Should You Automate Your Finances?
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So many personal finance bloggers are pro automation and when I decided to write this post I thought I’d be the other side of the argument. That is until I realized I actually do automate some of my finances though I am definitely against automating other parts of my finances.
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When I reached out to the personal finance blogger community I found I wasn’t alone. There is actually a wide range of opinions on automation in the personal finance blogosphere, some pro automation, some automation with moderation, and some wary of automation at all. Here is what some other Personal Finance experts had to say about their stance on automation:
“I’m all for automation. Because I don’t feel anyone can harness great self-control all of the time. If we set things, like investing, to get done automatically, we needn’t worry about always being disciplined. I doubt I would contribute so much to my 401(k) if every 2 weeks I had to make a conscious decision as to whether or not to contribute. A good book on the subject is “The Automatic Millionaire.“”
– Will Lipovsky
“Automating will give you a certain piece of mind because you know that if something comes up – an unexpected emergency, such as a death in the family – things will get taken care of. Nonetheless, you must still be in control of your finances. Every two weeks you should sit down and review what happened, including the automated pieces and what you can do to push your finances to the next level.”
“I automate for benefits and risk management. Some companies provide a discount when you automatically pay through direct debit (i.e. Student Loans or HELOC). To avoid the possibility of late fees, I automate minimum payments on credit cards. And for convenience, I automatically transfer 1/12 of annual payments, like car and life insurance or property taxes, into a savings account with the side benefit of earning interest. Then when the bill comes due, I transfer back to checking and pay in full. This also saves the “monthly convenience” fees” that insurance companies charge for the ability to pay monthly vs annually.”
– Lee Huffman
“Automation is amazing! Out of sight – out of mind. The money you don’t see in your account, you won’t miss. To get more bang for your buck set up savings accounts in an online bank where you can easily have automatic transfers (each month or paycheck) but takes a day or two to withdrawal. You not only get a better savings rate., but you can personalize your savings goals as well!”
“I think it’s [automation] just another system that makes your life easier, saves time, and helps you run your life like a boss. One less administrative thing you have to remember. I still keep a google calendar for my bills so I know exactly when they will come out, but I don’t have to worry about making the payments.”
– Tai Stewart
“Automate your financial life. Your military career and your family keep you too busy to make the same choices every month about saving for retirement and paying bills. Avoid decision fatigue and repetitive chores. Put the retirement deductions and the bill pay on autopilot, spend time with your family, and focus on your military skills.”
“I automate as much as I can, all my bills, and certain types of savings that I sock away the same amount each month. I still receive emails for bills so I can check to make sure the amount is correct. I set up alerts on my credit card for all purchases made online so nothing fishy goes under the radar. “
“I’m a big automation fan, particularly for savings, and investments. For nearly a decade I’ve been automating my 401(k), Roth IRA, and other savings. Automated investments means putting the cash away for your future self habitually without having to do anything. Keeping the money for fun spending is way too easy when you don’t do it automatically.”
– Eric Rosenberg
Automation in Moderation
“I’m for automation with frequent manual audits. I like automation because it works even when you forget. While it’s good you always have to audit your automation to make sure things are running smoothly and tweak your settings depending on your budget or upcoming needs. Let’s face it, if we leave saving and investing to manual actions, most people won’t do it.“
– Grayson Bell
I have to agree that saving works best when you automate. I not only have part of my paycheck automatically put into my savings account but I also utilize Chime. I love Chime because it saves for me, I don’t even have to think about it. Every time I use the Chime Debit Card it rounds up my purchase to the nearest dollar and puts in in savings. Right now they also offer a 10% bonus on those savings.
“I’m for automation in moderation — as long as you keep an eye on it. I have all the bills I can charge automatically to two American Express credit cards, which I then pay off manually and have set for electronic alerts. That way companies can’t go into my bank account and take money. For other bills, I set up automatic bill pay from my bank. I also have automatic withdrawals from savings to checking and automatic withdrawals for investments. I keep a close eye on my bank account to make sure I can afford those.”
– Teresa Mears
“You should be automating everything as much as possible. I automate all my bill payments, 401(k), savings, etc. This will save you from also forgetting to pay that $10 bill or that $350 credit card. I do recommend that you go through and fact-check things on a monthly basis to make sure you’re not being overcharged as good practice. I typically find something weird every 2-3 months that I have to call up and cancel so not everything can and should be automated.”
– John Rampton
“I love automation when it’s coupled with notification. The automation keeps me on track with minimal effort and willpower. The notifications keep me mindful so I can course correct when appropriate. For example, an alert from a recurring payment might remind me to cancel an unused service, or an alert from an automated deposit might remind me to adjust a goal based on current progress.”
– Bill Dwight
Love/Hate to Automate
“I have a love-hate relationship with automation. Yes, it makes saving and investment almost painless, and nearly guarantees I won’t pay bills late. But it can encourage complacency and laziness. Periodically I have to remind myself to increase my savings rate and check my bills to see if I can negotiate better rates.”
– Valerie Rind
“If you do set up autopay, keep a few things in mind. One, have enough money to cover the debit in the account. Either set up a transfer from another account automatically or do it manually a couple of days beforehand. Two, make sure you adjust your payment should something change. Another pitfall to automatic payments is when companies keep your business but shift you to a new account. When I moved, the cable company closed my first account and opened a new one for my new location. What I failed to realize was my autopay wasn’t connected to the company, it was connected to my account with the company. They opened the new account, but didn’t set up autopay.”
So where do I fall? I think I’m firmly in the love/hate category. I love automating my savings and investments. My job lets me direct deposit into several accounts so I never even see the money I’m saving. It just goes to the savings account. I also contribute to my 401(k) through work, it’s done automatically when I get paid.
However, I don’t like automating bill pay. The only bill I do autopay with my internet bill on a credit card and I only do that because I get reimbursed for my internet through work. All other bills, including my student loans I pay manually. While some of my student loan servicers do offer a reduction in interest charged if you set up automatic payment, it is usually less than 1% and while every little bit counts, I’m too afraid of technology errors. While there is of course, the concern of overdrawing my account (unlikely since I pay a month ahead), given my relationship with technology it’s more likely to withdraw the wrong amount. I like having the control of doing it myself. I’ve been doing it for so long I have all my due dates memorized and a check them off my calendar when they’ve been paid.
Is Automation Right for You?
Like most things in life, it depends; it depends on your financial situation and your financial goals. Though generally, I think it is always a good idea to automatically save somehow. Before you take the leap into automation make sure you know when money will be pulled out of your account. You don’t want to be stressed wondering when the money is going to be taken out of your account. If you are wary of automation, try it with just one thing right now, be it savings or setting up one bill for autopay. See how you like it, did it make your life easier or were you stressed about the money being available when the automation went through?
Do you love automation or do you avoid it like the plague? Let me know in the comments!