How to Automate Your Finances to Save Time and Money

The words "automate your financial life" written on paper next to a pen and coffee

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Automating your finances has many advantages that can help you stay on top of things.

If you're one to incur late charges or miss payments once in a while, automating your finances solves for this by putting your bills on a set schedule. 

Likewise, if you have trouble remembering to save money, automating your savings solves for this by you setting up a process that transfers money to your savings account periodically without you having to think about it.

In this article, we'll discuss how to automate your finances to help you automatically save money and automatically pay your bills.

Let's jump right in.

What Does Automating Your Finances Mean?

To automate your finances is to set up a process in which you automatically send money from your checking account to your savings account and automatically pay your bills every set period, which could be monthly, bi-weekly, or weekly, for example.

Some of the primary reasons for automating your finances are to help you save money without having to think about it and to help you avoid incurring late fees from missing due dates on recurring bills.

What are the Benefits of Automating Your Finances?

There are three key benefits to automating your finances that we'll discuss below.

You Won't Be Late or Miss Bill Payments

You won't miss payments or be late when you set up an automated schedule for paying your bills. That's because your bills will be paid automatically without you intervening manually. Since being late or missing a payment can cause you to incur late fees, this benefit can save you quite a bit of money.

You Won't Forget to Save Money

Like setting up an automated schedule for paying your bills, you won't need to remember to save periodically when you set up an automated schedule for saving money. Instead, money will automatically be transferred from your checking account to your savings or retirement accounts.

The chief benefit of this is that if you encounter an unplanned expense, such as an emergency, you'll have money set aside to help cover it. This money will have been accumulating ever since you set up automatic savings.

You'll Save Time

While it takes an initial time investment to set up your automation, you'll save a lot of time over the long haul as you won't have to worry about paying bills that are set up to pay themselves automatically. 

Additionally, you won't have to worry about moving money to your other accounts as they will be set up to move money automatically.

What are the Drawbacks of Automating Your Finances?

While automating your finances comes with benefits, there are a few drawbacks that you'll want to keep in mind.

You Risk Overdraft Fees

When you set up automatic bill pay, you assume that you will always have enough money in your checking account to cover your expenses. The issue here is that if your checking account is low for one month and an automatic payment fails, you might be charged with an overdraft fee.

To avoid being charged overdraft fees, keep an eye on your account balances and either turn off automatic bill pay if your account is low or transfer more money to the account, for example, from your savings account.

Spending Less Time On Your Finances Means Potentially Missed Opportunities

Most financial experts agree that you spend time reviewing your finances every month. When you set up automatic savings and investments, you may miss the opportunity to do something specific with your money as you aren't paying as much attention to things. 

This could be something such as a missed investment opportunity or an opportunity to pay extra towards debt like a high interest credit card that you could pay down faster.

Is Automating Your Finances Right For You?

You certainly don't need to automate your money, and it's up to you whether or not to do so. You might find peace of mind by setting up your finances so that things are handled automatically. 

But, if your checking account balance fluctuates frequently, and you're worried about a payment going through when you have an insufficient balance, then it might be more challenging to keep everything automated.

How to Automate Your Finances

We've discussed what it means to automate your finances and the benefits and drawbacks of doing so. Now, we'll go over the actual steps of how to set everything up.

1. Have Your Paycheck Set To Direct Deposit Into Your Checking Account

The first step to automating your finances is to have your paycheck direct deposited into your checking account. This is common in many workplaces anyway, but if you are receiving a paper check, ask your employer about how to sign up for direct deposit. 

Generally speaking, direct deposit just requires you to fill out some paperwork, and from there, your paychecks will be automatically placed in your bank account each pay period, versus you getting a paper check where you'll have to cash it manually.

2. Switch Your Billing Dates 

The second step to automating your finances is to get all of your bills scheduled for the same date or around the same date. This usually requires you to call up each company that bills you and request your billing date to be changed.

