This is a story of the troubles that ensue when you live paycheck to paycheck and your paycheck is late.
My husband has been at the same job for 15 years and has without fail, been paid on time via direct deposit. Paid on time and in full every 15th and last day of the month for the past 15 YEARS! And even-though, with all my technophobia (my budget is still on paper), I have had such faith in the timely paycheck deposits that I automated ALL of our payments, bills, investments. The mortgage is automated for the 1st and most of the rest of the bills (car insurance, car, electric, phone, credit cards…) are all set up to be paid on the 15th.
This was all going along swimmingly, until this Monday, March the 15th.
I had a feeling something was amiss on Saturday when the paycheck wasn’t listed in “pending” on the banks website. If payday falls on a Monday it ALWAYS has been deposited after midnight on Friday night, although it won’t actually “clear” until Monday. I really felt uncomfortable on Sunday morning when it still wasn’t there. I stayed up Sunday night into the wee hours of Monday morning because the knot in my stomach was getting larger by the minute and was hoping against hope it was going to go in there.
I had 16 scheduled payments automated to come out of that checking account on Monday the 15th.
I freaked, it wasn’t there Monday morning by 7am. I scrambled to every website where a payment was scheduled to be made, canceling the payment, hoping it would cancel this late in the game. Trying to remember 16 logins and passwords and clumsily navigating websites I hadn’t visited in months. One website was “Experiencing Technical Difficulties” – “Try Back Later”, *sigh*. I was picturing an endless, disgusting cascade of bounced checks. 16 Bounced checks would = $576 in NSF Fees!!! I eventually figured out how to, and did cancel all the payments.
I called the bank. “No, we see no incoming deposits”. CRAP, the Ides of March got us.
As a SAHM, I say all the time, “I work, I just don’t get paid.” Apparently now, my husband does too.
He gets to work Monday morning, with the office all abuzz and comes to find, “a glitch with the payroll company and the problem will be resolved and deposits will be made by end of business.” And it was, at around 3pm the deposit went in the bank. Magically, it bypassed “pending deposits” and went straight to “available balance.” He was paid in full and on time (it was the 15th).
Now I had to login back in to 16 different websites and redo the payments.
The bills and payments were in no danger of being late, but I liked paying them early and the money left over on the 16th was “uncommitted money”. Our milk money, if you will. I never doubted it would be more than 2 days or so that he would get paid, but the drama of having A LOT of money set to come out of an account where there was NO MONEY was too much stress to bear.
I’ve UN-automated all our payments. No more “scheduling payments” or “automated bill pay”. We’re going old school. Well, I’m not going to write actual paper checks or anything that crazy, but I will pay each bill individually after I make sure the paycheck is in the bank.
We can’t afford to take the chance…
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Stay at Home Mom CFO - one mom, one income, too many issues... 
March 16, 2010 at 7:26 pm
I completely understand your horror! A few years ago, our school district changed the payroll system to make it more “efficient.” Well, guess what? It was a nightmare! Making it way less efficient. For the first 6 months of the new system “roll out” I way paid late on 3 pay checks. Since I only get paid once a month, this really left me strapped. I’m in the process of building up an EF (and saving for a down payment) so that if this ever happens again, I’ll have a nice, big cushion. I’m glad to hear your story ended positively, except for having to re-login to make your payments. What a pain!
March 16, 2010 at 10:22 pm
My biz doesn’t do direct deposits. And my bank has a 10-15 day hold on any check over a certain amount put into the ATM, lets just say I did not know that for 2 months and a few hundred bucks later….
Now I have enough in savings to handle it, but it is still stressful!
March 17, 2010 at 8:09 pm
That was very nerve-racking! I really felt your anxiety!!!
In my case it’s ironic, I’m a techie, but I don’t trust the online banking (strange huh, and I even work at a financial firm, hehehe that’s the real kicker). I do have 3 automated bills I pay, but they are all trivial.
With the mortgage, I use to write out each check and mail it in (erh, well my wife did anyway, I just logged the payment in a homemade spreadsheet we created).
