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You have to be careful when making principal payments on your bills.  Make sure you read how extra amounts are handled by each company.

For example, my Chase Auto account would take any amount over the current month’s minimum payment and apply it as the next month’s regular payment.  This would become a problem especially when making payments online.  There was no option box to check “principal payment”.  In order to just make a principal payment, I would need to write a check and send it to a specific address.  However, since I made my normal monthly payment via check, I had the option of checking “use remaining as principal” on the payment stub.  By doing this, any amount over my normal monthly payment was applied as pure principle.  If I did not check this box they would assume that I wanted to apply any amount over the minimum as next month’s regular payment.

On the other hand, with my Wells Fargo home mortgage, if I make a payment greater than the minimum they automatically apply the remainder as a principle payment.  I accidentally discovered this when I sent two payments out in the same month.  One was applied as pure principal!  Being paranoid, I called them up just to make sure nothing was wrong.  The representative explained the process to me and offered the option to make this payment a non-principal payment.  Since I had adequate funds, I opted to keep this one as pure principal.

What kind of principal or bill payment issued have you encountered?

I’m not sure why a lot of people cringe at the thought of budgeting.  It is a good way to get your finances under control.  In order to budget properly, you should have an understanding where your money is going.  An hour or two of your time can change the way you look at your finances.

I budget based on my bi-weekly paycheck.  I take my monthly expenses, divide them into two, and put them into appropriate savings accounts.  The advantage of this is I am not tempted to spend the money.  I find that if it’s in my checking account, I am more likely to spend it.  The other advantage of my bi-weekly savings is that I will build another monthly payment over the course of a year. This is particularly useful for building that extra mortgage payment every year.  Some mortgage companies charge you to change your payments from monthly to bi-weekly.

Budgeting for Variable Bills
I’m still working on this area in my personal finance.  One example of a variable bill that I have is the gas and electric.  I’m thinking about taking the average price of the bill over the past year and putting that amount away into another savings account. So when my bill is $50 in the spring or $250 in the winter, I will have enough money to cover it all. Sure, I can assume the worst case and always put away $250, but that will limit my cash flow.  Have any suggestions?

How do you budget?