A bill is an obligation. It’s also sometimes called a statement, which is a good way to think of it—a bill is a statement of money that you owe.

For most of the services you’ll use on an ongoing basis, like your Internet service, the company will bill you. That means they’ll send you a bill in the mail (or email) with a dollar amount written on it that represents what you owe.

A bill is a statement of money owed for goods or services supplied.


For the first few years we paid all the bills first and divided what was left as salary. Sometimes that was $50 a week.


Part of Your Money Kit

You might be wondering why we’d refer to bills as a tool in Your Money Kit. Credit cards, debit cards, checking accounts—those things seem like tools.

But why bills?

Because bills are going to be an enormous part of your financial life—you’ll be paying maybe a dozen or more every month—and you own them. The way you manage your bills will have a huge effect on how smoothly your financial life goes.

Manage your bills responsibly and you’ll enjoy great credit, access to the best loans, the trust of any new company you want to do business with, and an easy time getting access to most services.


Avoid surprises by reviewing your cell phone plan periodically. A 13-year-old in California had a cell phone bill totaling nearly $22,000.

How bills work

Companies that bill you monthly (most do) will usually send you the bill around the same time every month, and they’ll usually expect you to send them a check for the amount you owe within a couple weeks of receiving your bill. You’ll also have to send back a portion of the paper bill that you tear off (called a stub), which you include in the envelope with your check. Most important, you need to send the check early enough so that the company receives your check before the due date written on the bill. If it’s due on the 3rd, and you put it in the mail on the 3rd, you’re going to be late.


Your credit report lists any bills you have failed to pay and that have been turned over to a collections agency.



What’s on a bill?

Bills are all very similar, so they’re easy to fill out, and you can usually quickly scan a bill from a company you’ve just started doing business with, and learn right away where the important details are.

Although each bill is laid out slightly differently, almost all have the same handful of key items on them: 1) your account number, 2) a list of the charges, 3) the due date, 4) the total due, 5) a portion for you to fill out and send back with your check, and 5) the address to send your payment.

Sample bill

Here’s a typical bill.

It looks like it’s got a lot of complicated information, but it takes only a minute or so to get comfortable with the details. Take a look at this very ordinary cell phone bill, so you won’t be intimidated when you start receiving similar bills for car insurance, Internet service, television and bunch of others. Look for:

  1. your account number
  2. list of charges
  3. due date
  4. total due
  5. stub (for you to tear off and send back with your check)
  6. where to send payment
21 att bill


Setting up automatic payments can help you pay bills on time.

Benefits of bills

Bills make it easy for you to do business with many companies whose services you’ll want and need, by setting up a simple and routine way for you to pay for those services. In fact, bills can help you in several ways:
• You’ll enjoy services with convenient payment
• You’ll build a credit history
• You’ll have a record of how you’re spending your money


Living at home during and after college can be a smart financial choice. It could help you pay off college debts more quickly and start saving.

Service with easy payment

When you’re an adult, you’ll get to enjoy a lot of ongoing services, without interruption, by establishing a relationship with the companies providing you those services. That relationship works like this: The companies send you a bill for their services, and you behave responsibly by paying those bills on time, every time.

You’ll get to enjoy your cable TV, for example, because the cable company will send you a bill every month, which you simply send back with a check for the amount written on the bill—the amount you owe for that month. The same goes for your phone, Internet service, car insurance, air conditioning, electricity and many other services.


Twenty-five percent of young adults ages 18 to 24 lived with their parents in 1990. By 2000, this figure increased to 52%.

Building a credit history

Another great thing about bills is that they can help you build a strong credit history and a good credit score.

The financial responsibility you demonstrate by paying your bills on time, every time, is the number one factor in how the credit bureaus determine your credit score.

So if you simply get into the habit of paying all your bills on time, you’ll quickly establish a strong credit score for yourself.

22 credit house cards

Understanding Your Spending

Finally, bills are a great way to keep written records of how and where you spend your money.

If you file your bills into a folder, you can flip through that folder anytime and see how much you’ve spent this year for, say, your cell phone. This can help you create a realistic budget (which we’ll discuss next) or just get a better picture of your finances.

23 mishandling bills

Mishandling bills

All of these services we’re talking about—phone, rent, home mortgage, Internet and dozens of others—are privileges. You get to enjoy these privileges only when you act responsibly toward the companies providing them to you. There will be consequences if you don’t pay your bills or if you pay them late.
• Your service might be turned off
• You may incur penalties
• You can damage your credit

Losing your service

It’s pretty simple. If you don’t pay your phone bill, the phone company will shut off your phone.

