Automating your finances. Not a novel concept anymore. But it’s something that shouldn’t be overlooked. It works. It’s a process that has served me well over the last five years of my life. I automate many aspects of my financial situation:
- paying bills,
- short-term savings,
- debt reduction,
- retirement savings,
- even college savings.
In general, the bills are paid by either a recurring bill pay feature, or the money is automatically withdrawn from my bank account by the service company. Probably more importantly, my savings is also automated by using auto-withdrawals by the bank or financial institution who will be holding the savings.
Why do I do it? Because it works. It helps me achieve more with my money than I could if I were trying to manage it all manually. I just don’t have time to fool with writing out checks, or depositing money into various accounts. Plus, I don’t have the mental strength to remember to do it all each month. I have so much else I want to be doing, and have to do.
Does this mean that I don’t think about my spending or saving? No. I just don’t have to worry about it as much. It’s on auto-pilot. I can take a few days away from it and not worry. I still watch my accounts on a regular basis via Mint.com. I still have two bills that I haven’t been able to automate. So I deal with them monthly. Lastly, every few months I will adjust my financial goals and make sure that my automatic system is ensuring that I’m moving towards those goals. So, while I automate things. I’m not exactly setting it and forgetting it. But it’s good to know that I can, if only for a little while.
If you haven’t tried it yet, I would encourage you to try automating your own finances. With the new year rolling around, you will likely be wanting to improve things. Use that energy to take the time to set up your automatic financial system.
Automating isn’t for everyone though. It can be a real plus for those people with a stable financial situation who simply need an advanced technique to take them to the next level. I find that it’s ideal for those who seem to always spend what they earn no matter how much their income has gone up over the years. I am this type of person.
When you shouldn’t automate your finances:
- When you have a major spending problem. If you are trying to reign in your spending, automation might not be right for you. You may be better served by a cash-only system. Ridiculous spending could be masked by the automated payments to your credit cards. [However, I'm also of the opinion that true automation doesn't worry about spending. Since you've automated your savings, bills, and debt reduction you don't need to watch your spending. Your spending money is there for you to spend as you please.]
- When you are just getting started with properly managing your finances. This is a time when you need to be seeing every little detail and understanding the ins and outs of your money. Get to know your financial situation and slowly move towards automation.
- When you have a lot of different debts to pay off. If you are coming out of a bad debt situation, you may need to be in the trenches with this process. Since debt reduction requires a “pay as much as you can” mentality, you may find it’s easier to manually make payments each month as soon as your paycheck arrives.
- When you want to ultra-simplify. If your aim is an “off-the-grid” type of lifestyle, then automation isn’t for you.
Do you automate your financial system? If not, why?