As far as personal finance management is concerned, paying our bills on time is a requirement. However, at some point in time, most people have trouble making those bill payments on time. A crucial point to make is that we can all avoid such difficulties by planning for our monthly expenses and managing finances in such a way that we are paying our bills regularly. We achieve this by measuring all of our household obligations while alternately saving for that rainy day. The savings factor is essential in that it allows us to adapt to temporary, unscheduled reductions in income.

The first step when it comes to any financial plan involves collecting data. In this case, we bring all of our monthly bills together and add up the balances owing on each. By taking into account the interest rates, we can assign each bill a priority level (1, 2, 3 and so on), where the highest rate bills take on a higher priority than the lowest-rate bills.

The next step involves adding up all of our minimum payments, which will be listed on the bills. This number represents our minimum monthly obligation. What makes this step such a chore is that most of us are paid more than once per month (yet our bills are due only once). This means we need to align our minimum due payments with our paychecks. So, if we are paid every other week, we divide our bills into two piles ” a first paycheck of the month pile and a second paycheck of the month pile. (Hard to imagine why budgets generally dont work, isnt it?)

Obviously, drafting an efficient personal financial plan comes with a certain level of difficulty. Having adequate knowledge about managing personal finances surely helps, but most of us never learned this skill while in school. So, even though paying our bills every month makes perfect sense, throwing a financial plan together doesnt make sense to most of us; it is one of the most painful and tedious chores we will ever complete.

In the worst of times, we might find ourselves short of funds and paying our bills, while a priority, might not happen that particular month. While such instances are unfortunate, we have two options. The first is that we can revisit our stack of bills and determine whether we can modify our overall outflows by getting rid of redundant or unnecessary expenses (an old gym membership, premium cable, cell phone, etc.). The second involves starting over and examining our expenses to see where have an opportunity to amend the terms of our existing credit agreements (or even asking for a raise if our spouse is the one out of work). Doing so could improve cash flow, even if it means paying a slightly higher rate in the short-term. These decisions and actions are never easy, but they can certainly make a difference between starving and maintaining our credit score.

After we start on a plan of paying our bills, clearing the debts in full will seem like a long, drawn out process. Sadly, this is the truth. No change happens overnight, and paying our bills in full is no exception. In order to stay focused, we need to devise a strategy where we can not only see if we are on track, but also to see how a series of small steps leads to the giant leap of paying out all of our debt.