Kudos to you for jumping on it and preventing the fees on all of those bounced checks!!!
March 17, 2010 at 8:09 pm
Oh good gravy, what a mess! I’d have heartburn AND an ulcer.
That’s one reason I won’t automate everything. I manually pay most of my bills, but my automation system is just allowing certain bills to auto-bill my credit card. I like using the extra cushion as a safety feature in case a company tries to overbill.
Have you ever considered creating an expense fund or cushion? I got a little crazy with mine last year, but essentially, you take all your milk money that you can possibly spare and put that into a savings or checking account for however many months it takes to build the equivalent of one month’s salary or expenses. Then you just roll your paychecks into that account and pay bills out of that account so that if a check is ever late, you’re a month ahead anyway so it doesn’t affect you.
March 17, 2010 at 8:33 pm
Scary story!! I hope after a while you’ll feel comfortable to automate payments again… but I’d recommend maybe a couple of days after payday.
March 18, 2010 at 5:46 am
[…] a real-life story of how a stay at home mom managed to save $576 in NSF fees. I’m glad that she was able to incredibly cancel all of the automated payments for 16 bills. Now […]
March 18, 2010 at 5:49 am
I think that you could put a fixed amount of money into your bank account, just in case the paycheck arrives late. And as long as you have it there, you don’t have worries that your checks would bounce off.
March 18, 2010 at 8:33 am
I’m in the process of building up that buffer. It’s unfortunately going to take awihle….That’s the sucky part of living paycheck to paycheck – NO BUFFER!
March 18, 2010 at 8:37 am
[…] Don’t Count Your Money ‘Til It’s There – This article illustrates the fact that “automated payments” can sometimes “not” be a good thing. Thankfully, she was able to remedy the situation before major damage ensued. We are on a semi-automated mode ourselves; we’re just not comfortable turning everything over without any intervention from us. […]
March 18, 2010 at 10:11 am
I’ve had the same thing happen too. I no longer use any automatic payments…but one for $10. LOL I’d rather have the flexibility of making a payment whenever I want to in case something like that happens.
March 18, 2010 at 5:26 pm
Hey Stranger! I’ve been missing my first virtual friend! I’ve actually been slacking myself – The weather has been so nice finally – we are soaking up every minute we can outdoors. I need to find a new time to write. The TV has done it’s job babysitting the kids this past winter…
March 18, 2010 at 7:17 pm
I hate automated payments. I find it harder to “time” all the bill paying — it’s much easier for me to pay them once a month, manually.
March 20, 2010 at 8:03 pm
[…] Stay at Home Mom, CFO, writes about the hazards of living paycheck to paycheck, when the paycheck is late-good reason to keep your checking balance with a good cushion. […]
March 21, 2010 at 7:19 am
[…] Stay at Home Mom CFO tells us Don’t Count your Money until it’s THERE […]
March 21, 2010 at 5:02 pm
This really hits home.My heart started beating so fast. We do direct deposit and this has never crossed my mind. This has really made me stop and think.
March 21, 2010 at 5:28 pm
[…] Don’t Count your Money Until It’s There @ Stay at Home Mom CFO […]
July 18, 2010 at 11:32 am
[…] Stay at Home Mom CFO: Don’t Count Your Money Until it’s “There” […]
January 13, 2012 at 8:36 am
I’ve been reading in many MANY places on the internet accounts by people having problems with & cancelling Direct Debits (automated payments). I so much agree with the feelings expressed by the writer of this article and sympathise with the heartache they went through.
I have always had a great interest in money mechanics and payment systems and I have always strongly advised people to avoid automatic payments. I am convinced people are thoroughly misled and falsely reassured (by eg The Banks ‘Direct Debit guarantee’- here in the UK) about what these things really are, a belief that customers’ banks carry out proper checks when requested electronically by a payee company’s bank to set them up and another belief that their bank can cancel them easily. But its all based on false, complacent & comfortable assumptions. (As also is what money itself really is and how it comes into existense- which I will bring up elsewhere on this forum). I will try to explain.
