Lending Club Blog

Paying Seasonal Bills Through a Budget Plan

Seasonal price changes to your bills can make it difficult to plan for, and afford, payments at certain times of the year. Whether through a formal plan, or one of your own, you can help to even out payments and better manage your personal finances in the process.

Many utilities offer plans to charge you a fixed amount each month. These plans are often called Budget Plans or Equal Payment Plans. Though terms may differ slightly, they generally charge you the average of your previous 12 months of billing history. The result is that, compared to paying actual usage charges, you’ll be paying more in low usage months and less in high usage months. This basically spreads the high cost of high usage months across the entire year. In this way, you should expect to pay roughly the same amount each month, though rising prices may create a slow rise in the amount

If your utility companies don’t offer a formal plan, you can create your own. This isn’t always necessary, depending on the types of bills you have and when they are due. I’ve noticed that although the individual amounts vary, the total of my gas, water, and electricity bills tend to be about the same every month. Since the bills are all due within a few days of each other, I don’t really notice much seasonal change.

If your situation is not this immune to seasonal changes, creating your own plan is a simple as budgeting the average of your last 12 monthly bills each month. In low usage months, your bill will be less than the budgeted amount. The excess should be placed in a separate bank account. In high usage months, you’ll pay the bill with a combination of your budgeted amount and a withdrawal from this same account. You can easily combine multiple bills into the process.

Depending on your usage, or another factor such as a spike in gas prices, a budget plan may be a smart choice to help keep monthly payments relatively consistent. At times, the equal payment would be more than you would have paid otherwise, but avoiding an unexpectedly high bill that significantly impacts your finances may be worth this minor downside.

Do you notice seasonal changes in your overall spending? Are you currently using a budget plan for any of your utility expenses?

Friday, October 31st, 2008 at 7:45 am

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