Organize Your Finances by Automating Them

Introduction

If you haven’t automated your finances, you could be spending hours each month reviewing your statements, transferring money between accounts and setting up payments. Over time, those hours can really add up.

And unless paperwork is your favorite hobby, there’s a good chance you’d rather be doing something else. Luckily, the internet and mobile banking apps have made it much easier to automate your finances and stay on top of your credit card payments.

Once you’ve properly set your finances on autopilot, you can save time each month and be sure that your payments are made on time, every time. That’s a good bonus, since making on-time payments is one of the most important parts of building credit.

How To Automate Your Finances

Automating your finances is going to take a little bit of planning and some initial work, but the payoff is ultimately worth it.

Review your recurring bills

Start by gathering or listing out all the bills you pay every month. Think of your mortgage, rent, car loan, credit cards, utilities, phone, internet, streaming services, and anything else you pay monthly.

Then, do the same for other expected expenses that will come up throughout the year but aren’t billed monthly. That includes things like insurance, wholesale club memberships or annual subscriptions.

Set up automatic payments

With your list ready, it’s time to set these bills up for automatic payments — sometimes called AutoPay.

Many companies offer the option and it’s usually as simple as logging in to their website, selecting the option, and adding or updating your billing info.

Some payments, like a streaming subscription or mobile phone service, can be set up as a recurring payment, automatically charging that bill to your credit card.

For other bills, like a mortgage, some utilities or a credit card, you’ll likely need to set up AutoPay using a checking account. You generally can’t pay debt with debt, like paying a mortgage with a credit card — at least not directly.

Some bills might not have an AutoPay option at all. But there’s still a chance you can automate that payment. Many banks offer a bill pay service, so you may be able to log in to your bank account, add that payee’s information, and set up an automatic payment that your bank will take care of.

Just make note that this kind of payment will probably take a few days to arrive and might not show in your bank account for a few days, either. They usually go out as an ACH transfer or paper check, so you’ll probably want to set them up to send about a week before the due date.

Set up automatic savings transfers

Setting aside some money every time you get paid is a great way to build up your savings account.

If you wait until the end of the month to transfer whatever funds you have left over, you might not have anything left to save. But automating the process can help you stick to your savings goals.

As with automatic payments, there are a couple of ways to approach this. Some employers allow you to split your paycheck to deposit it across multiple accounts. So, you could automatically deposit a portion of your pay into your savings account every payday, with the rest going into checking.

But if your employer doesn’t offer this option, or if you have irregular income, most banks will allow you to set up automatic transfers between your accounts.

Let’s say your paycheck deposits into your checking account every other Friday. You can set up a recurring, automatic transfer for a specific amount from your checking account into your savings account every payday.

You’re not limited to a savings account, either. Someone saving for a goal or an emergency might make automatic transfers to a high-yield savings account, but someone with other goals in mind may instead transfer to an IRA for their retirement or to a 529 account for their child’s education costs.

Monitor your accounts

Once you’ve put your finances on autopilot, it’s important to regularly monitor your accounts to be sure that the correct amount of money is being transferred each month. You don’t want any surprises to come up and leave you with insufficient funds. Monitoring your accounts should also help you identify any suspicious activity.

You can even automate the monitoring, to some extent. Many banks offer a financial alert feature, informing you of account activity via text, app or email as soon as it happens. But it’s still a good idea to log in every now and then to check that things are moving as planned.

Make adjustments

We’ve established that you want to monitor your accounts to be sure that everything is working as planned. But you’ll also want to review every now and then to ensure that your choices still make sense for your lifestyle and financial goals.

For example, if you cancel a service paid through your bank’s bill pay service, you’ll want to cancel that payment. Or, if you get a raise and your paycheck becomes bigger, you may want to increase the amount you’re putting into your savings accounts.

The Benefits of Automating Your Finances

So, you’ve figured out how to automate your finances and put in the work. Now it’s time to reap the rewards.

You’ll get all that time back

The initial work you do to automate your finances helps you save time every month after that. No more writing checks, making calls to pay by phone, or logging in to schedule a one-time payment — unless you want to make additional manual payments to lower your balance.

With AutoPay, you did the work once and it will pretty much handle itself (barring unforeseen events like technical difficulties).

You can avoid late payments and boost your credit

Life gets busy and things can fall through the cracks. When you properly automate your finances, you shouldn’t have to worry about forgetting to make a payment. As long as you always have sufficient funds in your payment account, your payments shouldn’t be late.

This is already great because it helps you avoid late fees, but it gets even better. Payment history is the biggest factor in calculating credit scores, so your recurring on-time payments can also help boost your credit score.

You might reach your financial goals faster

When you intentionally and automatically set aside money on a regular basis, you greatly increase your chances of achieving your savings goals.

Once you’ve split your paycheck or set up automatic transfers, that money will go directly into the appropriate savings account and you’ll be less tempted to spend it.

You could earn some rewards

Some bills and services allow you to use a credit card to set up AutoPay. If you use a rewards credit card, this can be a good opportunity for maximizing your credit card rewards.

Just be sure the bill you’re paying counts as an eligible purchase and you can start earning cash back rewards, points, airline miles, or more just for paying your bills.

Bottom Line

Putting bills on AutoPay and setting up automatic transfers for savings may take some time and a little bit of planning, but the good news is that you should only need to do it once. Then it’s just some monitoring and any necessary adjustments down the line.

That little bit of leg work up front could go a long way toward helping you meet your financial goals, maintaining your credit health, and even earning credit card rewards.