The Importance of Automation
Between ever expanding resources and constantly improving technology, personal finance has never been easier. No more trips to the bank thanks to mobile deposit. Checks are basically useless with the invention of Venmo. The ubiquity of ATMs makes cash easy to access. Heck -- you don’t even need that ATM now that you can via your phone. Of all our technological advancements, there is one that may seem excruciatingly simple, however when used wisely it can ensure savings goals are met, bills are paid on time, and debts are eliminated as efficiently as possible. Today we are talking automation.
The first step to automating your finances is to coordinate your bills. I have all of my recurring bills charged directly to the same credit card. That way I can review everything in one place and much simpler to pay as one big payment instead of 15 different smaller payment.
Before using a credit card, I still found it easiest to synchronize my due dates. Companies will work with customers to pick the day that will work best for you. Because my rent is due on the 1st, I elect to have my other bills (or credit cards) due on the 15th. This allows me to keep the most consistent cash flow throughout the month.
Make sure to then coordinate your income. I elect to use direct deposit whenever possible. It’s not only one less thing to worry about, but it also allows you access to your earnings quicker than if you were to have a check mailed and then deposit it. I also make sure to deposit any cash payments directly into that same account. Personally, I find it so easy to wastefully spend cash. To combat that, I carry as little of it as possible. I make a point to deposit it all into a money market account. If I need a significant amount of cash later I can always go to an ATM and consciously remove that money from my bank account. Having all of my money coming through a single account streamlines my finances and as a result cuts careless spending. From that one account, I have a very reliable gauge of my income and can effortlessly divert funds to investments, savings accounts, and bills.
Add some savings to a Buffer Account. Many banks have a feature that will automatically attached a savings account your checking account. If you attempt to overdraft your checking account, {spend more money than you have available to spend} the savings account will automatically transfer some funds over. Overdrafting incurs truly avoidable fees – just set up a buffer account.
Setting up autopay is crucial for all of your bills, credit cards, and loans. Make certain that you’re automatically paying each bill in full every month. Many autopay presets will automatically enroll you in paying the minimum balance each month. While that might be tempting, carrying a balanced month to month will rack up an overwhelming amount of debt and interest charges. Of course you’ll need to make sure that your autopay is attached to an account that has enough money to pay all of your bills. Coordinating income into a single account as well as utilizing my buffer account has allowed this to be a non issue.
Always automate your savings. One of Warren Buffett’s favorite sayings is, “Don’t save what is left after spending; spend what is left after saving.” Every month automatically deposit a set amount of money right from the top of your income. If this seems troublesome on your variable income think about it this way: you already have fixed monthly expenses that you don’t refute (i.e. rent, utilities). Build retirement and other savings into your mindset of fixed monthly expenses. Your future self will thank you.