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When you travel there’s always the worry about what’s going on at home. Has the house caught fire? Did I turn off the oven? Did I forget to pay the mortgage and credit cards? So that we can relax and enjoy ourselves, I’ve automated my finances to ensure that all bills are paid while we’re away on vacation.
What is automation?
Automation is when you set a repetitive process on auto-pilot so that you can focus on more important issues.
You may already be automating
Setting your finances on auto-pilot may sound scary or even difficult, but you may already be automating some portions of your life already.
- Do you contribute to a 401(k) through payroll deductions?
- Are any of your credit cards set up for automatic payment?
- Are your mortgage, car loan, or student loans set up to be deducted on the same day each month?
If you answered yes to any of these, you’re already automating some of your finances!
6 simple steps to automate your finances
Saving for retirement
If your employer offers a retirement account (i.e.: 401(k), 403(b), 457), sign up to contribute to the plan. As an added bonus, many employers will match a portion of your contributions. My company matches $0.50 for every $1.00 that I contribute until I reach 6% of my salary.
You can supplement your work retirement account with a Traditional or Roth IRA account. If you choose to contribute to a Traditional IRA or a Roth IRA, be aware of the income limitations. If you need help investing, check out my friend Joseph’s investing resources page.
Keep track of all of your accounts in one place
I love using Personal Capital to keep track of all my bank and investment accounts. It’s a simple user interface that automatically updates your balances and gives you easy-to-use graphs to show the growth of your net worth.
For my loyalty programs, my favorite tool is Award Wallet. It updates my airline miles, hotel points, and reservations, and you can access it through their website or app. Most important… it lets you know when your points are going to expire, so you can use those points to book your next vacation!
Minimum payments on credit cards
Protecting your credit is critically important! One of the ways I protect my credit is to set up automatic payments on every one of my credit cards. My goal is to pay off each card in full each month, but by setting up the automatic payment of the minimum payment, I ensure that they don’t hit me with $35 late fees and that my credit doesn’t get dinged for a late payment!
This step is one of the 11 immediate steps I suggest people do whenever they get a new credit card.
Sign up for direct deposit of your paycheck
Most companies actually want you to have direct deposit. It reduces time and expense and automates the process for both you and them. If you’re on vacation or away from the office for any other reason (like being sick or having the day off), you aren’t in the office to grab your check to deposit it. With direct deposit, the money is automatically in your account without you having to stop by the bank. Bonus: your bank won’t ever place a hold on the money. When you deposit a check, it may be subject to a 7-day hold. Double bonus: if your payday is on a Saturday or Sunday, the funds may show up in your account on Friday, meaning you have access to your money earlier than normal!
Automating annual bills
Sometimes it is hard to come up with the money for an annual bill, like property taxes or car, home & life insurance. Many of these companies provide the “convenience” of monthly payments, but then they charge you $3 a month for it. Some convenience… charging you $36 more than what you already have to pay.
What I do is open a sub-account at CapitalOne360 for each of my annual bills, then transfer 1/12 of the annual amount automatically each month into the savings account. I don’t get much interest, but would you turn down someone if they offered you a couple $1s? Then, when the bill comes due, I transfer the money back into my checking account to pay the annual bill.
For me, it is easier to budget a bunch of smaller bills, than one large bill. Setting aside $100 a month sounds a LOT better than having to come up with $1200 once a year.
Discounts for automating
Besides avoiding the “convenience fee” for paying monthly for annual bills, you can also receive discounts for having automatic deductions of bills. When I had my student loans with SoFi (use my affiliate link to save $100 on refinancing your student loans with SoFi), I received a 0.25% discount on my rate for having payments auto-deducted from my checking account each month. My Home Equity Line of Credit also provides a discount on the rate for having payments automatically deducted from my checking account.
To put things in perspective, if you have a $10,000 balance, a savings of 0.25% is equal to $25 a year. When I first graduated with my BS and MBA, my student loans were $60,000, so that auto-deduct was worth $150 a year! That’s extra money that I could use towards paying down the loans that much faster.
One word of caution
The biggest negative about automating your finances is that these processes are always in motion. If your checking account goes negative, you could have a bunch of transactions bounce, resulting in your bank charging you overdraft fees.
I recommend that you have a savings account, an overdraft line of credit, or a credit card attached to your checking account that will pay your overdraft items. Yes, there may be a little bit of interest or a small fee, but it saves the embarrassment and fees associated with bounced charges. Not only will your bank charge you for overdrafting your account or bouncing an item, the person or company that you bounced a check to will also likely charge you a fee!
Automating allows me to travel worry free
I travel as often as I can, so having all of these steps in place gives me peace of mind. I don’t need to be at work to collect my paycheck, and I don’t have to constantly log on to my accounts to manually initiate payments of my bills or retirement contributions.
I can relax on the beach, hike the mountains, or explore the city, all without wasting time thinking about my finances. Instead, I can focus on spending time with family and creating awesome memories.
Have you automated your finances? What has your experience been with automating? Is there anything else you’d like to automate?