People just don’t think about the dangers of Direct Debit- just Internet search to easily find out about the huge amount of people that have had problems, companys taking too much, the wrong time etc, saying they will stop taking regular payments and then not doing so; making you go overdrawn and into fees (£30+ in eg the UK for every bounced DD) + interest etc. I contend that the DD guarantee IS worthless, if you complain to your bank here in the UK they almost invariably tell you to take it up with the company issuing the DD. Or if the bank even DOES (after much begging) get the money restored for you, did you know that the company can simply REINSTATE the DD amount and you’ll have to go to your bank to get it reversed AGAIN. Banks have even admitted to distressed customers “DD originators have every right to reinstate DD amounts if they believe they have an outstanding unpaid debt”! (And there was me thinking the money in my account was mine and what gets paid out is under my control- that really is no longer true once you sign a DD mandate!). Another astounding thing is that once anyone has got your sort code & AC number they can (here in the UK & I believe elsewhere too) put it on eg any charity donation newspaper form and set up a DD- the bank doesn’t check the signature or anything at all once the details are transmitted electronically to them by the charity’s bank. (I learned this from someone who used to write DD software for banks). If you don’t believe me please check out this very telling article http://news.bbc.co.uk/1/hi/7174760.stm The direct debit request and payment is entirely automatic once you’ve handed over your account details to the payee company & its been keyed in at the payee’s bank- from then on its just banks’ computers talking to each other via the interbanks BACS payment system here in the UK- no human being checks that you’ve been properly notified by the company requesting the money or even that the signature on the original DD mandate you signed was correct to their records. Even the £30+ penalty for bouncing a DD for insufficient ‘funds’ is automatically applied! That’s how wide open the system is that the all powerful commercial banks have unleished on us permitted by our supplicant and negligent governments. The onus is on YOU to notice the payment you didn’t authorise!
Moral of the story in my opinion: Don’t EVER give your AC details on DD mandates to ANY company you need to pay, use standing orders (which YOU have total control over) to pay them or telephone banking (where you ring your bank every time you get a bill) to transfer the money, or pay by cheque the bill at your bank branch or at a Post Office (no charge in eg the UK) or by post. Carefully guard your AC numbers and watch your statements like a hawk every month.
One final point how do I manage to avoid DD (where I live in the UK) without being penalised at ALL? Answer: 1) My UK gas & elec ACs are with Scottish & Southern energy EQUIPOWER tariff which charges everyone the same low tariff HOWEVER they pay. 2) My landline phone- I ditched BT as soon as they started heavily penalising non DD payers and changed to Post Office Homephone exactly the same service, copper telephone line & BT exchange equipment & IN ALL ASPECTS (line rental & free periods) CHEAPER than BT retail & no extra charge at all for paying by cheque at any post office- EVERY bill. 3) Council Tax & Inland Revenue charge nothing extra for paying by cheque either at your bank, the PO or by post. 4) I don’t bother with Gym membership- I just WALK a lot!, 4) My mobile phone is Pay as You Go where I buy £10 max credit each time at a supermarket, pay at the checkout & just key in the voucher details to my phone 5) I take the risk and don’t bother with AA or home insurance as I am an engineer and able to forecast and carry out all my own home repairs and build in stiff burglary prevention measures, locks alarms etc. But I am very confident it would be possible to find a home insurer that doesn’t charge non direct debit payers more. 6) My credit card statement comes to my home by post and I simply then pay it every month by cheque at my bank or my credit card provider’s bank branch. It usually takes 5 minutes max to do this, I can of course do it at any branch. Or I could do it by telephone banking and FREE for me to to call in evenings or at weekends. The monthly credit card statement has NEVER- in 25 years- failed to come to me by post from several credit card providers I have changed between over the years. And I watch out for and would chase it anyway- its easy to get into the habit. Or use a diary reminder.
Please: Stop doing what you’re told people- think about the possible downsides later when the commercial companies (and banks- stiff £30+ penalties they can now levy if you misclculate) suggest to you ways of doing things that benefit them. Telling you the upsides but not the less obvious serious downsides.