5 Ways To Automate Your Finances

I‘m convinced that the one thing that could greatly improve finances for many people is also dead simple: automation.

Financial automation puts a fail-safe in place, protecting you from your own forgetfulness, poor judgement, or even procrastination. It also frees up time and energy — rather than worry about the same things each and every month, automating allows you to “set it and forget it.”

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Studies have shown, for example, that when an employer automatically signs new employees up for the company’s 401k plan, a greater percentage of employees participate in the plan. While many of these employees would not have enrolled in the retirement plan if left to their own devices, they apparently also won’t go to the trouble of canceling their enrollment when the employer takes the initiative.

Learn More: What to Do When Your Employer’s Retirement Plan Sucks

Financial automation, moreover, has never been easier. With the internet transforming everything from online banking to investing, a fully automated financial life is a snap. Although some might still use traditional methods, there are ways to let our high-tech world do it all for us. We can automate virtually everything from our bills to our investments. By automating our finances, we can spend less time managing our money and more time doing things we really want to do.

At the end of this article we ask the question, “Should you automate?” Let us know what you think — is automating fiances the lazy man’s idea of money management, or is it a smart way to manage your money?

Here are 5 ways to automate your finances…

Automate Bill Pay

Paying bills can be time consuming, but this doesn’t have to be the case. If you automate your bills, you save yourself time and don’t have to worry about late fees. Most banks and credit unions even offer this feature for free.

Once you’ve set up online bill pay, it’s easy to maintain. There are also online services that offer free bill pay and can keep everything in one place for you.

For monthly bills that let you pay by credit card (e.g., cell phone bill, utilities, cable), you can also set up automatic bill pay directly. We pay every bill we can this way, and use a rewards credit card to get the free points. Just be careful to keep an eye on your cash flow if you decide to automatically pay in full each month. The last thing you want to do is overdraw your bank account and end up with NSF fees for your other transactions!

Related: How to Use Google Docs to Manage Your Cash Flow

Automate An Emergency Fund

Having an emergency fund is an essential part of your financial stability. Even when you are in debt, you still need to put money into an emergency fund; this cushion can keep you from accumulating even more debt when an unexpected expense hits.

If you take the stance that you’ll simply save whatever is left at the end of the month, I have some bad news for you: you’re never going to save as much as you could… if you save any at all! It’s very easy to get caught up in bills and unnecessary expenses when the money is in the bank, or to think you’ll just skip saving “this month.” However, for many people, six months goes by, and they haven’t managed to stash away a single dollar or they only put away a fraction of what they are capable of saving.

A great way to avoid this is by paying yourself first and automating your savings. You can have money transferred right out of your checking account into a savings account each pay period. A high yield savings account is a great place to stash your cash.

How to Know If It’s Emergency Fund-Worthy

Automate Retirement Investing

If you invest in a 401k through your employer, then you know it’s already automated for you because it comes directly out of your paycheck before you even get paid. This works great because you don’t even miss the money.

You can do the same thing when investing in an IRA. You can set it up so that your investment comes right out of your paycheck and goes directly into your IRA.

Automate Investments in Non-Retirement Accounts

You can automate your non-retirement accounts with sites like Betterment. Betterment is a website that allows investors to invest in the stock and bond markets through a basket of ETFs. I like this site because you don’t have to pick individual ETFs; instead, Betterment picks them for you based on the asset allocation you select.

Once you sign up, you just link your checking account to Betterment. This gives you the option to set up a recurring contributions or just make a contribution whenever you see fit. That’s exactly what I’ve done, and I now invest a couple hundred dollars a month automatically with Betterment.

Learn More: Mutual Funds vs ETFs — Does It Really Matter?

Automate Tax Prep

With Turbo Tax, you can even automate your taxes. There is an Automated Tax Return feature built into Turbo Tax that allows you import last year’s tax information directly into this year’s taxes. On top of that, you can easily download directly into TurboTax much of the tax information you’ll need to complete your taxes (like your W-2, for example). This makes data entry much more manageable and eliminates some of the pain brought on by tax season.

Why Make It Harder On Yourself?

It seems like no one has enough time these days, and our lives are jam-packed with more obligations than we know what to do with. One way to simplify our day-to-day and free up some time is to automate your finances.

No matter whether this means paying your car payment automatically each month or auto-investing and letting a roboadvisor manage your investments, it’s one less thing that you have to worry about.

Topics: Money Management

4 Responses to “5 Ways To Automate Your Finances”

  1. Great article! I heard David Bach [Debt Free for Life, etc.] sharing the value of automation in a recent interview.

    I was a registered securities rep for a major discount broker for 12 years and hold an MBA in Financial Services. This kind of advice is greatly needed.

  2. Lively Jason

    Agree with you that one of the things people should do more is to automate as many of their financial planning activities as possible. Regularly setting aside some money for investment and emergency funds is one big step to achieving long term financial security.

  3. John Quirke

    Hi Rob,

    Have you looked at other types of automation? Eg, simplifying keeping financial records? Forereceipt and IQBoxy both have wickedly fast receipt scanning software which can then be integrated into a personal finance system. This has the potential to save loads of time. I would not recommend ReceiptBank for this. I am finding that it takes 8 – 12 hours to process a receipt!

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