Auto pay vs paying when you get the bill (looking for different thoughts on this topic)
I have been playing around with YNAB for a few months, but just actually got down and dirty with it this week. A move, new job, new house, new bills… I started a brand new budget from scratch. I have some of my bills set up on auto pay, and some bills I pay myself, usually when I get the bill. If I have the money I’ll pay it. Doing this though makes me paying some of Novembers bills in October. My mortgage is usually done this way. I have always used my last check of the month to pay my mortgage due on the first of the next month (I got paid Oct 21, my mortgage for November was paid at that time). I could be overthinking this, but paying some bills due in November early (in October) seems to be confusing how I set up my budget. Does anyone else do this? Or do you set up auto pays for everything except rent or mortgage? I just want to get some input from real users. I’ve confused myself. Lol!
I have autopay for everything, including my mortgage. Long ago I prioritized getting a full month’s jump on my budget so that I’m always budgeting a whole month at a time. At the beginning of the month, I adjust all my scheduled transactions to the amounts they’ll be for that month, budget last month’s pay, and then begin the month. When I used to pay my rent in the month before, I budgeted that money in that month (October in your case) and that autopay fired on the 25th. It was part of October’s budget, not November’s, just like anything else paid in October. My mortgage does not allow me to set the autopay for earlier than the 1st so I don’t do that anymore.
I have as many things as possible on autopay. I am a month ahead so I budget for the next month on the 22nd of this month (when I get my last paycheck of the month). In the Before Times, I traveled a lot for work a lot and it is just easier not to have to worry about it while I'm gone - for example, my gas company won't let me log on to pay a bill if I'm outside the US (which I generally am if I'm traveling for work). I mean, if you have a VPN that makes it look like you're in the US, it will work, but it's just one more thing.
I autopay as much as I can. It helps lot and we are now a month ahead so we budget the full month on the 1st.
Because YNAB is a cash based system, it might be helpful to realize that you budget based on when you are going to make the payment rather than worrying about which month it is related to. So, if I have any manually paid bills, it doesn't matter to my budget that it is due in November, it matters that I have paid in October so I budget in October.
Think of it in the opposite. If I missed a bill, and paid after it was due, I would not go back to the previous month and record the transaction there. So, if I had a bill that was due in October and I realized it in December, I would record the transaction in December and find the money to cover it in December. Now, it could be a case where I had budgeted the money in October and it carried forward so I don't have to find money because it is already there. In other cases, I might not have budgeted for it or used it for other purposes so I would have to find the money to cover the late bill.
The due date is important to help with deciding when you will pay, depending on your cash flow, but you should record the payment when you pay it and budget for it then.
Magenta Transistor said:
I could be overthinking this, but paying some bills due in November early (in October) seems to be confusing how I set up my budget.
I'm not going to answer your question. I prefer to comment on the quote I've put above. We see this a lot. People are so intent on associating a particular month to a particular bill that they get confused with the budgeting. From a budget point of view, a bill "is for" the month you are going to pay it. In other words, from a budgeting perspective, the only thing that matters is you need to assign the money to the category in time for you to pay the bill.
So from the budget perspective if you have a bill due on 10th July, you are good if:
- you assign the money in January and leave it there and wait for July 10 to pay the bill
- you assign the money in January and pay the bill there and then
- you assign the money on July 9 and pay on July 10.
You are not good if:
- you pay in June and assign the money in July
- you pay on July 10 and assign the money on July 12 or August
In short, from a budget perspective a bill "is for" when you need to have the money assigned in the category. Of course, you can choose when you pay (to some extent), hence your question. But you should let go of the mentality to associate a bill with a specific month. That's why you think it's creating confusion in your budget. It doesn't create confusion in your budget, only in your head :)
A common example to give about this is planning a vacation, say in July. You will use the accommodation in July but often you need to book in advance. So although the price of the accommodation "is for" July (in the thinking of your quote above), from a budget point of view, at least part of that cost "is for" earlier, often much earlier. That earlier date is the date that matters for your finances.
Heartily seconding what Fuzzball Meows said. Autopay vs manual pay is just transactional logistics. You need to have the money in place first either way - although if you're going to pay the bill as soon as you receive it, you need to have the money in place sooner than if you pay it on the due date. When funds are tight, asking "what does the money I have right now need to do before I get paid again?" is sometimes the key to whether you pay the bill now or in three weeks.