Make money just by setting some aside to pay your bills? It’s possible.
In the early years of our marriage, I kept track of our spending by recording each purchase on a spreadsheet under its designated category. Gas, tolls, insurance under “transportation”; donations under “giving”; groceries and restaurant purchases under “food”; etc.
This was painstaking and time-consuming and unfortunately didn’t rein in our spending, though it did enable me to see where our money went each month. I thought it would help in making a budget, as all are advised to do to become financially responsible.
But I found budgeting by category too complicated. Many expenses vary widely, and by the end of the month, the virtual budget would resemble taking the cash out of all the respective “envelopes” and throwing it at whatever bill needed paid next. Messy.
(I mean, seriously, do you say, “Ohp, can’t drive anymore, I overspent on gas this month.” I’m sure the boss would love that excuse.) 😉
My budget now consists of three categories: fixed expenses, broken down into “monthly” and “other”, and “discretionary spending.”
“Monthly” accounts for bills paid monthly (duh) like phone, internet, and utilities. The benefit of this is that the bills will always get paid.
“Discretionary” covers all spending that isn’t a known bill–everything from food to doctor visits. Since we use reward credit cards for almost all of our purchases, it’s easy to keep track of what’s been spent and how much is left. There are no surprises when the bill comes in, no overage charges, and the money is there to pay it off each month, so no interest charges either. (Racking up credit card debt is a whole other issue that deserves its own post.)
The “other” fixed expenses category is where I found potential to make a bit of money.
Even with keeping track of my bills, it was easy to forget the ones that came up infrequently, like HOA dues, Amazon Prime membership or pest control fees.
I finally made a list of these with their estimated amounts and due dates. Then I divided the total amount by the amount of time I had to save up between each bill.
For example, Prime is once a year, so I divided it by 12; HOA dues are quarterly, so I divided that by 3.
The resulting amount was what I needed to set aside each month to ensure the money would be there when the bill came due. Since I would rather over-save than come up short, I’d round up to the nearest $5 or $10. Makes things nice and neat.
Let’s take Prime. That’s roughly $100 per year, or $8.34 per month. (Yeesh) By rounding that up to $10 a month, it means I’d have $120 saved by the time it’s due. (The other benefit of this is that Amazon can raise their price, and I’ll likely still be covered.) After the bill is paid, any overage goes directly into savings.
But while that money is sitting there waiting for the bill, it can also earn interest.
I have 10 of these expenses, so it was fairly easy to figure out how much money I’d have set aside each month. If the amount was enough to invest in a CD with a higher rate of return than my online “high-yield” savings account (currently 1.20%), I’d buy one for the number of months left until the first bill came due that I’d need it for.
For example, Prime for us is due in January, and pest control is paid yearly in July or August. If I were buying a CD in September, I’d purchase a 3 month CD, or maybe a 4 mo if I could find one with a maturity date before Prime’s due date in January. Then in February, I’d purchase a CD for 5 or 6 months depending on when I planned to pay the pest control bill.
If I couldn’t find a CD with a higher rate, I’d funnel the money into the h-y savings account. The only consideration there is the limit on the number of withdrawals allowed per month (6). But since I know how much is due each month, it’s easy to make 1 withdrawal for the whole month right before the first bill is due.
For instance, I pay car insurance in mid December and HOA fees at the end of the month. So the week before the car insurance is due, I pull out enough from the savings account to cover both bills. This allows adequate time for the money to settle out from the ACH transfer and will be the only withdrawal I make that month.
Though the interest earned may seem small, it’s easy to make, essentially free, and will add up over time if parked somewhere earning interest itself. And that is a good deal.