How to Automate Your Finances

How to automate your finances

Automating your finances is a really great way to successfully stick to your financial goals. If you tend to pay bills late or aren’t saving enough, automatic payments can help you better manage your money. 

If you’re new to the idea of pre-planning your finances, don’t worry. I’m going to walk you through how to automate your finances and answer some of the most frequently asked questions. 

What does it mean to automate your finances?

By automating your bill payments and savings, you’re basically putting your money on autopilot. Once set up, all you’ll have to do is adjust things from time to time to make sure everything is going according to plan. 

What kind of accounts can I automate?

You can automate pretty much every single aspect of your finances. You can automate your bill payments:

You can also automate contributions to your savings and investment accounts:

If it’s a bill or financial goal, chances are you can automate it.

How do I set up automating my finances?

There are a couple of ways to accomplish this.

Option 1: Sign up for automatic debits from the creditor or service provider

This means that your creditor or service provider will automatically deduct their payment from your bank account. This happens periodically according to the payment schedule. This is set up with the creditor or service provider. Think banks, utility companies, etc. 

For example, your gas company may have its own automatic payment service. If your bill is due the 3rd of every month, you would opt-in or enroll for automatic payments through your account on their website. Sometimes you can use a debit or credit card, but many times you’ll need to use your bank account information to avoid fees. It just depends.

This would also apply to any other savings you’d like to do — your savings institution would automatically debit your account.

Option 2: Set up bill pay with your bank

In this case, your bank will issue the payment to your creditor or service provider on your behalf. Most major banks — like Chase, Bank of America, and Wells Fargo — and even your local banks and credit unions offer some sort of bill pay service.

This is great if you have a utility company or other vendor that does not have an automatic or online payment option or still requires you to send in paper checks.

When setting this up, you’ll have to provide your bank with account numbers and addresses of where you want the payments to go. Keep in mind you’ll need to allow enough time for your payments to get sent and received before the due dates.

How to automate your finances

What are some first steps to get started automating payments?

Fortunately, it’s pretty easy to schedule recurring payments or deposits. If you’ve never automated anything and are ready to begin, here are three things to keep in mind.

1. Automate your retirement contributions through your employer

Begin by automating your retirement contributions through your employer. If you’re not sure how to do this, reach out to your payroll or HR department and have them automatically deduct a certain percentage of your pre-tax income each pay period towards your retirement savings.

If possible, try to max out your contributions, or at the minimum contribute enough to get your employer match (10% is a good guideline for what your minimum contribution should be regardless of if an employer match exists or not).

Take it a step further and have a certain percentage of your paycheck automatically sent to your emergency fund account and other savings accounts. Again this is something your payroll department or HR department would be able to help you set up if the option exists at your job.

Automating your retirement savings and other savings through your job is a no-brainer. It means that these savings transactions will be made before you get your final paycheck so you don’t have to worry about spending this money, forgetting to make a transfer, or not having enough money to contribute to these accounts.

2. Create a budget based on the balance you get paid

After your retirement and savings deductions are made, you can use your budget to plan out your bills, debt and any other savings you’d like to make. Your budget will basically help you tell your money what to do. Automating your finances will ensure your money gets put to work doing to the various tasks you've designated.

3. Be aware of all your bill due dates

It’s very important that you understand when your bills are due in relation to when you get paid. This way you make sure you will have the funds available and avoid any fees due to insufficient funds. The last thing you want is to have an overdrawn account or pay bank fees as a result of automating your finances.

What else should I keep in mind when it comes to automating my finances?

It’s very important that you are aware of any changes to your bills. A good practice is to plan to check your account statements every month in advance of the automatic bill payment date. Set a calendar reminder a couple of times a month to review your bills and review your budget.

In Summary

Automating your finances might take a little bit of time to set up but it’s totally worth it. Once you have things all set up, you’re less likely to slip up on your financial goals

{Updated by Cristy S. Lynch}

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