In the modern world, you have so many options for automating your finances. We can use bank bill pay, payroll deductions, automatic payments through billers’ web sites, direct deposits, and recurring bank transfers. Most of us think of these services are simply conveniences, but they can save you a ton of money. Here’s how:
- Avoid late fees. If you’re paying your bills automatically, you’re never going to have a late fee, even if you forgot about the bill or got sidetracked by life.
- Pay off debt faster. You know when we started making serious progress on paying off our debt? We used to plan to use “whatever is left over” to pay extra on our debt. It all changed when we set up extra automatic payments to our creditors. We promised ourselves that we would only cancel that extra automatic payment if an emergency came up. A few times we did have real emergencies and missed an extra payment. Most of the time, we made the payments and continued to make steady progress until we paid it all off! How does this save you money? The quicker you can pay off your debt, the quicker you can avoid wasting money on interest!
- Save easier. Do you have something that you need to save up to do? Set up an automatic savings transfer or a direct deposit from your paycheck to save for it. Just like the extra debt payments, it’ll happen a lot faster if you set it up as automatic and don’t have to think about it. How does saving for a goal save you money? It helps you reach your goals without resorting to more debt.
- Avoid installment fees. Do you have a bill that is cheaper if you pay it in quarterly or yearly installments instead of monthly? Often insurance bills are cheaper if you pay them bi-yearly instead of monthly. Why would you pay extra for something that is so easy to do yourself? You can set up a budget category or separate savings account for insurance and automatically put away the amount every month to be ready to pay the bill every 6 months. A nice side bonus is that the money is always available, so it can act as an extra emergency fund.
- Prevent overspending. If your finances are set up in an automated manner, with money going out of your accounts for things like saving or getting out of debt, then the only amount left is what you’ve decided is okay to spend. It’s much harder to overspend when all the “good stuff” of your finances is already handled.
All of these automatic actions work because, as humans, we’re all lazy. If we set up our finances to do all the right things automatically, it’s easier to do the right things than it is to do the wrong things. Take a look at your finances and see where you can automate to make doing the right thing into the easier choice.
Has automating your finances help you to save money? Comment below to share your tips!