How to Avoid Bill Shock ⚡️ and Manage Your Expenses
As one year comes to an end, we start thinking forward, about what we will aim to achieve in the New Year. Yet we are often held back, by perhaps some of the excesses enjoyed in the year just gone.
In order to get your year on track from the outset I wanted to I highlight a common challenge that impacts many people called Bill Shock.
Bill Shock is where there is an unexpected additional cost that needs to be paid, often coming at a time when you can least afford to pay the bill.
With rising costs of living, increasing cost at the grocery store, petrol pumps, energy and utilities, the unexpected additional expenditure can be detrimental, with the effects likely to hang around for long periods of time.
What are types of Bill shock that you may experience
- Increased energy usage and higher utility bills over warmer and colder months
- A car repair that requires a large investment to get back on the road
- Roaming charges or additional mobile phone costs when travelling overseas
- The credit card repayments after splurging on a few luxury items over the festive period
- The washing machine, fridge or TV that needs to be replaced
- Rising interest rates increasing your mortgage repayments
- Increased Internet usage or subscription costs
And whilst any one of these items can have an impact on your finances, a combination of some or all of these items, with similar due dates, can have a far devastating consequence compounding the problem over a longer period of time.
Knowing Bill shock is likely to occur, What can you do?
There are a few options and each of these will depend on your own personal circumstances
- Pay regular amounts off your bills on a regular basis before the due date
- Pay a little extra (if you can afford to) on your mortgage so you have a little buffer when unexpected bills come through
- Set up different accounts for different expenses types
- Reduce your credit card limit or eliminate your credit card. Where possible only pay from cash you have on a debit card. Use your credit card in the utmost emergency only,
As an example, after experiencing Bill shock, I started paying an amount every fortnight into my water, electricity and rates accounts. The amount I paid was so that when the bill came through, I had nothing to pay and at times was in credit. We also set up a small savings account for Household items to cover for those unexpected household repairs.
Some companies also provide notifications of when your internet or phone usage is nearing the quota so you can adjust your plan, or behaviour where required. This helps individuals manage their usage and avoid unexpected charges that can lead to bill shock. Additionally, regulatory bodies in some regions may have implemented measures to prevent excessive charges and ensure transparency in billing practices goes along way to understand those hidden costs
Benefits of this approach
Smooth Outlay of Cash - into predictable regular repayments and the ongoing monitoring allows you to manage for unexpected changes to patterns and additional charges.
Good financial management - by allocating the money you earn into the expenses that are likely to be incurred at the time you have the money
Pitfalls of this approach
Paying regular amounts of money to a service provider forgoes potential interest you could be earning by investing the money yourself. Service providers will not pay you interest on your funds by paying in advance.
Difficult to get started - In financially constrained environments you may not have additional funds to start the process
Conclusion
Bill Shock is real, and if you are experiencing or have experienced Bill shock, applying some of these practical steps can help you smooth out the outlay of cash on expenses when you earn the income. Allocating and budgeting your expenses can ensure you don’t spend more than you earn whilst ensuring you cater for those bills that are likely to come through in a lump sum.
Have you experienced Bill Shock and what are some strategies you have adopted?
