About 6 years ago, Colin and I took a close look at our bills. As freelancers with income that varied month to month, the timing of several of those bills really hurt. Of course, some essential bills are due each month (mortgage, gas/electric, cable, health insurance, car insurance, etc.). Although we took a look at lowering these how we could, these were not the bills that were really hurting us.
Much more hurtful were the four yearly estimated tax payments, especially the two that were due during the summer when income was lower. Or Colin’s life insurance payments that were only due five seemingly random times per year (once per quarter plus a separate yearly fee). Or IUS parking or AAA or Amazon Prime which all came due once a year during the summer. If we had not made enough that month we were dipping into our emergency account to cover those bills. We financially dreaded the summers.
The smartest thing we did was to look at those bills that come up less frequently than monthly. This includes the aforementioned bills as well as the water bill, phone bills (mine is monthly, but Colin’s is prepaid every 6 months), Costco membership, etc. To take the Costco bill for example: it is a yearly renewal, so we divide the Costco bill by 12 and tuck away that portion of the bill payment each month so that we have the money in the account when the bills come due.
We do the same for Colin’s phone bill: divide by 6 and tuck away that portion each month so that we have the money in the account when the bill is due. Or even the water bill: that comes every other month, so we divide it in half. You get the pattern.
Now since we are spreading out the bills over multiple pay periods, the amount we are paying each month is much more equalized, making it more affordable, so we don’t need to dip into our emergency account just to pay regular bills any more. This also provides us with a financial buffer to cover using our debit card to do grocery shopping and the like. Financial security for freelancers.