Memory doesn’t always serve me well when it comes to getting things done. Even when I have the best intentions to do something that will help me save money, sometimes the details slip by me.
Has that ever happened to you? You got hit with a late payment fee because you forgot to pay a bill? You meant to save money, but then you got to the end of the month and you hadn’t saved a dime?
You’re not alone. And there’s one way to make sure you remember: Automate your finances.
By automating your finances, you can take control of your personal finances and save money doing it. Tell your money where to go, how often it should go there, and then let it do it’s thing. Set it and forget it.
How to Automate Your Finances To Save Time and Money
I don’t automate everything at our house, but here are a few things that have helped me to automate my finances and save money.
I have our paychecks automatically deposited. Nearly all of our income goes directly from the employer into either checking or savings accounts, with the majority of it going into savings. If I don’t touch a physical check, I’m much less likely to cash it out and fritter away a portion of it on stuff I don’t need. Putting the majority of our income into savings allows us to keep tight reins on our spending. We can always take money out later if we really need it, and having to go through that transfer process helps us to make sure we’re taking out money for the right reasons.
I put money into a flexible spending account. Each payday we have money set aside in a flexible spending account. Because that money comes from pre-tax dollars, we see a savings on our tax bill, and it forces us to prepare for things like illnesses, eyeglasses, and the like.
We put money into retirement accounts. We have a portion of our paychecks go directly into retirement accounts. If we don’t see it in our checking, we aren’t tempted to spend it. The retirement accounts grow, with only minor adjustments each year, and we don’t spend a lot of time worrying about the future because of it.
I have my insurance and property taxes put into an escrow account. Remembering to save up money for home owner’s insurance and property taxes can be a bit of a challenge. And let me tell you, it is no fun to realize you have a big tax payment due right before your summer vacation. So we set up an escrow account when we took out our mortgage. When we pay our mortgage payment, we also pay a little toward those taxes and insurance. It’s much easier to pay those smaller amounts each month than larger lump sums all at once or twice a year.
I schedule my mortgage payment to come directly from my savings account each month. Since most of our money goes from our paycheck to our savings, it is simple to have that money applied to our house payment. We save a stamp, an envelope, the hassle of filling things out, and we get the piece of mind knowing that we won’t be late on our house payment.
Recurring regular expenses like phone, utilities, satellite and internet are billed to a rewards credit card. We truly believe that if you don’t carry a balance, you can use your credit card to save money. We put those regular recurring bills on the rewards credit card so that we can earn rewards more quickly. Those rewards are used to buy things we need or to shop for birthday and Christmas gifts. The credit card offers some extra protection in the case of billing errors, and automating the payments saves time. I never worry about late fees with this method.
Avoid costly automating mistakes
There are some risks to automating your finances. It is easy to become complacent and not comparison shop. Billing errors could go unnoticed and cost you money. So here are somethings I make sure I do so that automating my finances doesn’t cost me:
I am very selective about what types of things I automate. I don’t like to automate things like membership fees, magazine subscriptions or charity donations, and I make it a point to never put anything I buy on a payment plan. Those are all things that I may decide I am no longer interested in supporting, and it can be cumbersome to put an end to the automated payments. Blindly allowing automated payments to continue (particularly for services you aren’t using) can be expensive.
I review my accounts regularly. That means I read everything sent to me by mail or e-mail regarding my services. Those communications can alert you to price increases or account changes. You should also make sure to review your accounts to make sure you are being charged correctly. Credit cards expire, so if you’re using one to automatically pay a bill, make sure you update your billing information accordingly.
I continue to shop around. Once you’ve set up your automatic payments and deposits, your work doesn’t end. If you want to continue to save money (and make money), you’ll need to continue to educate yourself on all of the options available to you. Shop for lower rates regularly. Make sure to balance your retirement accounts so that they earn as much as they can for you.
A couple more tips
I don’t have any car loans or student debt, but if I did, putting those on automatic payments will help you avoid potential late fees, and in the case of your student loans, may even get you a reduction in your interest rate.
You can also set automate your finances to set up sinking funds to cover regular expenses. You could choose to have money taken from your paychecks and set aside in special accounts for things like car insurance or Christmas gifts. Then when those bills come, you’re not stressed out trying to figure out how to pay for them. You just go to your account and take out the money to pay the bill.
Automating your finances saves time and money because you don’t have to make extra trips to the bank or to the post office. You save money on postage. You guarantee your payments arrive on time and never forget to save. It’s a great way to make sure you’re making the most of your money.
Do you automate your finances? What tips do you have?