If one of your paychecks is around the first of each month, then it makes sense to have your bills due a few days later, such as on the 5th of the month. If you're paid bi-weekly, you can consider having some bills due on the 5th and some bills due shortly after the 15th of the month, such as the 20th.

The benefit to switching your billing dates is that all of your bills are paid automatically within a few days of your paychecks clearing. This takes care of your bills, allows you to save money automatically, and then accurately see how much money you have left over after all is said and done.

3. Pay Yourself First

Once you've switched your billing dates, the next step is to pay yourself first. What paying yourself first means is to treat yourself like an expense. When you pay yourself first, you force yourself to save money. An example of paying yourself first is automatically transferring $50 from your checking account to your savings account with each paycheck. 

It's important to pay yourself first, before you pay your bills so that you are always saving money. The advantage of paying yourself first is that you will build up an emergency fund and a nest egg for your future.

The more you can pay yourself each pay period, the better. One such way to save money for emergencies is to open an online high-yield savings account. CIT Bank is one such bank that offers online high-yield savings accounts. 

With CIT Bank, you'll be able to tuck your money away for when you need it the most, and you'll earn a competitive interest rate at the same time. 

Open a CIT Bank Savings Builder account with this link.

Ramp Up Your Emergency Fund with a CIT Bank Savings Account

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4. Set up Autopay for Your Bills

Now that you've set up an automatic transfer from checking to saving so that you can pay yourself first, it's time to set up autopay for your bills. Most banks offer the ability to set up online bill pay and dates to schedule certain payments. Credit card companies and other companies that bill regularly, such as utility companies, your cable company, and your mobile phone company, also generally have a way to set up automatic payments.

Automatic bill pay can be set up either through your bank or your credit card company. The most common way to set it up is to go to the company website where you owe the bill, find out if they allow autopay, and enter your bank or credit card information. 

From there, either your bank will be debited, or your credit card will be charged on the specified date.

If you have a credit card that offers rewards, whether cash back or points that can be used to buy things, you may consider using the card versus directly debiting your bank. If you use your credit card, always be sure to do your best to pay down your balance each month to avoid sinking into credit card debt. 

5. Invest Any Leftover Money

Finally, if you've covered all of your expenses, paid yourself first, and your credit cards are paid down, then a wise move is to use any leftover money to invest.

There are many options in which to invest your money. For example, you could invest your money in yourself. Perhaps you want to learn a new skill to make yourself more valuable, which will allow you to make more money either at your current job, a new job, or through starting a side business.

In this case, check out Skillshare and Udemy. 

Skillshare is an online course platform with thousands of courses across dozens of niches, all accessible for one low subscription. Learn at your own pace and master a new skill. 

Sign up for Skillshare here.

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Udemy is similar to Skillshare, except you pay for each course individually. Udemy frequently has flash sales where many courses can be purchased for up to 90% off. 

Use this link to check out everything Udemy offers and become an expert at what you do or something new.

You can also invest your money in the stock market. M1 Finance is a great platform to invest your money. M1 Finance gives you the ability to invest based on pre-made portfolios customized for your goals. The platform then invests your money for you via roboadvisors, so you don't have to think about it. You can then set up automatic investments, so your money grows on autopilot. 

Click here to sign up for M1 Finance.

Another option is to invest in real estate through Fundrise. You can get started with just $10, and Fundrise will invest your money into microshares of several real estate projects around the United States. This is a great way to diversify in the real estate world without managing properties yourself. 

You can check out Fundrise here.

Most importantly, about any investment you make, make sure you do your research and understand what you're investing in. You can lose money when you invest, and it's important to understand the risks before you jump in. 

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Wrapping It Up

Automating your finances is an excellent way to save time and money, though there will always be some type of manual activity involved. It's a good idea to keep an eye on things so that you don't overspend or undersave.

That said, with today's technology, it's often pretty easy to get automation set up.