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Finances in 55: Automating Your Finances
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One of the ways you can streamline your finances is to automate them so that you don’t have to worry about paying bills and transferring money into your savings account. Many people enjoy having their finances on automatic, since it means fewer things to worry about. Plus, with your money automated, you can go on vacation without fear, knowing that your bills will be paid and money will continue to be moved to your savings account, without effort on your part.
The actual process of automating your finances takes significantly more than a minute. However, you can sketch out your needs, and put together a plan for automating your finances, in 55 seconds or less:
- Figure out which items can be automated: Your first task is to list out which of your financial needs can be automated. This can include your utilities, car payment, automatic transfers from your checking account to savings account and even regular payments to creditors. (17 seconds)
- Decide which accounts each item should come from: Your next step is to determine which account you want each item to come from. If you have a central checking account that serves as a hub, it makes it pretty easy; everything comes from that account. In some cases, though, you might want to get rewards points for making purchases with your credit cards. At that point, then, you need to adjust the flow of money so that your bills are automatically paid with a credit card, and then your credit card bill is paid out of the checking account. (22 seconds)
- Determine which days you want different items to come out of your account: When I set up automatic debit for my mortgage, health insurance premiums, and other bills, I was able to choose what day of the month I wanted the money to come out. Think about what days would work best for you, dependent on when you are paid. If you have your paycheck directly deposited, this can make things a little bit easier. Make sure you split up the bills so that they are staggered according to when you know you will have money in the bank. (16 seconds)
Once you have the basics figured out, you can make a plan for automating your finances. You can create a financial network map that provides you with a visual of where your money is, and where you want it to go to aid you in your efforts.
Remember, though, that automating your finances isn’t a solution if you have difficulty making ends meet. All those automatic withdrawals and debits can become a problem if you consistently drain your main account. Additionally, automation shouldn’t be an excuse to stop keeping track of your spending. Use personal finance software or a web app to record transactions. You can program in your automatic bills so that are reflected, up to date, in your software.
For those who are already financially organized, automation can be a great help. I worry a lot less about making sure my bills are being paid, since it’s mostly automatic. I know my money is moving through my personal economy the way it should, and it’s one less thing to worry about.
(Photo: Leo Reynolds)
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Most of my bills are automated. I get paid twice a month and I deduct the bills from my check register on the day I get paid rather than wait until the date of actual withdrawal. This way I never overdraw my checking account by accident.
Is there an intro to the 55 Seconds series? I have trouble seeing a lot of the times listed in these posts working for myself.
I have been enjoying your articles for several months now. Great work! I have a couple comments to consider:
Discover card doesn’t allow you to pay your monthly balance close to the due date if you setup the auto pay feature. I religiously follow the time value of money principle of delaying payments as long as possible without incurring fees our interest. That’s why I haven’t set this up yet with them.
Chase credit card and several others that I have on the other hand, piece of cake!
Be mindful that alot of times, there is a waiting period. Be very sure when the autopay goes into effect. You may miss a payment or make a double payment.
My auto insurance adds $3 per month to the total premium for having all the cars put together on one monthly billing. That $3 is not charged if they automatically take the premium from my checking account monthly.
this one of the smartest things i have ever done. not only does it make the whole process easier, but it makes it easier to pay one’s self and save money at the same time. many sites/services give you breaks or bonuses for setting something on auto.