Why You Need to Start Automating Your Finances
This guest post was written by Go Banking Rates, bringing you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide.
Do you ever feel like the available technology in banking and finance is growing at a pace that’s too quick to keep up with? Do you refuse to participate in automated banking because you wouldn’t even know where to start? It’s easy to feel lost in a world where your iPhone can deposit checks and your computer seems to know more about your financial situation than you do.
However, you really are missing out on some serious benefits to automating your finances. There are a few relatively easy things you can do to set your money on autopilot and reap instant rewards-you don’t even need an overpriced cell phone to do it.
Never Pay Another Overdraft Fee
How much have you spent in bank fees since you opened your checking account? Probably more than you’d care to investigate. Between paying for monthly maintenance, using another bank’s ATM and occasionally dipping into the red by mistake, your bank is probably making a sweet profit off your account.
Why pay for such easily avoidable things? One thing’s for sure, there is no reason to pay overdraft fees, not when you can sign up for overdraft protection.
While it’s recommended you not get in the habit of overdrawing, it happens to the best of us every once in a while. Having a system in place that fixes the problem before it’s ever really a problem can save you from what’s essentially throwing money away.
Most overdraft protection services require you to keep a minimum amount in your savings account, which will be used to fund whatever isn’t covered by the money in your checking account. While this means you have another account balance to worry about, it also encourages you to save more money just in case.
Trick Yourself Into Saving More Money
So what if you have trouble keeping your savings account cushioned, even with the extra encouragement? Automate your savings so you never miss the money to begin with.
It seems like the more money you have, the more ways you can find to spend it. You promise to add to your emergency savings or IRA as soon as you’re done paying the bills, but then the end of the month rolls around and you suddenly don’t have anything to contribute.
Interestingly enough, you’ll find that if the money is deducted from your paycheck before you see it, you barely notice it’s gone. Suddenly, you can function just fine on $20, $50 or $100 less every month.
If you want to automate your savings, either contact your employer to have retirement plan contributions deducted from your paycheck and deposited right into your account, or set up automatic transfers with your bank. They’ll transfer a specified amount from your checking to your savings account every month automatically and you won’t even have to think about it.
Stop Paying Late Fees While You’re at It
Late fees: Another financial nuisance that could simply be avoided if you weren’t so distracted. Considering credit card companies often charge $30 or more for paying a bill late, it’s in your best interest to ensure this never happens.
That’s right, sign up for automatic bill pay. If you’ve been hesitant in the past because you’re worried about your account balance dipping too low after an especially large bill, there are certain things you can do to prevent that from happening.
First, only automate fixed payments. For instance, your cell phone bill is the same amount every month as long as your plan is adequate and you’re not going over your minutes. Other prime examples include cable, your gym membership, Netflix, etc.
Other bills, like utilities or credit cards, fluctuate too much and should be evaluated on a monthly basis before sending in an electronic payment. As long as you know exactly how much is going out of your account every billing cycle, you should be fine. If you want extra assurance you’re not overdrawing, sign up for automatic text or email alerts, too.
Of course, automating your finances will only improve your situation if you still keep a close eye on your account activity. A set-it-and-forget-it system will lead to trouble, so continue to check your account balance and review statements regularly.
