3 Tips for Automating Your Personal Finances

by Miranda Marquit · 6 comments

automating finances
One of the financial strategies that has received a lot of attention recently is automation. The idea behind automating your finances is that you can set up your finances to mostly manage themselves. This works especially well because of the technology we have today to set up automatic payments and transfers.

My finances are mostly automated, and I prefer it that way. Not having to think about the mundane tasks makes it easier to ensure that my bills are paid when I’m out of town, and it also means that I don’t have to think about setting aside money for my retirement account or for other savings accounts.

If you want to automate your personal finances, carefully consider the situation before moving forward. While automation can be a great thing, it doesn’t always work in your favor. If you aren’t careful, you could end up overdrawing your account. Before you automate, here are a few things you should consider:

1. Is Your Budget Under Control?

Your first step is to make sure your budget is under control. Do you live within your means? Do you have enough coming in to take care of your expenses? If you automate before your budget is in hand, you could end up overdrawing your account on a regular basis. Make sure that the spending is in line with income before you decide to automate your finances.

2. What’s the Timing on Your Bills?

Another consideration is the timing related to when your bills are due. When you choose automatic payments, you usually pick a day to have the money taken from your account. Consider your pay schedule before you pick that date. If you are paid twice a month, you want to make sure that some bills come out earlier in the month, and others come out during a different pay period. Timing is important when you automate your finances.

When I chose the dates for my automatic payments, I made it a point to choose dates that were far enough into the month to account for the fact that there are times some of my clients pay late. Knowing there is a buffer gives me peace of mind. Plus, I know that the money is more likely to be available when it’s time for the car payment.

3. Use Back Up Systems to Smooth Cash Flow

While some of my bills, like the car loan payment and the student loan payment, have to come from my checking account, other bills can be paid with credit card. I try to put as much as possible on the credit card, including my Internet bill and my cell phone bill. That way, I don’t have to worry as much about timing. I can just pay off the credit card when I receive payment.

Editor’s Note: Some credit cards even let you move the due dates around, making cash flow management even easier. Use this feature wisely to fit your schedule better. I’ve requested due date before and the process is actually pretty simple.

I also have a personal line of credit attached to my checking account. While it’s not something that is used often, it is available for times when the timing might be off between when I receive pay from clients and when bills are due. It’s better than getting an overdraft fee, and I don’t end up paying interest if I pay the balance off quickly.

Automating your finances requires thought and planning. Make sure you are ready and have the proper systems in place before you decide to automate.

Do you automate? If not, what’s keeping you from making everything automatic?

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  • Beau W says:

    I like the idea of auto payments. But I’m more of the hands on approach. I like the peace of mind of paying my bills myself. It’s kind of an accomplishment for my mind if you will. I know that it’s done and over with for the month. Peace of mind is priceless.

    • David@MoneyNing.com says:

      Believe it or not, I have some of my bills on manual pay too. I want to know how much I’m spending, and I feel like I’m just going to forget about them if I just have a set it and forget it approach.

      • Beau W. says:

        That’s exactly what I was thinking about. I won’t forget them. Personally I’ve never liked the set it and forget it approach to paying bills. For bank transfers yes. My Dad was the same. He said I pay my own bills, not some computer.

        • David@MoneyNing.com says:

          I pay them when the email notifications come, then I delete the email afterward. If the email is still there, then it means I haven’t paid the bill. It’s hard to forget it when the email is stuck in the inbox that I check every day.

          There’s a place to set it and forget it, like you said, bank transfers for savings for instance. I just don’t like it for bills.

  • Margarita says:

    Hello David I have a problem. I was save money in my job beside the pension so was personal account I have this account zero rick I stop long time put money on my account have 5 thousands dollars I tray to get my money because I really need better car my is from 1995 always need to fix some noting always 3 or 4 hundreds last year paid for air conditions y no worked I need my card for my job no new car but something more reliable this years with the weather the b rake wan off I almost kill my self because don’t stop in red light was I o e is take the five thousands and save another three and buy me better car but the company Deny to get my money now even when my plant was personal please David hell me and thank very much

    • David Ning says:

      Where did you save that money Margarita? Is it through a bank? I assume it wasn’t because it would be illegal for banks to withhold your money, but I’m not sure what could be done if you opened an account somewhere shady other than find legal representation to try to claw back the cash.

      Hopefully you’ve already resolved your situation by now.

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