One of the ways that you can simplify your financial life is to automate your finances. Automation can make it easier for your finances to essentially take care of themselves, freeing up your time for other pursuits.
You do have to be careful, though, since automatic finances can lead you to make assumptions that could get sticky later. Make sure you automate your finances correctly — and double check the situation on occasion.
Setting Up Automatic Transactions
Consider which transactions you would like automated. It’s possible to automate more transactions now. You can have you paycheck automatically deposited into your bank account. You can have your loan payments withdrawn on a regular schedule. It’s even possible to set up recurring transfers so that money from your checking account is automatically deposited into your savings account on the same day each month.
As you set up your automatic transactions, take into consideration your pay period and when your bills are due. You want to make sure that the money is in your account before you have bills withdrawn. I divide my month into two periods. Some of my bills are taken out between the 5th and 10th of the month. This is the first pay period. It gives my account time to be replenished with payments from the first of the month before bills are taken out.
During the second part of the month, bills are withdrawn between the 20th and the 25th. Again, this provides time for my deposits to be made in time for the bills to be taken out. This buffer is important, since sometimes you don’t receive your direct deposits right when you expect to. If the regular direct deposit date falls on a weekend day, you may not receive the money until the following Monday. It’s important to account for this.
You also need to account for variable bills. My utility bill is different each month, as is my grocery delivery bill. Make sure that your bank account has enough padding to handle some of the variability that comes with some of your bills.
Double Checking Your Account
Even though you have your finances automated, it’s still a good idea to check on the state of your bank account once a week. I learned this lesson the hard way. A couple of months ago, my husband’s employer only deposited a portion of the amount he was owed. We went on with the month as though the entire amount had been deposited, since we didn’t realize a mistake had been made. It was only more than two weeks later, when the overdraft notices (and fees!) started rolling in that we looked into the problem.
The oversight was corrected, but in the mean time it cost us. You’ll want to double-check withdrawals as well, since sometimes billing mistakes can result in extra money being taken out of your account.
Overall, I find automated finances very helpful in my life. For the most part, I don’t have to worry about whether or not the bills are paid when I travel, and I can focus my energies on other things, rather than writing checks, or going through online bill pay. I have more time in my life, even with the regular checkups with my accounts.