Paying bills on time does wonders for your credit, Grownups—and your peace of mind.

I’m obsessed with paying bills on time. Actually, I prefer to pay early.

I’ve set up monthly auto-pay for my bills, which means the full balance gets deducted from my bank account each month. But I still log in to manually pay my credit cards every week or two, just to zero-out the balance.

I’m a small business owner, and when my contractors send me invoices, I typically pay the bill immediately, even if it’s not due for another month. Waiting until the deadline stresses me out.

Why is paying on time so important to me? And what would happen if I started paying late?

Let’s start with the first question. I have a confession: I developed this habit to avoid the temptation to overspend. Paying bills early might make me sound like a responsible adult, but in truth, I’m trying to protect my finances from myself.

How does on-time bill pay help me spend less? Here’s an example: Let’s assume my checking account holds a balance of $4,000. Let’s also imagine I receive a dozen bills of various amounts, all due in less than 30 days.

I skim through the bills and mentally tally their totals at $3,000. I assume I have an extra $1,000 to spend, and book an airline ticket for a beach weekend.

But in reality, my mental math might be off. I may not have as much spending money as I think I do. That reality hits home once I start making payments. See what I mean?

Sure, I could use an app or spreadsheet to tally my post-bill-pay total. But the emotional impact of watching my checking account balance dwindle packs the most powerful punch.

Like most people, I pay a series of small bills—electricity, internet, insurance—most of which look negligible in isolation. It’s easy to imagine that these small bills hardly make a dent in your account balance. But small sums add up, and the best way to feel their impact is by sending in the payments.

As a second benefit, I never pay late fees. Well, not anymore. When I was in college, I racked up $400 in overdue fees at the campus library. Ouch. That was a painful lesson, particularly as a student who earned just over minimum wage.

Fortunately, I haven’t paid a late fee in years. This is a particular relief given how high fees have climbed; some companies charge $35 or more to customers who are just a few days past due. I’ve avoided paying late fees by setting every bill on auto-pay, which protects me from accidentally forgetting to send in a payment and getting sideswiped with extra charges as a result.

The third benefit is I have an excellent credit score resulting from many years of on-time bill paying. If I’d accidentally paid a bill late (which can happen when I’m busy, sick, or out of town), my credit might have suffered a blow. Fortunately, auto-pay coupled with voluntary early payments keeps both my balances low and credit score top-notch.

As a fourth benefit, I’ve started building a cash buffer in my checking account. Since I don’t want to spend my account balance down to zero, I’ve made a habit of living below my means and watching that cash buffer grow.

(To be clear, this cash buffer is separate from my emergency fund, which lives in a different account.)

Over time, this cash buffer has grown large enough that I don’t bother checking my account balance before I pay my bills. I know that even if I pay higher bills than usual for a month, or if I delay making a few deposits, my cushion is large enough to float me through most temporary cash-flow crunches.

Since I’m self-employed, which means my paychecks arrive on an irregular schedule, this saves me from an incredible amount of stress—which is yet another benefit.

Many assume avoiding late fees is the only benefit to paying bills on time. In my experience, the advantages are far more widespread. My habit of timely (and early) payments helps me live below my means, keeps my credit intact, builds a cash buffer, and reduces stress.

I’d say that’s a compelling case for developing an on-time payment habit.

Paula Pant quit her 9-to-5 job, traveled to 33 countries,
launched a business she runs from her laptop,
and uses the profits to invest in real estate.
She shares details about these adventures
and more on her website, Afford Anything.

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