate the “extra” paycheque appropriately. For your budget’s sake, you may have to live as if you only get two pays a month, and use the “extra” for boosting things like Home maintenance, your Vacation Fund, Savings … anything that doesn’t have to be deducted monthly.

When you align your cash flow, you pay only the bills for which you have money in the bank during any period.

Look at your calendar with the bills and pays plotted on. Do you have enough for your jars and to cover each of the bills that must be paid on the date they are due? If you have bills you simply cannot cover in a particular pay period, then you will have to call some of the companies you deal with and change your billing date. Yup, you can do this. It’s a pain, but a little effort now will make managing your cash flow a whole lot easier over the long term. Simply pick up the phone and ask for your billing date to be changed to a time in the month when you do have the money available to pay the bill on time. Keep in mind that you’ll have to pay a pro-rated bill when you change your billing date, but it’ll eventually smooth out.

Once you’ve aligned your cash flow, go back to your Bills to Be Paid List and write the “paid on” date in beside the bill, so you have an at-a-glance list of when all your bills will need to be paid. One of the biggest benefits of having all your bills visible on a calendar and on the Bills to be Paid List is that you can track them as they come in. If for some reason a bill doesn’t arrive when it is supposed to, you’ll know the bill is missing and can call, get your balance, and make a payment before late fees and interest start to accumulate.

Doing this takes some time, but not as much as you might think. And finally having a system for when each bill will be paid will mean you’re not scrambling to find money. No more overdraft fees. No more interest and late fees. It’s definitely worth the effort.

GAIL’S TIPS

If you change your billing date from the 1st to the 12th, the first time you get a bill it will be for more than normal because you’ve used more days of service. So your first new bill will be “pro-rated”… it will have the additional amount on it. This may, in fact, not happen until the second or third bill, depending on when the pro-rated bill gets calculated so keep an eye on your bills when you make a billing-date change, particularly if you have an auto payment set up for that bill. You don’t want to be caught short in your bank account because a pro-rated bill took more than you expected from your account.

WHAT’S PUSHING YOU OUT OF YOUR BUDGET ZONE?

One of the biggest problems people have living on a budget stems from their failure to plan for inevitable and