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5.1 UNDERSTANDING CASH FLOW; PERSONAL AND HOUSEHOLD FINANCE, HOW TO MANAGE YOUR BILLS AND YOUR MONEY

Cash flow is a term that is often used in business. It means that money is like a river. Some money is always coming in and some is always going out. If you can pay a few bills later than you thought each month, the level of the river will rise a bit. In short you will have more money to work with.
As we pointed out earlier, some bills may be due much later than you thought. It is possible that you could "find" some money this way.

5.1.1 WHEN ARE YOUR BILLS REALLY DUE?

The health insurance bill I get every month says that the bill is due on the first of the month. It turns out that I can pay it on the 30th with no repercussions. I only discovered this after speaking with a representative. My cable TV bill states, "Balance subject to a late charge of $4 if not paid within 35 day of due date." Translation: you may be able to pay weeks past the due date without any problem.

Some bills have grace periods. Credit cards often have grace periods of up to five days, but each company is very different. For example, other credit card companies demand that they receive their payment exactly on the due date or they charge hefty fees.

I suggest you call the central office of each company you deal with and find out exactly what their rules are: When is it due? Is there a grace period? Is there a penalty?

A good rule of thumb is to mail your bills five business days before the date you want it to reach the company. (Don't count weekends or holidays.) This should keep any bill payments from arriving late.

5.1.2 KEEPING UP YOUR CREDIT RATING

Paying some bills a little late can seriously affect your credit rating, while paying others a bit tardy may hardly affect it.

In particular, utility bills are very important to pay on time, especially if you are trying to establish credit. Paying credit cards on time is also a good idea.

Paying your bills on time, is a critical component of establishing and keeping good credit. A bank looks not only at your income and your assets but also at your ability to make payments on time. Punctuality is considered to be a key element in gauging the credit worthiness of an individual.

An interesting story illustrates the point. A man who had won millions in a state lottery tried to get a credit card and was denied. The reason was he had not paid his bills on time. Of course he could have gotten a secured credit card, that is a credit card secured with a savings account.

If you have a bad mark on your credit, it may affect you in unexpected ways. A couple I know was denied homeowners insurance coverage because of their credit history. Some insurance companies are now using credit records to evaluate risk. In addition bad or fair credit will cost you. You will pay more for credit cards and more for loans.

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