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The Perils of Automatic Payments

Automatic payment systems are convenient, but convenience always has a cost. It is essential to audit your automatic payments regularly, or you may get an unhappy surprise.

I noticed a charge on my PayPal account. An email arrived confirming I had made the payment. I investigated and saw it was for a service I no longer used. The email concerned me, as I don’t particularly appreciate squandering my income.

The convenience of this service is obvious. You have a fire and forget system that makes sure you pay your bills on time. The problem I have run into is with PayPal. I have not managed these payments. Operator error is the main issue here, not the services offered by PayPal.

PayPal allows you to set up automatic payments to various services. This capability is very convenient, but it also offers the ability to Manage Automatic Payments. You can find it in the Menu for Payments.

automatic payments

There were many automatic payments on the list, and some were payments dating back over ten years. I busily cancelled all the transactions I didn’t recognize. There were payments from demised companies like TigerDirect.

Perils of Automatic Payments?

If you do not cancel these payments, companies can take your Paypal payment without notice. You permitted them already. It is possible to recuperate if payment is taken (via PayPal’s resolution process), but your money may not come back.

Are there companies that snap up demised companies’ assets and PayPal accounts? Do these companies maybe try to withdraw money when they shouldn’t? I hope not, but I would not be surprised.

Remember that phishing scams can be hidden in emails that look like automatic payment emails.

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Bill Notification Overload

Bill notification is less of a problem today. This was written back in 2015 and 90% of my bills are now electronic. I still have issues with email losing bills, but that is easily fixed. I have set up monthly reminders in my online calendar for most of the bills.

It used to be my bills showed up in my mailbox ( Canada Post mailbox). I opened the bills, I piled them up and once a week I’d pay them (online). The system worked fine. It was better than the old system of either mailing (Canada Post) cheques out, or going to the bank and paying bills there.

Bills, Bills, Bills
The Barrage of Bill Delivery Mechanisms

In the past few years, things have changed. Various firms started offering to send me bills in electronic format. This sounded interesting to me, however, I like my paper bills. Back then e-mail systems were a little flakey (and untrustworthy). Then I started getting charged for getting my beloved paper bills, which annoyed the crap out of me. That is when I started to get some of my bills electronically. This has now created a veritable electronic tsunami of bills.

Allow me to elaborate on the many ways my bills arrive:

  • Some bills still arrive in my super mailbox down the road (yes I hate those too)
  • Other bills are sent to my e-mail account (I try to have them show up to only 1 account, that way I don’t have to sift through my 15 different e-mail addresses).
  • Still, others are sent to my e-post account (from Canada Post)
    • An interesting side issue is that I get an E-post account with my TD accounts as well, however, I cannot merge my other E-post account with the TD version, thus the TD version is useless to me.
  • Then some bills I have to go to a website to pick it up (but I get an e-mail to tell me the bill is available)
  • Finally, other bills send me annoying text messages reminding me about payments due, and some do not

All of this really is getting under my skin, and also has succeeded in making me paranoid because last year for the first time I missed paying more than 4 different bills, which has never happened to me before (usually it is 1 a year). Is this due to the fact that I am barraged with bills from many different sources? I keep getting the feeling this “brave new world” may be passing me by. It is certainly making paying my bills on time a challenge.

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Updated Tip: Scan those Bills

From 2013 back when bills were not sent via e-mail.

So one of the first useful tips I wrote about was To Scan All Your Bills. If you do, you didn’t necessarily need to keep paper copies of them.

I still to do this. I do keep paper copies as well, for these type of bills:

  • Tuition receipts for University and my son’s schooling
  • Utilities bills, as I do claim part of those as business expenses
  • etc.,

I no longer only save these images on my computer at home (which is being backed up). There are now many different services that offer free off-site backup of files such as:

  • Google drive, which comes with your Gmail account
  • Dropbox which is an app that runs on many devices
  • Outlook has file space for you
  • iCloud from Apple
  • Even Ubuntu One offers some free disk space

I am leery to use “the cloud” for this kind of storage. You need to encrypt them if you use these services. You never know who the heck might look at your files from elsewhere. Also be aware that clouds are not in Canada, so they have different “seizure” rules.

The interesting part about the scanning of my bills was that I did exactly that when I was asked for receipts from the CRA, and I sent them scans of the documents in question, and they seemed happy enough with that. My guess is if it was an actual audit, they would want to see the originals, but for a “request for receipts” the government seems happy enough with a scanned image now as well.

Unfortunately you need to keep your paper records for a while before you can safely dispose of them (i.e. shred and/or burn), but maybe we are finally getting away from paper copies of things?

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Pay Yourself First : AutoMagic Bill Payments

How do You Pay Yourself First ?

