7 tips to make managing your finances easy & automatic
If you’re like me, you dread paying bills. It’s not fun, it takes time away from other things, and it’s repetitive — happening at least once a month.
So if you are not already doing it, I recommend putting your finances on autopilot. Once you set yourself up, you can pay all of your bills automatically or with just a couple taps.
The system to make managing your finances easy & automatic
Every payday, your paycheck is automatically deposited in your bank account. Once you’ve got this system set up, your savings will be automatically transferred to your high-interest savings account (pay yourself first!), then your bills will be automatically paid online. Voilà!
Sound easy? It is. It just takes a little bit of setup, and you’re good to go. (Warning: You will still have to do regular checks on your system to make sure things are sailing smoothly, but this system can make things much more painless.)
Here are the steps to take to make your finances so automatic they seem automagic.
1. Use direct deposit
Make sure your paycheck is automatically deposited into your bank account. In addition to saving you the time and hassle of having to go to the bank to visit a teller or an ATM, many financial institutions will reduce or eliminate fees if you utilize direct deposit.
For example, on one account type, Bank of America offers no monthly maintenance fee when you have at least one qualifying direct deposit of $250 or more each month, while the Wells Fargo Everyday Checking account will waive the monthly service fee if you have qualifying monthly direct deposits of $500.
2. Pay bills automatically
Set up your bills to be paid electronically. If you’re sending out a bunch of checks every month, you could be saving yourself a lot of time and hassle — not to mention the cost of checks, envelopes and stamps.
Setting up automatic payments (sometimes listed on your bank’s site under “auto pay”) will take a little bit of time to locate all your account numbers and payment amounts, but it’s not hard. Start by grabbing all of your most recent bills, then go to your bank’s website and set up online payments for each one. For some, the payments can be made electronically, and for others you’ll have to have your bank send a check (a process that should ultimately be transparent to you, and usually doesn’t incur any fees).
You can schedule your account to pay each bill a few days before it’s due, or, as I do: plan for half of your bills to be paid after one of your paychecks (first of the month) and the other half to be paid after your other paycheck (middle of the month).
Most banks will allow you to set specific parameters for payment — for example, never automatically pay more then $150 to the electric company, but instead will send you an alert if you’re billed over the usual amount so you can look at the charges and be sure they are correct.
If you don’t already have one, consider getting a low-maintenance savings account with a financial institution that conducts all business electronically. All transactions can be made online or via a smartphone app, and many offer lower (or no) fees and higher interest rates than brick-and-mortar banks.
This transfer will be made from your checking to your online savings account, every two weeks, two or three day after your payday is deposited (to be safe). This is an easy setup process offered from your online savings account.
You’ll have to do a quickie budget to figure out how much you can afford for savings, if you haven’t already. But it’s simple: just make yourself a list of all your monthly expenses, including regular and irregular bills, savings, a few basic spending categories like gas, groceries and spending, and subtract those amounts from your income. (For this step, you could also set up a transfer to a money market account or other investment vehicle.)
5. Get your spending money
After you pay bills automatically, and put a bit into your savings, the remainder that’s left is your spending cash — for gas, groceries, entertainment and other miscellaneous expenses. Personally, I recommend you withdraw this as cash and separate them into three (or more) envelopes, each labeled with its spending category. That way, you can see if it’s running low and spend accordingly.
You could, alternatively, use a debit card (avoid checks, and especially credit cards!) for these categories, but it’s harder to remember how much you have left in each category, and so it’s easier to overspend. This fifth step would be easier if you could have the bank mail you your cash. As it is, I have to actually go to an ATM!
Almost every bank now offers an app that can help simplify your financial life in other ways. For instance, many banks and financial institutions — including US Bank, Citibank, USAA, Wells Fargo, Schwab, Mechanics and many others — allow you to photograph the front and back of a check and deposit the money virtually.
Some companies also allow you to transfer money to someone (or get paid by someone) quickly and easily via your smartphone.
6. Monitor it periodically
As automated as it is, you can’t just let the system — whether it’s money coming in or going out — go without monitoring it.
I log in to my banking account about once a week to make sure all the bills are paid correctly, and that everything’s sailing smoothly. Check for changes in billing amounts (especially at the start of a new calendar year.). We know of one case where a woman set a fixed amount to pay for her mortgage each month, and when the amount changed by less than $20, she didn’t catch the change… meaning she was considered late on payments for four months until she caught the error.
That’s it. Quick and painless. Now you can keep up on your incoming money, outgoing payments, avoid late charges, possibly boost your credit score, and, ultimately, spend less time on your bills and more time doing what you want to do.