Bill Smoothing to Help Your Budget

Bill smoothing is a practice made popular by energy companies to help reduce financial stress when making your monthly repayment. When you are creating a monthly budget, factoring in your energy bills can be tricky as it can fluctuate greatly. Most utility bills vary month by month depending on your use.

If you are trying to get a zero-based budget (meaning you assign every dollar you bring in to an expense of savings) figuring out your utility expense can make that a little trickier. One option that will simplify this process is called Bill Smoothing.  Essentially, bill smoothing takes the estimated total cost of your utility expenses for the year and breaks it into equal payments every month.  This means you will know exactly how much your bill is every single month.

Bill smoothing is a smart way to plan your monthly expenses. If you are having a difficult time keeping up with your budget, knowing exactly how much you are expected to pay will let you plan your expenses in advance. Bill smoothing eliminates the fingers-crossed, waiting game of will-it or won’t-it be low this month.

How does bill smoothing work?
For the budget conscious, this process is particularly useful because you will pay the same amount every month no matter what time of year. This means you do not have to worry about spikes in the gas bill during cooler months or spikes in the electric bill during extremely hot months.

 
If you opt to choose this payment plan, this is how your bill is typically figured out:

Your utility company will estimate your yearly energy, gas or water consumption based on customers with similar household sizes and house space. As an example: If your utility company estimates that you will use $1,200 worth electricity or gas or water, your payments would be split into 12 months for a total of $100 per month.

Your usage will be regularly reviewed and you will still get monthly statements so you can monitor how much energy you are using. At the end of the year your payment can be adjusted to reflect your new average. The adjustment is to help ensure that you pay enough, but not too much, to cover your energy expenses.

To sign up for bill smoothing, contact your utility company. Try talking to all of your utility companies if you pay for gas, electric and water to simplify your monthly payment routine.

Can I cancel Bill Smoothing?
If, for some reason, you do not want to use the bill smoothing plan to pay your bills, you will have to contact each utility company you use the bill paying plan with and cancel it. Most utility companies require that you give them at least three days prior to your next billing date to ensure that your plan is changed in time for the billing cycle.

Additionally, keep in mind that if you move to a new location, the bill smoothing plan is automatically cancelled. The cancellation is because your current rates are based on normal usage in your area. You will have to call and start bill smoothing again once you’ve moved into your new place if you wish to continue the program.

Your utility company can cancel your bill smoothing payment plan if you do not make your payments on time. If this happens, you will be required to pay late payments and your future bills will be based on your monthly usage.

Bill Smoothing with Centrelink
If you receive benefits from Centrelink, you can use Centrepay to make regular payments from your benefits. You can easily set up regular payments through your monthly account. Bills that you can pay via Centrelink include:

• Rent and mortgage payments
• Phone and internet bills
• Electricity, gas and water
• School fees and expenses
• Child Care
• Home Services
• Rental payments
• Medical Services

You may be able to pay other bills via Centrepay. Contact the individual company to determine whether they accept payment from Centrelink. You can also use the search  tool on Centrepay to determine if the business you want to pay accepts payments.

When you use Centrepay to pay your bills, you do not have to pay any additional fees. It’s a free service to you provided by Centrelink. The business who accepts your payment via Centrepay will be charged a small fee but they are not allowed to charge you for the expense.

Centrepay requires that you make at least a $10 payment to use the service, though the business you choose to pay may require you to make a larger payment.

Are there any downsides to using bill smoothing?
Bill smoothing is a great way to know exactly how much you make every month. It can also save you money during months that are typically higher. The only downside is that your monthly payments are the same every month. The predictability can be a good and a bad thing. While you will not have spikes in your monthly payments, you will not have dips either. This means that months that are typically lower, will likely be a bit higher to help keep your payments balanced.

At the end of the year your payments could go up, if you use more energy during the year. You can reduce the risk of an increase by making energy efficient choices around your home. Replace regular light bulbs with energy efficient models, unplug electronics when they are not in use and rely on natural light during the day. Wash your laundry and do your dishes at off peak hours (later at night) to maximize monthly savings.

 
How Bill Smoothing Can Be Applied to Other Bills & Expenses
Outside of utility bills and other household bills there are other monthly and annual expenses in which bill smoothing can be of great assistance – and save you money!

Take for example rego, this can be a very big payment and slug to your family’s budget if not planned for. However, if you create a rego specific savings account with your bank or credit union and put in a small monthly payment in it each month, when the bill comes you can handle it with ease and it doesn’t disrupt your family budget.

This is something that you can do for numerous other bills such as insurance, family holidays, Christmas, Anniversaries or any other expensive event, product or service.

Never get caught off guard again with a large expenses and stay in control of your money through budgeting and bill smoothing. If you are unsure about bill smoothing and would like some help, contact Centrepay or a financial counselor for assistance.