3 Dangers of Completely Automating Your Finances

by Jessica Sommerfield · 2 comments

Automation is a buzz word among financial advisors. And for good reason too. There are simply too many benefits of automating your finances for someone who cares about accumulating money to ignore. Whether direct depositing money into a savings or retirement account when you get paid, setting up automatic bill-pay, or investing in no-hassle index funds, automation can mean less stress, guess-work, and precious time managing your personal finances.

Complete automation can also have some serious disadvantages as well. Becoming aware of them can help you make more informed decisions about how — and how much — to use this strategy.

Here are three possible downsides to “set it and forget it” finances.

automating finances danger1. Losing Touch With Spending Habits, Expenses, and Savings Potential

Automation is designed for convenience, and like many other tasks that are automated in our modern lifestyles, it tends to make us lazy. Just as you spend less physical energy using an automatic dishwasher, leaf-blower, or an AI system that turns off your lights, you’ll spend less mental energy on your finances. Soon, “out of sight” becomes “out of mind.”

For example, if you set your credit card bill on auto-pay, it’s easy to lose touch with the individual categories you’re spending in from month to month. You might miss patterns that are insightful, alarming, or even encouraging. Manually releasing payments can have a beneficial “sting” effect. Being forced to engage with your bills might spur you to action, such as cutting an expensive monthly service or strategizing how to pay off your debt faster.

Automated savings takes out the need for self-control, helping people who have been otherwise unable to set aside money to create an instant savings habit. But it can also lead to stagnancy if you fail to adjust your savings to match raises or salary increases when you land a better job.

2. Getting Hit With Fees and Insufficient Payment Charges

Many people mistakenly think automation means completely hands-free, but you still need to play and be aware of what’s happening to your finances in order to avoid overdrawing your account (which is why many people schedule their bills to come out immediately after a payroll deposit). And, if your account is overdrawn for a bill payment, it can mean double charges — from your bank and your creditor or service provider.

While this downside is avoidable, it’s still something to consider if you’re not good at balancing your account.

3. Missing Errors and Signs of Identity Theft

Just as human error can be the cause of a missed payment or an over-payment, automation isn’t immune to mistakes. It’s easy for small or large errors to creep in, even when things have been working perfectly for years. The mistake could be as simple as a missing or extra zero, yet we’re all familiar with the tremendous difference a zero can make! With automation, you could be over-paying or under-paying a bill for some time before either you or the recipient notices (or chooses to inform you).

Although many financial institutions watch and report suspicious activity, identify theft is on the rise — and automating your finances can make it harder to detect. Thieves will often make tiny charges that don’t raise alarm before completely wiping your account, so unless you’re hands-on, automation could make you an easier target.

Financial Automation Is Good — But So Is Checking In

Like many things related to money management, balance is key. Whether you choose to automate all your finances, or only certain aspects of your finances, schedule time to check in. If you’ve been out of touch for a while, it might be good to start with once a week, then transition to once a month. Look for errors, track your spending habits, and note any changes to your income or expenses that impact your savings and debt-repayment potential.

By bringing oversight alongside automation, you can avoid the pitfalls of losing touch with your finances while making the most of this convenient, money-maximizing trend.

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  • Gary says:

    I’m glad I saw this article when I did.

    I have been thinking about completely automating my finances, but I will now keep my finances half automated, and half not automated to stay on the safe side.

    Thank you so much for sharing this article with me!

  • Dustin says:

    Thank you for this helping hand this will help me and my family be able to start living our lives and be happy and not have to wonder if we will have power or not thank you

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