Mortgages, budgeting and the 13 month year!
The holiday season is also the time of year when I review my budget, holiday expenses and cashflow. As I updated my spreadsheet it made we realize a large portion of America gets paid on some sort of weekly schedule but mortgages are paid monthly creating an inherent mismatch between pay cycles and bill cycles. There has to be an easier way!
I don't need tools to predict cash flow or any other fancy Fintech solution. I simply need a bank to help match my pay cycle with my bill cycle. So spilt my mortgage into 26 bi-weekly payments instead of 12 monthly payments and offer me this fee free option when I apply for my loan.
When I worked for companies that pay me twice a month it made budgeting super simple. The mid-month pay check had to cover credit cards and other monthly bills and the end of month paycheck had to cover the mortgage (and have a few dollars left over). Most financial advice generally recommends not spending more than 30% on housing so this simple budgeting technique should work for most , except if you get paid on a weekly schedule.
This will make financial management much easier than trying to figure out if this Friday's paycheck is the one I need for the mortgage or if I am free to spend! Yes, I suppose I could sit down and set up some sort of schedules payments from my bank bill pay website to accomplish this but why not attack the problem at the source instead of creating work arounds?
There is also the opportunity for mortgage servicers to address the problem and build it into the escrow process. Simply collect biweekly payments from customers but apply them monthly and use escrow to smooth out cashflow.
Or we could solve this for all industries and move to a 28 day month and 13 month year! But I won't hold my breath for that one.
And to all the banks out there I understand this isn't as simple as it sounds. We need Regulators to make it easier to offer these type of options. Regulating that certain bills be due at the same time every monthly might sound like this makes things predictable for consumers but it is only one side of the equation. It's time to realize that some people get paid on a monthly schedule and some get paid on weekly schedules and design financial products to match those pay cycles.
Happy Holidays!