Full disclosure: I’m a bit of a control freak.
I don’t think I’m overbearing or bossy, but I definitely get stressed when I’m affecting by something outside of my control.
In school, group projects would literally keep me up at night. The idea of half my grade being in someone else’s hands gave me stomach pains.
I share this because it helps to underscore the idea that automating things doesn’t come naturally to me. As much as I love technology, I’m not sure I totally trust it. But I have to admit, automation is one of the best things I did to take control of our finances.
Automating our finances helped force us to prioritize our goals over our immediate desires. It’s easy to say “I’ll save whatever’s left at the end of the month” but when we do that, how often do we actually have anything left? By forcing ourselves to save first, we limit our spending, not our savings.
Admittedly this takes some getting used to, so ease yourself in. But if you’re interested in having more control over your money, here are 5 ways to start automating your finances.
1 – Directly Deposit Your Paycheck
The easiest way to get started with automation is the one that gets you your money faster – direct deposit.
Not only does it save you time not having to drive to the bank or find an ATM, but it can also save you money. Most banks will waive monthly account fees if you have direct deposit set up.
It’s also more reliable than waiting for a paper check in the mail or having to pick one up at HR. With direct deposit, your money automatically shows up in your account when it’s supposed to, regardless of the mail carrier’s or HR’s schedule.
2 – Fund Your Retirement
I know it’s hard to picture your future self, but the fact is we’re all living longer. If you don’t want to work forever, you need to start saving for retirement.
Ideally, you should be trying to max out your retirement contributions each year, but that’s more of a goal than a starting point. If you’re not contributing much right now, start small.
You can start with as little as 1%, but I’d suggest checking into your employers matching policy. Many employers will match your contributions up to a certain percentage. This is literally free money so if your company offers it, I’d suggest contributing up to that level. For example, if your company matches up to 5%, start by setting your contributions to 5%.
It may seem like you can’t possibly afford to save 5% of your salary without taking a massive hit to your take-home pay, but since your contributions come out pre-tax, it may not be as bad as you think. If you’re worried, run your numbers through this calculator at Bankrate to get an idea of how your paycheck will be affected.
As you get your finances under control, definitely consider raising this amount until you’re able to hit your max contribution for the year. Start by just increasing it 1% a month. By increasing in small increments you’ll be able to adjust to living on less gradually.
3 – Pay Yourself First
You could probably consider saving for retirement paying yourself first, but that’s your future self. That money is usually not available to you until you reach a certain age.
To make sure you’re building savings you can access now, you need to pay your current self too. The best way to do this is by setting up automatic deposits into a savings account.
We’ve been doing this for Little GFB since he was born. Each paycheck we have a set amount that automatically transfers to his savings account. I use Betterment to set a goal and tell me how much I should save. With the magic of compound interest, he should have a nice little surprise for his 21st birthday.
You can set up one or many savings goals this way. Betterment is great for long term goals, but for more immediate goals or to avoid market volatility, you can use high yield savings accounts. In either case, automating the process will ensure your dollars are put to work making more dollars and helping you reach your goals.
If you feel like you simply don’t have the money to save, try out an app like Digit. They use a fancy algorithm that studies your spending patterns and automatically transfers money you won’t miss into savings. By the end of a couple months, you’ll be amazed at what you’ve saved.
Just a note – if you use YNAB, an app like Digit may be a bit of a headache. If you’re already telling your dollars what to do, YNAB has them properly assigned so keeping up with the random tiny transfers from Digit may drive you crazy.
4 – Set Up Auto Bill Pay
Setting up automatic bill pay was one of my biggest hold-ups. I felt like I would completely lose control and awareness by not tracking and paying everything by hand.
Automating our bill pay has been a huge relief. I still make sure to budget for the bills, but not having to worry about which ones need to be paid and when has made life so much easier.
Here are a few tips when it comes to automating your bills.
You Still Need a Budget
First, make sure you’re still budgeting appropriately. Just because they automatically charge you, doesn’t mean you can ignore the amount you’re being charged. You’ll still want to take a look over your statements to make sure there are no errors.
Also, don’t forget to budget for non-monthly bills (like car registration and insurance) as well as pad things a bit for variable bills (like your utilities).
Take Advantage of Credit Cards
Assuming you have a credit card with no debt that you pay in full each month, try to use it to pay your other bills.
If you don’t trust yourself with credit cards, skip this tip and move on. But if you don’t have any issues with credit, this can be a great way to make sure everything is paid on time and earn some rewards in the process. For those who usually time their bills to their paychecks, this can also help avoid potential overdraft fees.
Again, please please please only do this if you can (and are) paying off this card in full.
Save Money On Your Bill
Some billers will actually give you a discount for setting up auto-pay.
My old student loan chopped a quarter percentage off our APR and our current cell phone provider gives us a $10 discount per month. Many companies will also offer discounts simply for going paperless.
Check with your billers and see if you can actually pay less by automating things.
5 – Automatically Pay Your Credit Cards
This has been by far the most difficult automation for me.
We pay for everything on our cards, so we have pretty hefty credit card bills each month. But because we also make our purchases across several cards to take advantage of different rewards programs, it can get pretty complicated to keep track of due dates. I finally bit the bullet and automated our credit cards this past year and it has been amazing.
The trick with automating your credit card payments is to make sure you’ll have the funds available. I had to learn to trust my budget (and live according to it) before I was comfortable with this.
If you don’t have a budget or don’t trust yourself to pay things in full, I’d still suggest setting up an automatic payment for at least the minimum amount due. This will ensure you don’t get hit with any late fees. Plus, there’s nothing preventing you from making additional payments as needed.
If you know you can pay your credit cards but the timing is a bit tricky, use my At-A-Glance Bill Calendar to map out when everything comes due in relation to your pay. Then, if you need to, give the credit card company a call and see if they’ll move your billing date. Most have no problem doing that.
Time to Go Automate Your Finances
I know automating your finances can be a big hurdle. It’s not always easy to trust the banks or billers with your data or to trust yourself to stay on budget. But I truly believe part of our success paying off over $15,000 of debt last year came down to automating things.
It seems somewhat counter-intuitive, but automation forced us to take more control of our spending. We had to make sure there was money to cover everything being automated so we were more aware of our spending and category balances.
Automation has helped us take control of our spending, trust our budget, pay off our debt, build our savings, and maybe most importantly, remove the stress around keeping track of bills and due-dates.
If you want to give automating your finances a try, start with the ways above and let me know how it goes for you!