How Bill Reserve Works
Fitting the Bill
How much do you spend on bills every month?
It’s a simple question, but almost no one has a confident (and correct) answer. Most people have a whole bunch of recurring expenses — most are monthly, but some are annual or semiannual, and you may even have some weekly or quarterly expenses as well.
That makes it tricky to know exactly how much of the money in your checking account is actually safe to spend, and how much is already spoken for.
We built Bill Reserve to take all of that complexity and give you a simple, consistent amount that you need to set aside for bills. If you’ve ever had a bill sneak up on you or feel like bills are adding mental load for you at all, Bill Reserve is for you.
(Crew is a financial technology company, not a bank. Banking services provided by Bangor Savings Bank, Member FDIC.)
How does Bill Reserve work?
Bill Reserve allows you to tell Crew about your bills, and then have Crew automatically set money aside for them.
When you add a bill to Crew you define how frequently it’s paid, how much it’s for, and what it looks like. If you’ve already paid bills in Crew we’ll try to identify them so they’re even easier to add.
Bill funding schedule
You have a few options for funding your Bill Reserve so that you can align it with the way you get paid, or to your preferred budgeting cadence. Today these are all schedule based (e.g. every other week, once a month, etc.) but we’ll connect these directly to your paychecks soon!
Bill amounts
Once you’ve defined your funding cadence we calculate the exact amount that needs to be set aside for your bills each funding event to stay on track.
This means we have to normalize all of your bills to the same cadence as your funding period using the power of math. 🤓
If your funding cadence and bill are both on a similar schedule it’s pretty straightforward. For instance, if you fund your Bill Reserve twice a month, a $100 monthly bill will need $50 per funding period. Pretty easy.
Things get trickier if a bill is on a weekly schedule and your pay is on a bimonthly schedule because our calendar system is insane. A $100 weekly bill will need about $217 each funding period if you fund twice per month:
~365.24 days per year / 7 = ~52.18 weeks per year * $100 weekly bill / 24 funding events per year = $217.40 contribution.
We do a similar calculation for all of your bills — whether they’re weekly, monthly, quarterly, annual or some other cadence — and come up with the exact amount that needs to be set aside.
This is where a lot of the magic of Bill Reserve is, because instead of a whole bunch of bills hitting at all different times, you now exactly how much you need to be setting aside to cover all of your bills.
Reserve calculation
“But how much do we need to set aside in your Bill Reserve when you first turn it on?” you might ask. Fantastic question.
We can calculate this simplistically by calculating an “on-track” balance for each of your bills that pro rates it to each funding period.
If you have an annual $100 bill that’s 6 months away, you need to have half of the money set aside in order to be on track. Therefore your on-track balance is $50.
By calculating all of your bills’ “on-track” balances, that tells us what needs to be set aside in Bill Reserve to have you exactly where you need to be.
But, wait, there's more...
It turns out this “on-track” balance approach locks up more money than necessary. 😬
Here's a simple example: Pretend you have two $100 monthly bills — one early in the month and one later — and you get paid twice a month.
The "on-track" math says you need $150 in reserve right away (the full $100 for the first bill plus half of the second). But you actually only need $100:
- First bill hits → reserve is now $0
- You get paid → reserve back to $100
- Second bill hits → reserve back to $0
- You get paid again, and the cycle continues
The bills take turns using the same pool of money, so you don't need the full $150.
Optimizing cashflow
If you extend beyond that simple budget to a more realistic one with dozens of bills of different amounts and frequencies, there are many ways for each of these bills to intersect in helpful ways.
We calculate exactly how much efficiency there is in your specific budget by using the “on-track” starting reserve, and then forecasting your cashflow out several years. We find the lowest future balance your Bill Reserve will reach, and use that minimum as the opportunity for optimization for your specific budget.
We take that optimization amount and reduce contributions to your bills starting with the ones that are farthest away, and working our way backwards.
Because it’s a bit unsettling to be halfway through the year and see an annual bill without a balance, we show you what the on track balance is as the deferred bill amount.
Bill Reserve is Budgeting Magic ✨
So after all the math and calendar wrangling, Bill Reserve now knows 1) exactly how much to be setting aside for bills, and 2) the absolute minimum you need to set aside in order to never run out of money (assuming bills come in as expected).
But that magic causes some unintuitive stuff to happen
Cash optimization means that changing your bills can have somewhat unintuitive effects on your Bill Reserve because there’s a lot going on beneath the surface.
Each time you change a bill we adjust your funding amount, and how much you need in your reserve. Whenever you archive a bill your monthly funding amount goes down, which is intuitive (your overall bill cost has gone down). But the effect on your reserve isn’t always as obvious…
Your specific situation may mean that a bill is very efficiently timed, and doesn’t add much to your reserve requirement (like that second monthly bill in our original taking turns example). In those cases, archiving a bill may not release anything from your reserve.
Archiving a bill may even increase how much money you need to have in your reserve right now because of the extent to which future funding events are reduced.
What’s next
Kudos if you’ve made it this far! We love being in the weeds on all of this so you don’t have to be, and are excited to make Crew an even more powerful tool to simplify your finances.
As mentioned previously, we’re working on paycheck identification so that your reserve can be funded by multiple paychecks as those paychecks come in.
We’re also going to be adding spending pocket and saving pocket contributions to this process, which will mean full paycheck automation and a holistic view of your budget in Crew.
Thank you for being Crew customers, if you have any questions please reach out anytime under Menu > Contact Crew.
