Many of my bills are automated. Not only is my mortgage automatically withdrawn from my account, but I even have my weekly produce delivery automatically charged to a rewards card — a card that’s automatically paid off with funds from my checking account.
From automatic investing to regularly scheduled transfers to a savings account, my finances move fairly smoothly most of the time. However, automated finances aren’t for everyone. In some cases, they can cause more harm than help.
Advantages of Automated Finances
For the most part, having your finances automated is about convenience. When most of your bills are paid automatically, you don’t always have to think about due dates and using a check or cash. With everything moving through your accounts, you can go on vacation without worrying that you’ll miss a payment and be charged penalties. Additionally, it’s harder for the bills to slip through the cracks when you have them automated.
Finally, automating your finances can help you save more. If you automatically invest and save, you can build your wealth more quickly and more automatically — because you don’t have to stop and think about it.
Can Your Cash Flow Handle Automated Finances?
Even though automating your finances can be convenient, it’s still important to pay attention to your cash flow. In fact, it’s important to consider your cash flow before you start automating your finances. This is because when you have everything automated, it works out like clockwork — unless something goes wrong. Then, you’re going to have problems.
I saw this firsthand a few months ago. My husband and I both have irregular income, so we have to pay attention to our cash flow. For the most part, we’re covered; but a clerical error in the processing of one of my husband’s checks resulted in a smaller paycheck than we had expected. All of the bills were paid on time, but we didn’t check to make sure that the deposit came through as expected. As a result, we ended up overdrawing the account and being hit with fees.
When the mistake was discovered, my husband’s employer covered the fees — we were lucky. We put too much trust into the automation and didn’t follow up like we should have. It’s easy to become complacent with automated finances. If something goes even a little wrong, it’s possible that you could end up accumulating fees due to overdrawn accounts.
Automating your finances doesn’t give you a pass on paying attention to your accounts. Organizing your finances can be helpful, and automating can make things easier for you — but only if you’re already responsible with your finances. Carefully think about your finances, and whether or not you could benefit from automation. Also, recognize the pitfalls of automating your finances. Take the time to double-check your accounts occasionally, and make sure you have the cash flow to support automation.
Have you automated your finances? Why or why not?