Typically if your service is turned off, you’ll have to do more than pay your unpaid bills. The service provider might demand that from that point forward, you’ll have to come to the company’s offices at the beginning of each month and give them a certified check—a check that you have to ask your bank to write for you, which can cost you about $10 each time.

You may need to give additional money as a deposit against future non-payment.

You may even be denied service entirely for non-essential services like cable TV and cell phones.

24 red power button

Late fees and other penalties

Another danger in failing to pay your bills on time is that this almost always results in fees, fines or penalties. Often you’ll see printed right on your bill that the “late payment” amount is significantly higher than the regular bill.

If you miss that due date by one day, you’ll have to pay the higher amount.

Damaging your credit

Finally, not paying your bills on time can damage your credit.

How consistently and promptly you pay your bills counts for the biggest part of your credit score, which is like your financial grade. A poor credit score can keep you from getting loans, or leave you stuck with loans with high interest rates.

A poor credit score can also keep you from having access to many services—like an apartment or even phone service. Many companies simply won’t want to do business with you if you have bad credit—and especially if you have a habit of not paying your bills on time.

Pay your bills early

From the first bill you receive, you’ll want to maintain this all-important perfect record of always paying your bills on time. So we suggest that you get into the habit of paying them early.

Some of your bills will come at the end of the month and be due by the 15th of the following month. That’ll give you about two weeks.

Many people will wait until a few days before the due date to write out their check and put it in the mail. What if the mail is delayed? What if it doesn’t get there until the 16th?

In most cases, a day late still means late—and you can be charged late fees and penalties by the company, not to mention that now you have a stain on your record with that company, which might make it harder to do business with them in the future.

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We can’t state this enough

We should point out that some businesses have a grace period on their bills, which means they allow some extra time beyond the due date where you can get your bill in and not be penalized. A common example is a mortgage. Most monthly mortgage bills state that payment is “due by the 1st” of the month, but also state that payment is “late after the 15th.” So you really have until the 15th to pay your mortgage. Just to be safe, though, we strongly suggest you get into the habit of paying your bills soon after they come in. There’s no reason to wait and take even a small risk that you’ll miss the deadline.

Confirm receipt

We also suggest you get into the habit of checking to make sure they received your payment. You can do this by phone or online. Letters do get lost in the mail (although not often) and someone at the company’s payment processing center might screw up. If you learn before the due date that the company hasn’t received your payment, you can still make the payment in time by paying over the phone with a credit card, paying online with a credit card or electronic check, or (if there’s still enough time) mailing another check.

With this routine—paying your bill early, making sure the company received it—you’ll have the peace of mind that you’re building an excellent reputation, a great credit score and the trust of future companies you’re going to want to work with.

Keep your bills together

Another strategy we suggest is to keep all your bills in a single place until you pay them.

This way, you won’t ever lose a bill or forget about it—because you put every one of them in the same spot. This place should be visible and easy to get to. In fact, you should pick a place you see every day, like your desk or kitchen counter.

26 bill keeper

Some ideas to keep you organized.

How to track email bills

What about bills that don’t come in the mail, bills you receive only through email? If you set up a system where the company sends you a bill via email, and you pay online, then you have three choices:

  • Print out your email bill and place it with your paper bills.
  • Set up a folder in your email for unpaid bills. This is an electronic version of the single physical place for all paper bills; set up an electronic place for email bills. But keep in mind this works only if you check your “unpaid bills” email folder regularly.
  • Mark your unpaid-bill emails as unread, so they stay bold and you always notice them. When you’ve paid them, you can mark them as read and even place them in a separate folder; no more need to look at them every time you open your email inbox.


What’s another name sometimes used for a bill?

A bill is sometimes called a “statement” which is short for “statement of accounts.”

TIP: Personal debts are bills too

When we talk about bills, we don’t simply mean those official statements in the mail or email from businesses you have relationships with (like your cable TV provider or the power company). We mean every financial obligation that you haven’t paid yet.

If you borrow $25 from your friend Marcus, you should think of it this way: You now have a $25 bill from Marcus. And you should write it down, even if it’s on a napkin or the back of an envelope. Write “Pay Marcus $25” and place this piece of paper in the same place you keep all your other bills.

TIP: Train with your parents

If you really want to learn how bill-paying works, ask your parents if you can watch while they pay bills.

You’ll learn so much about bills and how money works in the real world by watching someone fill out bill statements, write checks and record the transactions in a check register.

It’s a great way to familiarize yourself with this important tool in Your Money Kit.

27 parent bills calculator


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