Finding the Best Way to Pay

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Option 2: A Software-Based System
Here are the steps you'll follow if you use personal finance software to manage bill payment:

1. Receive paper bills via regular mail or bill-ready notifications via email.
2. For paper bills, open each bill and discard the outer envelope. On the return envelope, write the amount and date due in pencil where the stamp will go; then stuff the bill into the return envelope. For e-bills, print the notice. Add the bills to others waiting to be paid.
3. If you don't already have a schedule for paying bills, create one: Consider when you will have money (your pay dates), when you have to give money away (the due dates on the bills), and your temperament (sprinter or jogger) to determine how often you must tend to this task. Then write it into your calendar. You can also set up reminders in your software, but don't rely solely on this method because the reminders will only work when you're in the software!
4. On bill-paying day, gather your bills, checkbook, bank card, blank envelopes, return address labels, and stamps, and sit down at the computer.
5. Prepare a payment for each bill, either by paper check or online using your bank card.
6. Open your money-management program and record each payment. Note the method you used to pay it (check, debit, and so on). If paying electronically, record your confirmation number in the transaction's memo field. Use the report features in your software to create your "Did I Pay That?" document as needed.
7. File the printout or statement portion of the bill if you keep them.
8. For each bill you're paying by mail, put the bill in the return envelope, stamp it, add your return address, and mail it. If you want to wait until closer to the due date to mail it, don't put the stamp on it yet: Set the bills aside in a designated spot, in order by the due date penciled in at the stamp spot; then, each day choose the ones you're going to mail, stamp them, and send them out.

Caution
If you're really techno-savvy, you might have noticed that the latest versions of money-management software such as Quicken and Microsoft Money are capable of communicating directly with your bank via your online banking feature. This means your software can download your transactions and even reconcile itself using information from your bank, with little or no involvement on your part. I strongly recommend that you do not do this if your goal is to be more aware of what's happening with your finances: It might be less work for you, but it might also distance you too far from the details.

Option 3: A Web-Based System
If you're comfortable with technology, have a reliable Internet connection, and want to pay bills as quickly as possible, consider paying online. Here are the steps you'll follow if you choose this option:

1. Receive paper bills via regular mail or bill-ready notifications via email.
2. For paper bills, open each bill and discard the outer and return envelopes. For e-bills, print the notice. Add the bills to others waiting to be paid.
3. If you don't already have a schedule for paying bills, create one: Consider when you will have money (your pay dates), when you have to give money away (the due dates on the bills), and your temperament (sprinter or jogger) to determine how often you must tend to this task; then write it into your calendar. You can also set up reminders in your software, but don't rely solely on this method because the reminders will work only when you're in the software!
4. On bill-paying day, gather your bills and sit down at the computer. Open your money-management software and log in to your bank's online banking Web site or each payee's online payment screen.
5. Create a payment for each bill in your online banking account or the vendor's Web site and set the pay date for each. Record each transaction in your money-management software. Use the report features in your software or your online banking system to create your "Did I Pay That?" document as needed.
6. File the printout or statement portion of the bill if you keep them.

Caution
If you set up auto-debits, don't forget to record them. It's nauseating to get an overdraft notice due to a legitimate debit you set up and then forgot about.