How to beat bill pain as household costs pile up
Some consumers create unnecessary stress by allowing bill costs to spin out of control, but these simple strategies can help save you money.
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We’ve all got bills we have to pay, but some consumers create unnecessary stress by failing to take the right steps to stop blowouts.
This means many are living payday to payday, with one in three having very little money left at the end of each month and seven out of 10 young adults struggling to prioritise their finances, according to Commonwealth Bank of Australia research.
The bank’s head of behavioural economics, William Mailer, says our brains can work against us at bill time through issues such as simple forgetfulness or a tendency to avoid information that’s complex or uncomfortable.
“We can often be overconfident and overoptimistic in our planning and this can lead us to underestimate our future expenses, or over-estimate our ability to comfortably meet them,” he says. “This might mean we don’t plan appropriately, or factor in enough buffer for higher or unexpected bills.”
Many service providers offer bill smoothing, where you pay a similar amount each bill cycle rather than face seasonal ups and downs.
“Some may even allow you to change the billing date to arrive in the days after your payday,” Mailer says. “Such arrangements can take the stress out of bill time by keeping things predictable, regular and by ensuring you have more cash on hand as bills arrive.”
Technology is helping consumers keep on top of bills. CBA’s new bill sense feature in its app helps people predict upcoming bills, and Mailer says technology will increasingly become available to help people match bills with pay cycles, deliver reminders and identify support services. Wasting money on unnecessary bills is a cash killer.
“Set a time in the diary now to carefully review all of your recurring bills to work out which you may be able to reduce or eliminate,” he says.
Beyond Bank Australia national operations manager Sophie Scott-Young says opening a separate bills account can help, if you have worked out roughly how much your bills are and when they arrive. “Your employer may even be able to split your pay into two accounts or you can set up a regular transfer on payday into the bills account so that the money is put aside straightaway,” she says.
And have a buffer in your account so surprises such as car repairs or appliance failures won’t smash your finances.
If large quarterly or annual bills cause stress, speak to your bill provider about getting them sent more regularly — perhaps monthly. “Bill shock is real so if you pay a smaller amount more often this will reduce the stress of having to find large amounts of money when they come due,” Scott-Young says.
Alex Mackenzie says the most concerning bills for his family are water and electricity “because they change seasonally and they’re hard to predict”.
Mackenzie says he and wife Charlotte use timers on their heating and cooling to ensure they don’t leave appliances on overnight or for extended periods.
“We also try to be smart about when and how we water the garden,” he says. “They might sound like little things but they make a really big difference to the final bill.”
BILL TRAPS TO AVOID
• Sticking your head in the sand. Behavioural scientists call this “the ostrich effect”.
• Using a credit card to pay bills can multiply your costs through high monthly interest if you fail to pay it off on time.
• Late payment fees have been around for years, but many bill providers also offer early-payment discounts — don’t miss out.
• Bills sent to different locations — such as work email, home email, letterbox or text message — can be confusing, so set them up to arrive in one place.
• Infrequent or variable bills can be harder to monitor.
Source: CBA/Beyond Bank Australia