Information below is a direct result of personal studies from financial experts like Dave Ramsey, Forbes and Kiplinger’s.
Did you know that many commercial airline pilots use the autopilot function for around 90% of the time the plane is engaged? Just imagine the exhaustion of a pilot who would attempt to manually fly you to Australia. You would end up at the bottom of the ocean before ever sighting the famous pointy Sydney harbor.
People found out a long time ago that automation is innovation. If you can automate it, well then you should automate it! Information overload is the cornerstone of the millennial generation and we need to deal with it intelligently. I know that there are late bloomers out there with me, and it is not too late to learn new tricks to inject our finances with a fresh burst of technology. I hear you saying there’s just no time for learning new skills on your plate, but I insist: your schedule will suffer if you don’t make automating your life a priority.
It’s a good thing it isn’t difficult to do, and it’s also a good thing that if you still get stuck there are people who are willing to help just a phone call away.
Automate Your Bank Accounts
Let’s start with your bank. Most banks worth their salt will have a free service that will allow you to set up automatic bill pay online. You punch in the payee, tell your account how much you’re going to pay and set the date you want to pay them each month, and whoosh the money goes out of your account to whomever you owe. I think this is perfect for paying your rent or mortgage since those amounts never change from month to month. Think of whatever else you pay that doesn’t vary from month to month (Netflix, cable, insurance).
Your bank should offer an option to open a savings account for free if you set up automatic deposits into your savings account from your checking. A certificate of deposit is especially useful if you are a compulsive spender. This basically ties up your money for a fixed period of time, which means you can’t make a withdrawal until that time is up. When you do get it back, you get it back with roughly 2% interest. Sound low? A regular savings account will earn you around 1% interest. Take your pick.
If you are building your credit, you’re most likely using your credit card, and if you’re doing it right you need to be paying off the balance each month. The bank that you have your credit card with gladly provides you with the option to automatically pay off your credit card balance every month. Of course if you had to buy a car or a refrigerator recently, you can also set it to pay a specific amount, or even the minimum payment (if you’re a chump).
Automate Some of Your Bills Directly
Setting up automatic debits through the merchant is an excellent option. This is basically giving your payee (cell phone service, gas company) the authorization to debit the outstanding amount from your account every month. This is great for bills that regularly come to us with a 2 cent or 20 dollar variation every month, like your cell phone bill depending on our usage, overages or roaming charges. Or your gas bill depending on the season.
Automate Your Investments
Forbes even suggests automatic investing. This sounds risky especially if you don’t consider yourself an investor, but it doesn’t have to be. I am not a financial advisor, so I am not qualified to tell you to invest in wine or oil, but there is one investment that is painfully obvious to everyone and their elderly mother: retirement. Set up an individual retirement account (IRA), the advisors at your bank can help you with arranging your investments, then ask for automatic monthly deposits taken from your checking. Just set it and forget it, and you’re on the road to retirement.
How to Avoid Trouble
Remember Mint? It comes equipped with alerts and reminders for bill payments, savings and investment deposits, credit card payments and anything else you can think of. Stay on top of your finances. Automating everything can make you blind to error if you don’t check up on them. Reminders are great, but don’t look the reminder and ignore it. Take 2 minutes to make sure things are kosher. Your account balance and the bill amount should suffice. You might consider setting aside a little time every month just to make sure no one is hoodwinking you or making mistakes in their favor. Check up on fees, penalties, over charging, etc. Most of all, stay on top of your budget.
Especially wise is to set a reminder of when your debit card expires. If you provided several payees with your card information rather than your account number, you could get slammed with late fees for not staying on top of your expiry date.
BE CAREFUL giving your bank account information to your creditors if you are in a lot of debt. They may take it as a license to clean you out!
Why It’s the Smart Choice
Of course the big giant glaring “pros” are:
- you don’t have to think or worry about it as much. Please still think.
- you don’t have to deal with as much paper (paperless is the way to go)
- long term success is a virtual guarantee (pun totally intended)
- your wealth will begin to accrue passively