Managing your money can be a source of stress and uncertainty.
When was that bill due? Am I saving enough for retirement? Did someone steal my credit card and use it to buy crypto-mining robots?
While some of the above concerns may be more realistic than others, you won’t have to worry about any of them if you’ve properly automated your finances. That may sound like an advanced topic only accessible to computer geniuses, but it’s actually easy for anyone with a phone and internet connection.
Don’t believe me? Read on to find out how to automate your personal finances, as well as why you should do so.
Why Automate Your Finances?
Technically, you don’t need to automate your personal finances. Most banks and merchants will still let you do everything by mail or over the phone.
I imagine, however, that you have other things you’d rather be doing. And this is one of the main arguments for financial automation: it saves you time. Less time paying bills, moving money to investments, or calling your bank about potential fraud means more time for the things you enjoy.
Beyond that, automating your finances brings peace of mind. You don’t have to worry in the middle of the night if your credit card information has been stolen. Instead, you can know you’ll get a text alerting you to suspicious charges (learn more about how to do this below).
Finally, automating your money increases your financial security. A missed payment, for instance, can seriously damage your credit score. But if you have your bills set to be paid automatically, then your finances will remain healthy even while you sleep.
Sounds great in theory, right? But what parts of your finances should you automate? Read on to find out.
Automatic Bill Pay
If you do nothing else in this guide, set your bills to be paid automatically! It will vastly improve your life.
Automated bill pay has two huge advantages. First, it saves you time since you won’t have to manually pay bills. And if that wasn’t enough, it will protect your credit score (since you won’t have to worry about late payments).
So what can/should you automate? While this isn’t a complete list, here are some of the most common bills we recommend setting to autopay:
- Rent
- Utility bills
- Credit card payments
- Student loan payments
- Car payments
- Insurance premiums (renters, auto, home, etc.)
As far as how to automate each of these, you should check with the specific company or institution billing you. Usually, you just have to agree to the recurring charges and provide payment information.
This could take some time if you’re currently paying all of your bills manually. But once you have everything set up, you barely have to think about it. The only necessary maintenance is to update your payment information if it changes.
Note: This tip assumes that you aren’t spending more than you’re making and are generally in a financially stable position. If you can’t afford to pay your bills, then you should address that before setting them to be paid automatically.
Fraud Text Alerts
While digital banking has made it much easier to manage all of your various accounts, that doesn’t mean you have time to check each transaction every day.
Because of this, a fraudulent charge could slip through without you even noticing. Before you know it, your card will have racked up hundreds of dollars of charges at Taco Bells around the LA metro area. (This really happened with a card of mine years ago.)
If you have fraud alerts set up, however, then your financial institution will alert you the moment someone makes a suspicious charge to your card. You’ll then need to confirm if the charge is valid. If it is, you can continue with your life as usual. But if it’s not, then your financial institution can cancel the stolen card and send you a new one ASAP.
The details of setting up fraud alerts will vary, but you should be able to find the option in the “My Account” or “Security & Privacy” section of your financial institution’s website or mobile app. You can also find instructions by searching “NAME OF YOUR BANK OR CREDIT CARD + fraud alerts”.
List of Recurring Charges and Subscriptions
One of the best ways to build credit responsibly is to only use your card for recurring charges such as a gym membership or streaming service. This way, you establish a consistent payment history without the temptation to overspend.
If/when your credit card information changes, however, it can be a pain to update all your various subscriptions.
That is, unless your online credit card account can show you a list of all your recurring charges and subscriptions. While not available with every card, it’s worth seeing if yours offers it. I recently used it to update the subscriptions on my business credit card, and it vastly sped up the process.
To use this feature, sign in to your online credit card account or app and look for an option to “View recurring charges” or something similar.
Bonus Tip: Viewing a list of recurring charges can also help you find and cancel unused subscriptions that are wasting your money (such as that free trial you forgot to cancel 6 months ago).
Automatic Savings
If you’ve set up automatic bill pay and fraud alerts, then you can move on to automations that will help you retain or even make money. The first of these is automatic savings.
Automatically saving money has many advantages. First, it can be a great way to build up your emergency fund before you start investing. And beyond that, automatic monthly savings are a great way to amass the cash you need for large purchases such as a downpayment on a home.
The details of how to set up automatic withdrawals to savings will vary based on where you bank. But generally, you have the option to set up recurring withdrawals every 2 weeks, every month, or however often works best for you.
Ideally, you should set these withdrawals to happen each time you get paid. And the money should go into an account where you won’t be tempted to spend it. Also, we recommend using the highest-interest savings account you can find.
Whatever you do, don’t rely on your own memory, willpower, or motivation to save money. Set it up once and then forget about it.
For more tips on saving money, check out our budgeting guide.
Automatic Investments
If you have enough money in your checking/savings account to cover emergency expenses, then you’re ready to start investing. How to invest your money is a big topic that we cover elsewhere, but one of the most important lessons is this: automate it.
Specifically, you should automate monthly contributions to your investment account. And ideally, these contributions should come out of your paycheck before it hits your checking account. This way, you aren’t tempted to spend your nest egg contributions on takeout.
So how do you do that? It depends on your type of employment and which investment options you have available to you.
If your employer offers a retirement plan such as a 401(k), then focus your automatic contributions there. Ask whoever handles your company’s benefits about how to set up automatic contributions. Alternatively, you can check with the financial institution that manages your employer’s retirement plan.
If you’re self-employed or work somewhere that doesn’t offer a retirement plan, then you’ll need to set one up for yourself. How to do that is beyond the scope of this post, so let’s assume that you’ve already done it. (You can find more detailed information about opening a retirement account in our investing guide.)
Once your account is set up, just go to your broker’s website and set up automatic/recurring contributions. You’ll need the account info for whatever bank account will fund your contributions, but that’s about it. Just be sure to pick an amount you can stick with consistently.
If you’re not sure where to invest your money, then we recommend M1 Finance. It’s the best option if you don’t have an employer-sponsored retirement plan. Learn more about M1 below:
Once you've started earning a stable income and paid down your debts, it's crucial to start investing for the future. In my opinion, M1 Finance now represents the best option for beginning investors. The platform is free to use, allows you to open a Roth IRA (the best starting option for most students and young professionals), and allows for automated investing into index fund ETFs. Almost no other platform offers this combo.
Automating Your Finances Frees Up Your Focus
Now that you’ve read this article, you’re ready to go out there and automate your finances. Once you’ve done this, you’ll have more time and energy for the things you want to do.
As a recap, here are the areas of your money that most benefit from automation:
- Set your bills to be paid automatically
- Sign up for automatic fraud alerts
- Check your credit card account for a list of recurring charges
- Set up automatic savings for your emergency fund and large purchases
- Set up automatic contributions to your retirement/investment accounts
For more tips on easily managing your money, check out our guide to the best budgeting apps.
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