Financial advisor Salve Duplito said there are dangers in automatic bill payments because it gives the illusion that you can spend cash on hand without worrying about monthly expenses.
“It gives you until the end of the month or more than that to settle your utility bills, that means you get a false sense of spending leeway,” she said on ANC’s “On The Money.”
She said there is also a risk of getting a monthly “bill shock” if you fail to monitor utility rates.
“When electricity rates go up suddenly, or you get a busted pipe without knowing it, you are likely to get bill shock,” she said.
Being unable to pay credit card bills in full every month also poses as a problem because interest piles up.
To avoid being in debt while maximizing the benefits of automatic bill payments, Duplito advised to be clear on how much your total utility budget should be.
She said reviewing credit card statements in the past year and adding up all utility bills in a month will help.
That amount should be then given a buffer of 20 percent, and should be put aside as a “no touch utility money.”
Duplito added that it should be a habit to check your credit card balance every day if possible, or every week of your schedule is really tight.
“This is a must, if you can access your Facebook account, you can check your credit card account. It won’t take more time than checking your News Feed,” she said.
For automatic bill payments to work, Duplito also suggested spending only a small fraction of your monthly income and be conscious of how much you are spending at any time.
If you find yourself in debt because of credit card payments, pay off as much of that debt as soon as possible by getting a lower interest bearing loan like a salary loan with the Social Security System.
She also said one should cash in any investment you may have and pay off your debt.
“No investment can earn a guaranteed 42 percent per year. That’s why it makes sense to pay off debt first before investing,” she said.
source: www.abs-cbnnews.com
