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Tips on structuring your monthly payments

July 3, 2008 12:00:00 AM PDT
In this economy it's not uncommon to pay a bill before payday, hoping the paycheck clears in time to cover it. But be aware, in this digital age, creditors can get their money in less than a day, which could trigger overdraft and bounce fees. Here's how to create your own grace period to avoid those expensive fees.In this high-tech world, you have to be a little smarter than the computer. As you'll see, some strategy on your part can make juggling your bills a much easier task.

Keisha Scott feels like she's walking a financial tightrope, and she's about to lose her balance.

"My financial situation is a little bleak at this moment," said Keisha Scott.

Several of her big bills arrive at the same time, when her cash reserves are low. She recently had a tough decision to make: pay her auto loan or her cell phone bill.

"If I don't pay my car note, they can come and pick up my car the very next day, so I had to go without service for my phone," said Scott.

Juggling bills used to be easier when you could depend on "float time," those two to seven days it took for companies to run your check through their bank and then yours. But that's gone.

"Now, banks are allowed to make a digital electronic image of your check and they can cash that rather than a physical piece of paper," said Liz Pulliam Weston, personal finance columnist.

And the cash is out of your account in a flash. But financial expert and author Liz Pulliam Weston says there are still things you can do to buy yourself time and avoid overdraft fees.

Her number one piece of advice: Sign up for direct deposit.

"It's electronic, it's safe and it's fast. And usually you can get access to the money almost immediately," said Weston.

Number two: Call your creditors and customize due dates for your bills.

"If you have a credit card, for example, that comes due at the end of the month when you don't have a lot of money, you can switch it to the beginning of the month, right after you get a paycheck," said Weston.

Credit card issuers, retailers and utilities are generally flexible. Weston says another great tool for managing your money: online banking.

"You can typically set up e-mail alerts for when your balance drops below a certain amount," said Weston.

And you can schedule automatic bill payments.

"It's an entirely electronic transaction, so you can see exactly when the money leaves your account and you can trace it right to the biller that you're paying," said Weston.

Weston also recommends keeping at least $100 of "padding" in your checking account. Many banking software programs allow you to write a "virtual check" that never actually clears, but always remains on the ledger, so it looks like you have less money than you actually do.

 

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