A financial strategy that works really well is automation. The idea behind automating your finances is that you can set up your finances to mostly manage themselves. This works especially true today because the Internet made everything so much easier 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. 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 great, 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 dates your bills are due. When you choose automatic payments, you usually pick a day to have the money taken from your account. Consider your payment 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.
Also, remember that the date your bill shows up in your inbox is different than the date the bill is actually due. Even if you can’t move the due dates around, you can still pay anytime from when you get the bill until the very last due date.
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 a credit card. I try to put as much as possible on the credit card, including my Internet bill and my cell phone bill. Yes, the credit card cash back is great, but there’s also another reason I choose to pay with plastic. This is because I don’t have to worry as much about timing on any expenses I put on my card. Any payment that goes on my credit card becomes one payment and it’s just easier to manage that way, as 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 a due date change before and the process is smooth and 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 payments 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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When I was young [ 18 ] I joined the Navy [ 4 years ] I had the government automatically put aside 18 % of my pay [ $ 18.75 ] and purchase a $ 25.00 Savings Bond . What was left was for me to spend . As far as I am concerned , that is common sense . After the Navy , I wanted to travel to Europe for 3 months and visit various countries . I bought a bicycle in Europe and traveled around staying at Youth Hostels [ cheap ] . But 9 months before I went , I worked a 40 hour week plus a part time job 20 hours a week [ 12 hours a day X 5 days ] I did not want to spend my savings that I accumulated over 4 years . It payed off BIG TIME . A high percentage of people not only SPEND , SPEND , SPEND but also go into debt paying Credit Card interest rates of 18 % to 24 % . ” A Fool and His Money are Soon Parted ”
You work for a company / Corporation
You work for the government [ taxes ]
You work for the State [ State tax and Sales tax ]
You work for the Banksters …. Student Loans , Credit Card debt , Mortgages , etc.
What is left is yours .
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
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.