We are constantly looking at ways to save time and make our lives easier. It makes sense to do this with our finances, as it is something that can consume our lives and add to our daily stresses if we let it get too far out of control. Not only do most of us want less hassle in our day-to-day lives, but we also yearn for a long-term goal, be it a new home, a nicer car or a family vacation. Automating your finances is an excellent idea in principle. It can help you to plan:
- Saving for a specific target, such as a wedding
- A strategy for your 401k
- Paying off credit card bills
- Regular payments, such as rent
- Budget for free cash. That is, cash that’s yours to spend however you wish.
However, some people find the idea of automating their finances daunting, and don’t know where to start. Here are some things that you may be doing that undermines automating your finances.
Things to Avoid
Not looking at your cash flow.
It may sound like common sense, but it’s amazing how easy it is to overlook this simple element of automating your finances. You need to look at the chronological order of your payments and deposits to make sure that the payments don’t come out before your money goes in to your account. Yes, it is fine that your bills are still being paid, but you run the risk of falling into your overdraft, which can lead to bank charges, regardless of the amount of money you go over drawn, or for how long. (Check your own account’s features so that you’re aware of the charges that you may face.)
The simplest way to sort this issue is to look at when you regularly get money coming into your account and set all bills to be paid a few days after this date each month.
Not monitoring your finances
When you first set up a system to automate your finances you may feel inclined to sit back and forget about your monetary responsibilities for a while. This is a dangerous trap to fall in to, as although automating your finances helps with the regular payments and scheduling of money, no system is completely watertight. You need to be aware of any changes that occur, such as changes to your phone services, so that you can approach the possible need for change to your system before it becomes a major issue. To keep an eye on everything, remember to:
- Balance your accounts on a regular basis
- Check your credit card statements whenever you receive them
- Be flexible with increasing or decreasing your savings
- Review your investments regularly
Not budgeting the right amount based on your income
You may be lucky enough to have a job where you get the same salary every month. However, hourly-paid employees need to keep a close eye on their wages and base their automating system on a ‘worse-case’ scenario. Bear in mind not only fluctuations from week to week but throughout the year, for example, you may find that there are seasonal highs and dips in your line of work.
Not shopping for the best rates
We all have regular payments such as insurance policies which, when we first started them, were the best for us at the time. However, an important part of automating your finances is keeping up-to-date with the best deals on the market. Set up reminders on your calendar to allow you enough time to check for better deals before a yearly contract is renewed. Also, don’t be afraid to use one company against the other – if a new company has a better deal, tell your current company about it. They may be willing to drop their price rather than lose a customer altogether. Use comparison websites such as Bankrate to get a more unbiased view of what’s on the market.
Other rates to consider are savings accounts rates and CD rates.
Not improving how to automate your finances
So, you’ve got a system in place to automate your finances. You may think that this is all you need to do. However, our lives are constantly changing, and so is the financial world around us. Get hints from bloggers, finance websites, friends and family to allow you to tweak your system as and when you need to.
Small Plans, Big Payoff
Don’t let these words of advice discourage you. It may seem that there are many pitfalls when it comes to automating your finances. However, all it takes is a little time here and there to keep a check on your system and adapt it in a way that suits you. You’ll soon benefit not only from the financial rewards but also the comfort of knowing that you are in control of your money using the most efficient and streamlined structure.
And here’s a video for you: