woman trading stocks on phone to automate finances

How to Automate Your Finances

Forgetting to pay a bill or to put money in your savings account can be a costly mistake. When you automate finances, it takes the thinking out of it and ensures your most important financial tasks are completed on time.

It’s a lot easier to do than most people realize. All you need is a smartphone or computer to set it up in most cases.

What does it mean to automate your finances?

When you automate finances, you set your accounts up to do the intended action itself. You can automate your savings, pay bills, or even invest. You take the need to handle the task yourself out of the equation, letting it happen for you.

Put the days of forgetting to move money to your savings account or paying your bills late behind you when you automate your finances.

Account types that can automate your money

You can automate almost any type of account, but the most common are bills, savings, and investments.

For example, you can set up your mortgage, utility bills, credit card payments, and loan payments to pay on a specific date each month. You set it up online or over the phone, giving the vendor permission to debit your account for the specified amount on a specific date each month.

You can also automate your banking. For example, if your employer offers direct deposit, set up a portion of your check to go into your savings account each month. If you don’t have direct deposit, you can set up automatic transfers from your checking account to your savings account or even investment accounts each month. 

Why automate your finances?

If you automate your finances, you can benefit in several ways.

Peace of mind

Have you ever woken up in the middle of the night panicking because you remembered the car payment you didn’t pay or the insurance premium you forgot? If so, you understand the importance of automating your finances. You’ll be able to sleep better knowing your bills are paid on time, and your savings account or investment accounts continue to grow.

More financial security

When you automate your money, you put your money to good use. You know your bills are paid on time, so you avoid late fees. You also know your emergency fund, retirement account, or any other savings account will continue to grow and will be there when you need them.

Save time

Most people wish there were more hours in the day than we have. If you aren’t crossing everything off your to-do list every day or find that you forget to pay a bill or save money, you’ll enjoy the time you save automating your finances.

8 things to automate in your finances

There are more ways to automate your money than most people realize. Here are the top ways to take the task off your shoulders and know that it’s automatically done.

1. Bill pay for recurring expenses

Bills are one of the best things to automate. You eliminate the risk of late fees or hurting your credit, and you pay your bills on time.

Every creditor has a different method for setting up automated bill pay, but typically you provide your banking information and the date you agree to the automated bill pay. You may have to sign a form stating that you agree to allow the creditor to debit your account each month.

Make sure if you change accounts or get a new debit card that you update your automated bill pay accounts, so you don’t miss any payments.

2. Savings

Automating your savings is a great way to build an emergency fund or save for a large expense, such as the down payment on a house. It’s a great way to set-it-and-forget-it so you don’t find yourself spending the money you should have saved.

Each bank is different, but typically you choose the frequency you want to save and the amount. It’s best to coincide the dates with your pay date. Figure out the percentage of your pay that you can save each payday and set it up. It’s best to send the money to an account at a different bank than where you have your checking account, so it’s harder to access the funds and spend them needlessly.

3. Retirement contributions

Automating your retirement contributions is just as important as automating your savings. If your employer offers a 401K, it’s easy to set up automation. You earmark a percentage of your salary for your retirement funds, and your employer withdraws the funds each payday, sending them to your retirement account.

If you don’t have an employer-sponsored retirement account, you can automate your savings with an individual retirement account (IRA) too. Just like you would with a savings account, set up the contributions to automatically transfer to your retirement account on your paydays or any frequency you think is best.

4. Sinking funds

Sinking funds are accounts you set up for large expenses down the road. They are similar to a savings account, such as an emergency fund, but are for a different use. Like your emergency fund, open your sinking fund accounts at a different bank, one that you can’t easily access, and set up an automated transfer of the funds you budgeted to the account.

You can set up the frequency, especially since it may not be as often as you send funds to your emergency or retirement funds.

5. Investing 

If you’ve maxed out your 401K contributions and you have enough saved in your emergency fund and sinking funds, you should start thinking about investing in taxable accounts.

Regular contributions to your investment accounts increase your portfolio’s value and the assets you invest in regularly. When you set up automated investments, you reduce the risk of spending money you could have invested, and you invest in the future versus instant gratification.

To automate your money to go to your investments, you can easily set up automatic deposits with an online brokerage account. You choose the amount and frequency, and they handle the rest.

6. Canceling subscriptions

Canceling subscriptions you no longer use is one of the best ways to save money, but it can be a pain. Thankfully, there are apps like Truebill that will monitor and cancel subscriptions for you.

If you have your subscriptions set up on automatic payment with your credit card, though, there’s a trick.

Go to your credit card account online and see if they offer a ‘recurring subscriptions’ feature or category. If so, click on it and see which bills you pay each month and which you no longer need. This makes it a lot easier to keep track of your subscriptions, canceling those you no longer use or need.

7. Taxes

The last thing that you want to forget about your finances is paying taxes. As an employee, be sure to set up your tax withholdings so that your taxes are automatically taken out of your paycheck. This ensures that you don’t owe anything at the end of the year.

If you work for yourself or run your own business, taking care of your taxes is your responsibility. You don’t have an employer to withdraw the necessary funds from your paycheck, but you can automate your money by automatically transferring the allotted amount of money each time you get paid.

Set up a separate tax account at another bank and make sure you only use the funds to pay your taxes. File your estimated taxes quarterly, paying the amount you set aside from each time you got paid to stay on track with your taxes.

8. Fraud text alerts

Fraud text alerts let you know right away if someone else got a hold of your credit card information. If you’re anything like me, this is one of the most important steps to automate your finances. 

Most people don’t comb through their credit card statements daily – who has time for that? But if someone gets a hold of your credit card, you’d want to know right away. Fraud text alerts let you know when something unusual happened and prompt you to take action.

Check with your credit card companies on how to set it up in your account. It’s usually just a feature you switch on, and everything else is done for you. 

What first step should I take to automate my finances?

If you’re ready to automate your finances, you may wonder where to start. There are many options to automate finances, but you should start by looking at which accounts you can automate.

For example, not every bank offers automatic transfer to savings, especially if you use a small bank or credit union. To decide how to automate your money, look at your bank accounts, payroll, investment accounts, and other financial accounts to see which offers automation and which is the easiest to set up.

Then one by one, set up your accounts. Don’t stop until you’ve automated as much as possible with your finances, taking the work off your shoulders and making it easy to stay on track with your finances. 

Final thoughts on automating finances

Don’t let busyness ruin your finances. Even people with plenty of money ruin their credit or don’t have enough money saved because they forget to take care of it. Don’t let that happen to you.

Learn to automate finances as much as possible. Take the thinking and work out of the chore and enjoy the peace of mind that comes with knowing your finances are under control.

Samantha Hawrylack

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