November Challenge�Put Cash Flow on a Calendar

Money management, as with so many things in life, often comes down to timing. You can use simple techniques to put time on your side. Mileah, a member of Keesler Federal Credit Union living in Long Beach, Miss., sends her idea:

Designing a budget is one challenge, sticking to it is another. You get paid on the 8th and your bills aren't due until the 15th; the 15th comes around and you have less than enough to meet your obligations. If you are living on a "maxed out" budget, timing and control can make or break you.

I have an annual schedule of bills broken down into 12 months; each month is broken down by pay periods. We have one person paid every two weeks and the other paid twice a month, and this method helped me keep better track of what was due or coming due each pay period. I pay bills more often, but I use my credit union's online bill pay and schedule automatic reminders with auto pays. I perform "maintenance" on it once a month to make sure all expenses are covered and then review on paydays.

I love Mileah's idea�in fact, I use a version of it myself. I use the simple Microsoft® Works calendar on my home PC and its 'recurring event' feature to note all paydays and the amount coming into my checking account on each one, as well as major bills�mortgage, car payment, telephone, cable, gas and electric, insurance premiums, and so on. My schedule doesn't include savings because that amount already comes out of each check automatically�I work just with my disposable income. I note my checking balance on each payday so I can see where I stand relative to the bills coming due.

Mileah explains her system:

I created a table using Excel. This allowed me to schedule all of our bills for a month based on pay periods and due dates. We work on a very tight budget with less than $100 wiggle room each pay period. We withdraw our budgeted 'living expense' in cash and do not use our ATM or debit card. This helped tremendously. We found ourselves better able to live on the weekly allotted amount.

You don't have to use a spread sheet�you can use any online or paper calendar large enough to note the bills and paycheck amounts, or even a legal pad.

Bill Hampel, senior vice president and research chief economist for the Credit Union National Association, Washington, D.C., says as many as two-thirds of consumers live paycheck to paycheck. That means most of us can benefit from being able to visualize our cash flow, and using some kind of calendar system helps you do that. Your cash flow calendar picks up where your check register and monthly statement leave off�they all work together. Until I started using a similar method I was always getting caught off guard at least once in awhile by a bill that exceeded my checking balance.

Mileah's system notes her surplus or deficit each week. If you're paid every other week, you already might keep your eyes open for the three-paycheck months that occur a few times a year. But it matters less whether a month has three checks than if there are two paydays between due dates for your largest bill, typically your mortgage. Plotting all your paydays and bills lets you see right away when this happy little anomaly will occur. It can give you a chance to make a larger payment on your credit card bill, for example, or to make a larger deposit into your emergency fund.

Out of sync, out of money

If you see that the date when a large bill is due just doesn't synchronize with your paydays, ask if your lender will let you choose a new due date. Make sure it won't result in late payment fees. And when you borrow initially, work with your lender to choose a due date that falls strategically on your cash flow calendar.

More ways to match bills and paydays: Use online bill pay to pay large bills in chunks, say thirds or halves. If you have trouble coming up with full payments, set up a savings account just for bill payments; make consistent, automated deposits into that account and then transfer what you need to checking when the bills are due. Pay some bills early, from a paycheck when you're a little flush. You might lose a tiny amount in dividends but the upside is better�no late fees, bumped-up interest rates, or damage to your credit score. Keep in mind that mortgage payments typically have a grace period�you might be able to pay 12 days after the due date and still be within a 15 day grace period, for example.

Think of the many benefits to Mileah's careful planning: reduced or no overdraft or courtesy pay charges, no late fees for tardy bills, better savings growth because of consistency, reduced anxiety about having enough money to pay bills, no unpleasant financial surprises�you might be able to think of more.

And keeping your obligations visible this way also can help you stick to your spending plan�you pretty much know your priorities at all times.

Another key benefit, especially in these days of economic turmoil, is that you will build and maintain a sterling credit history and score. Gail Cunningham, spokesperson for the National Foundation for Credit Counseling (NFCC), Silver Spring, Md., says, "Unless you already have excellent credit, it is not likely that additional lines will be open to you."

She explains, "A recent Fed survey showed that a record 36% of banks reported less willingness to extend consumers installment loans, with 80% tightening standards on home equity lines of credit. The story with credit cards is just as grim, with 67% of the banks refusing new loans to consumers without good credit."

Cunningham's advice: "Do whatever it takes to responsibly service your debt obligations. Keeping your head above the financial waters isn't as easy as it used to be, but it's more important now than ever."

The good news for you and other members is that credit unions are still lending. They're far less affected by the credit crunch because credit unions were mostly bystanders to the subprime home loan mess. But Cunningham's advice holds true for all consumers�this is no time to be getting sloppy about money management.

2008 Financial Fitness Challenge

For her unique suggestion, Mileah wins a $50 Visa card and becomes eligible to win $1,000 at the end of the year for the grand prize. We'll share another reader's prize-winning idea�the last for 2008�next month.

And always remember, the people at your credit union are available to help with all your financial challenges.

ST
Susan Tiffany, CCUFC
[email protected]

Published November 1, 2008