Why I Automate My Finances and Who Probably Shouldn’t Do It

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.

Automate Like a RobotIn general, the bills are paid by either a recurring bill pay feature, or the money is automatically withdrawn from my bank account by the service company.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 Personal Capital. 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?

Last Edited: March 7, 2016 @ 11:04 pmThe content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.
About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, FinCon CEO, and husband and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. I usually like automating money and believe that when it comes to saving money, you have to “pay yourself first.” Although I agree it can be difficult to keep up with everything. I automate around $1,000.00 per month in student loans and just recently started automating some money into an IRA as well. I do not keep a lot of money in checking, however, because I am always paying it out into savings, etc. So I forgot to have enough in to cover the new expense of the retirement fund and then did not have enough money to cover.

    Enjoy your site.

  2. I automate 90% of my financial life and 100% of my savings. Until I started the automatic savings every month I just happened not to have anything to save! Funny how that worked out lol

  3. Briana Ford says:

    My finances are automated. Direct deposit goes into my checking account. Automatic transfers to my savings account. Coming soon: automatic deposits to my Roth IRA. Haven’t gotten to the bills part yet though because they vary but I do schedule them once I’m sure of the balance.

  4. We automate our finances as it really helps us control our cash. All the essentials and savings leave the bank account before we get a chance to spend it.

  5. Don’t know if you’ll see this since this is an older post, but I’ll throw my .02 into the discussion anyway.
     
    I have enjoyed your articles, and find that many of the approaches you take are ones that I have been drawn to myself.   Six months ago I was on the paycheck-to-paycheck roller-coaster ride, complete with late payment charges because I didn’t get the check where it needed to be when it needed to be there, routinely asking, “Can you hold this until Friday?”, or dropping off checks late on the last day of the month they were due so that they would be covered by the next month’s paycheck, making payments on three very-high-interest CC’s because every time I made headway something came up and I whipped out the plastic again.  Three-and-a-half years of that–I shudder to recall.
    Getting my house refinanced (at last!) gave me a breather on a mortgage payment, which I used to attack some high-interest debt and get a little capital built up.  Since then, I’ve put aside an emergency fund, and am building up a buffer so that I can pay my monthly expenses out of income accumulated in the previous month.   Each time I make a step forward, it seems that I can then see the next step on the path. 
     
    Figuring out that I can pay all my bills on the same day, early in the month, was a light-bulb moment.  I’m only on my second cycle with that, and it already feels like the most logical thing in the world.  I had two bills that I’ve spent a few years running around town dropping off (or forgetting to drop off!) the checks.  A few weeks ago I went to my CU’s bill-pay feature and set it up to go out automatically–my final step in automating everything.  Sweet relief. 
     
    All credit card bills are set up to pay out on the same day;
    my mortgage auto-pays that same day;
    all of my utility and insurance bills go to one CC (my mileage card)–they dribble in throughout the month, but I just pay the CC once a month;
    twice a month I pull out cash for groceries and gas for the next two weeks.
     
    This gives me much more of a clear vision for what I have left to work with.  Before, with checks coming in three times a month, and 18(!) bills and payments going out at different times all month long, I was never really clear on where I stood.  Just rode up and down on the painted ponies, grabbing and throwing out money as needed.  No wonder I was stressed!
     
    That’s it.  The only exception is if I have to use a CC to make a purchase (online, for example), I get in there and pay it off right away if I can–otherwise I adjust the scheduled payment to cover it.
     
    My next goal is to get to the point where all of my income for this month will be allocated for next month’s bills, so I will be working with a little bit of a cushion.  In addition to my $1000 emergency fund, I have $500 designated for all those unplanned expenses that seem to crop up–a little `shock absorber’ set up to keep the plan on track. 
     
    Once I’m at the point that I am a month ahead on my income, I’ll have the last piece in place (as far as I can see now) to know where I stand and what I have left to tackle an aggressive debt paydown. 
     
    Last summer I was growing so weary of the debt, and failure to make headway that I was considering cashing out a pension at about a 50% loss just to pay off the debt and get it over with.  I don’t need to do that now, but more to the point, now I can see that the skills I’ve developed in the last few months are what I need to keep this from happening again. 
     
    Will continue to visit your site for continued inspiration.

    • Thank you for sharing this with us. You’ve been on a nice journey it seems and you should be so proud of getting ahead. Here’s to a successful New Year!