It’s great living in an automated world, isn’t it? Especially when it comes to our banking. We can create mini systems to help us achieve our financial goals faster and with less hassle. Let’s look at a few of the many ways that automated banking can help you.
No More Late Payments, Checks, or Stamps
Are you fully automating your bills? If not, why? Particularly your bill payments. Avoid late fees, checks and stamps by using your bank’s bill pay feature to automatically pay your fixed bills (i.e. mortgage) each month. For varying bills like utilities, consider allowing automated withdrawal. You give up a bit of control, but you don’t have to worry about making the payment from month to month. If the bills do vary from month to month and you’ve allowed for auto withdrawal, make sure you have enough cusion in your checking account.
More Reward Points Earned
Over the last year, I’ve made it a point to have as many bills paid automatically directly from my cash back credit card. This way I’m earning rewards points for most of my fixed expenses. This adds a significant amount to the total rewards I rack up at the end of the year. That’s money back in my pocket. If I could only find a way to get the mortgage on there. One caveat, if you pay for everything with your credit card, make sure you automate your credit card payments, as that’s typically the worst kind of bill to pay late. And it goes without saying to pay your credit card off in full as any interest charges you pay will likely negate the points you earn.
Saving More for the Short-Term
You can automate your savings too. Any financial advisor will tell you one of the first things you need in order to secure your finances is a solid short term savings fund. Often called an “emergency fund”, this account should ideally contain enough money to cover you for 6 to 12 months of expenses. It’s there so that if you lose your job or experience some other financial disaster, you don’t have to raid your retirement savings or go into debt to stay afloat.
Most people don’t have an adequate emergency fund. If you don’t, consider setting up a small automatic deposit or direct deposit from your check to a separate online savings account. This way you never have a chance to spend this money. Start with a small amount each month and I’m sure you’ll never even miss the money. By automating the savings, you don’t have to worry about remembering to save from month to month. You are doing it automatically.
More Retirement Savings
Like short-term savings, retirement savings should be automated to be most effective. It’s common for people to have an automatic savings plan through their employer’s plan. Way to go if you are doing that. But you could also be doing more. Many people neglect their opportunity to automate additional retirement savings outside of the workplace through an IRA. Beyond the obvious tax benefits of such a plan, an IRA would give you far greater control over your investment options. It makes sense to be automating here as well.
Just like with short-term savings, have the money moved from your paycheck directly into the IRA. If you can’t pull that off, then move it automatically from your checking account as soon as it hits. Start small and work your way into a larger monthly contribution over time.
In what ways are you automating your banking?
This is a guest post from Philip Taylor of PT Money: Personal Finance. Visit PT Money for more tips to save more, make more, and spend more wisely.