I was reading another site and saw that someone has written a book or is charging folks to learn how to make their personal finances automatic so in response to that, here are some simple ideas (for free (and thus worth every penny you paid for it)) to automate bill payment for your personal finances. I offer these ideas as a possible solution, your mileage may vary, and with all personal finance you should make sure this fits into how you deal with your money (and as always pay yourself first ).

Yesterday I outlined a simple way to make sure we follow one of the pillars of personal finance Pay Yourself First. This methodology is automatic, and hopefully helps folks to hide money away for a rainy day.

Automating Bill Payments

Pay yourself first

Hocus Pocus for Finances
Image courtesy of Photo by digitalart at freedigital.net

How is this possible? Well you may ask that good reader, this heuristic is simplistic in it’s details, so please make sure you understand what the methodology outlines before trying to implement it.

First, find all of those monthly bills that you pay, excluding your credit card bills (given those bills can have wildly different balances each month, I like to exclude those from this system). Some examples of these bills would be:

  • Electric Bill (or Hydro as we would say in Quebec)
  • Water & Sewers Bill
  • Heating Bill (if you don’t heat with electrical
  • Home Phone Bill
  • Cell Phone Bill
  • Mortgage and/or Rent

This list of bills, you can figure out what your average monthly outlay is, assuming all these bills are close to the same amount every month (if any of these bills vacillate wildly over the year, you might want to exclude it from this method, or make provisions for this happening).

Bank Accounts

We had two bank accounts from yesterday Working and Savings First, we now create a third account which we can call Bill Payment. This account is effectively a working capital account, so it should not have penalties for number of transactions, and such, because money will go in and out of it a great deal.

Once this account is set up, you need to set up another per pay cheque automatic transfer to this account, because this is where your bills are going to be paid from.

Some Simple Arithmetic

How do we figure out how much to be transferred? Look at how much you spent on the bills over the past year, take into account any increases in service fees, and then take that amount and divide it by the number of pay cheques you will have over a year (i.e. if you are paid twice a month, divide by 24, if you are paid bi-weekly, divide by 25.5, etc.,). This amount is what you should transfer to the Bill Payment per pay cheque (at a minimum). I added at a minimum, because it is best to have a float in this account, in case there are unexpected charges or increases in your bills every year. It would even be better to start this account with a float of at least 1 pay cheque worth of payments, in case of problems.

So now you have solved half the issues with monthly bill payments, you have taken that money away automatically, before it is in your Working account.

How do I pay these bills monthly? That can be dealt with in a few ways, and can be automated as well:

  • You can set up with each company a direct withdrawal of money from your Bill Payment account. I really hate this idea, but include it for completeness. I never like anyone taking things directly from my bank accounts, but this is one way to make your bill payments, automagic.
  • Set up payments from the Bill Payment account to every one of your bills that pay 2 days before your bills are normally due every month. This is a little tricky because you have to cheque with each bill, to see when they are normally due, and then set up a recurring bill payment for that bill using your On Line Banking or Phone Banking system (the same way as we did for automatic money transfers). Doing it two days before means you are less likely to be tripped up by weekends and holidays.
  • You can try to pay your monthly bills bi-weekly (this one is tricky, some firms really get pissed off when you do this). Simply pay a portion of every bill on each payday. You need to calculate what 1/2 of the bill is normally and simply pay it every pay cheque. This will mean that eventually you will get ahead of your bill payments (if you are paid bi-weekly). I tried this for a while and had two companies phone me saying they didn’t like this, and told me to stop doing it (very interesting).

This heuristic can work, but I would strongly suggest you do it manually for a month or two, to see if it can work for you, and if it seems to be OK, you can automate it after you are done.

If you automate your saving (i.e. pay yourself first) , and automate most (if not all) of your bills, all you need to do then is control your day to day spending, which might be a little easier if you only get a smaller amount of money.

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When Your Shredder Overheats…

You know you have made a good start in your secure clean-up of your old Financial Records! Maybe it is time to get a new Shredder though.

This weekend, I attempted to find the desktop that my computer sits on and the floor in the room where I do most of our finance work. This is where I write these articles. Most of this clutter is old bills and old financial statements . Some of the chaos is pictures and other things that I am not sure what to do with. I started using my shredder to dispose of these old records. Remember never to throw out old bills as they can easily be used for identity theft.

I view as “old” anything before 5 years ago (except for anything to do with my taxes which I keep forever right now). I shredded old chequebooks from old bank accounts (closed ones), old hydro bills, bank statements, etc. It felt very satisfying.

The shredder did an excellent job until it stopped, and I noticed a flashing light on the top (a flashing RED light), which I had never looked at, and in fact, I had “overheated” my shredder, and it needed to cool off before I did any more work with it. This gave me a feeling of joy, knowing that I had disposed of that much financial stuff.

I could try to either buy a bigger shredder or find a place that does secure shredding so that I don’t burn out my shredder. The other idea would be to use the shredders at work.

Does anybody else have any exciting shredder stories? No ties in the shredder stories, please.

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