DR Podcast 328: 6 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 judgment, 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.”

Studies have shown 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 finances the lazy man’s idea of money management, or is it a smart way to manage your money?

Here are 6 Ways to Automate Your Finances

1. 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

2. 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

3. Automate Savings Goals

All of us have both short- and long-term goals that are worth saving up for; as long as you have an emergency fund in place, there’s no reason not to start setting money aside in order to reach those goals.

By automating all of your savings efforts, you can spread the pinch out over time. This makes it even easier to reach your goals without needing to think about the process.

Your other savings goals may include setting aside money for things like:

• The down payment on a future home
• College tuition for your kids
• Wedding expenses
• Cash for a new car
• A big purchase or project, such as a home renovation

The simplest way to automate your savings is to choose a platform that lets you track progress and work toward multiple different goals at the same time. One such app is Simplifi (by Quicken), which makes it easy to set as many goals as you want.

You can then establish specific milestones, add automatic savings contributions, and set target dates for completion.

Other savings goals apps include Qapital, Simple Bank, and Chime.

4. 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. It can easily be set up so that your investment comes right out of your paycheck and directly into your IRA each month.

Some folks may want to consider using a robo-advisor to help maximize their 401(k) and/or IRA savings, even if they’re held in employer-sponsored plans. For that, platforms like Blooom can be incredibly helpful.

Blooom will give you an in-depth analysis of your existing retirement accounts, including 401(k)s and IRAs, without needing to move funds away from your employer’s plan. Blooom will offer recommendations as to how you can better allocate your funds, then rebalance your portfolio to suit. It’s only $10 a month, too, and there is no minimum account balance requirement. Read the full Blooom review

5. Automate Investments in Non-Retirement Accounts

You can automate your non-retirement accounts with platforms like Betterment or M1 Finance. Betterment allows investors to invest in the stock and bond markets through a basket of ETFs. Betterment picks your ETFs for you based on the asset allocation you select. M1 Finance actually gives you a little more options. They’ll let you choose one of their pre-made diversified portfolios and you’ll get the option to customize it by adding ETFs or stocks of your choice.

Both M1 Finance and Betterment let you set up 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.

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

6. 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 Turbo Tax 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.

Boost Savings Efforts When You Can

While taking a “set it and forget it” approach to finances can be very freeing, it doesn’t mean that you don’t need to still check in every once in a while. One of the best times to revisit your efforts is when you have a sudden windfall, or if your income situation changes.

At least once a year, schedule a sit-down with yourself and conduct a status check. Are you on track to meet your goals, and can you boost your efforts in any way?

You may be able to increase your savings if you:

• Are now making more money
• Have reduced your monthly expenses
• Have eliminated certain debts and no longer need to make monthly payments

If any of these are true, be sure to maximize the impact that those funds can have as soon as possible!

Tackle high-interest debt, if you have any. Then increase your automatic savings contributions, thinking about retirement accounts, savings goals, and emergency funds in the process.

For most of us, it makes sense to spread these additional funds out rather than allocating them to only one place.

Realted: Best Finance Apps for Every Budget

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 robo-advisor manage your investments, it’s one less thing that you have to worry about.