The following post is from Christina of Northern Cheapskate: Is a Budget Billing Program Right for You?
It can be frustrating to set up a budget when some expenses fluctuate from month to month.
I’ve had months where my utility bill is around $100 a month and others where it has been more than $300. I finally got so tired of not having a good idea of what to expect that I signed up for my utility company’s budget billing program. The utility company averages out my utility costs for the whole year and then divides them by 12 to calculate my monthly payment.
I’ve enjoyed the convenience of having a set monthly figure to work with. But is a budget billing program for your utilities right for you? Here are some things to consider:
Budget billing makes it easy to plan your budget.
You know exactly what your bill will be each month, which also makes it easy to set up e-bill pay through your bank.
Budget billing is not for the transient.
You usually have to live at the same address for at least one year before you can sign up for budget billing services. This helps establish the pattern of your usage so that the company can properly estimate your bill. If you move around a lot – or if you have to travel a lot for your job and have erratic utility usage – budget billing may not be right for you.
You have to be okay with overpaying some months.
During the summer months, we don’t use nearly the same amount of electricity that we do during the winter. Your actual utility bill may indicate that you owe a lot less money for the month than your budget billing requires. You still have to pay that higher budget billing amount, even if it is more than what you would normally owe. You have to be comfortable with the utility hanging onto your money for you during these months, which can be hard when you realize that they’re essentially using your money interest-free.
Beware the adjustment.
Just like there are months during which you overpay, there can also be months in which you’ve underpaid. You may have added additional family members, hosted numerous overnight guests, or used more electricity for heating or cooling than you have in the past. Most companies reconcile your estimated bills with your actual usage and adjust your budget billing every 6 months to one year. It is possible, despite all of the best efforts to estimate what your budget billing should be, that you will owe a chunk of money. Avoid the surprise of a big bill by regularly checking your monthly statements and discussing your payment options with your utility company in these situations. Of course, if you’ve overpaid, you’ll receive a credit on your bill, which is always a nice surprise.
You still need to pay attention to your monthly statements.
Just because you’ve automated this bill, does not mean that you can just ignore it. Pay special attention to your utility usage. A sudden unexpected spike may indicate a bad meter or a water leak somewhere. You’ll also be better prepared for those adjustments to your plan when the company figures out your actual, rather than just estimated usage.
I’ve been using budget billing for our utilities for several years now, and I’ve found it to be a useful tool in helping us manage our expenses.
Do you use budget billing? Why or why not?
|Christina Brown is the creator of Northern Cheapskate, a blog dedicated to frugal living through coupons, freebies, and money-saving ideas. She lives in the rural north woods of Minnesota where she clips coupons, pinches pennies, and chases her three boys (a 6-year-old and twin 4-year olds) as a stay-at-home mom.|