This post is by our regular contributor, Erin.
When’s the last time you told someone how busy you were? Probably yesterday. Or today.
It seems like everyone I know (including myself) is always on the go, moving from one thing to the next. As a result, a lot of things tend to fall through the cracks. Namely, our finances.
Let’s face it – gone are the days of sitting at a desk, writing out checks, balancing your checkbook. This is the routine my mom goes through at least once a week when she gets bills in the mail. Who gets bills via mail anymore?!
Millennials are online, and most of us probably think checks are tedious.
Plus, if you’re not a “natural” at money management, you may forget to check into your accounts every now and again. Or maybe you’ve come close to paying a bill late. Whatever the case, staying on top of your money is a must if you want to get ahead.
Crunched for time? One of the best solutions is to automate the process. Here are 4 ways millennials can put their finances on autopilot.
1) Automate Your Savings
After I got a full-time job, I set up an automatic transfer of $20 per week from my checking to my savings account. Yep, just $20, but it added up over a year!
The great thing about automatic transfers is they’re flexible. You choose the amount and the frequency with which the transfers occur, and they can always be changed at a later date.
That means you can ease into things by setting up a weekly transfer of $10, $20, or $50, and adjust it later on if you have more money to spare.
Are you someone that loves to have separate savings accounts for each goal you have? Automatic transfers can simplify the process a lot. If you know exactly how much you need to save per month, just set up the automatic transfer for that amount and be done with it. Your savings will grow without having to think about it.
2) Automate Your Bill Payments
Did you know putting loans on autopay can often make you eligible for an interest rate discount? It’s true! For example, many student loan lenders will give you a 0.25% interest rate deduction for enrolling in autopay. That’s pretty awesome and worth taking advantage of!
In any case, no one wants to deal with late fees. I have my credit cards set to be paid in full each month via autopay, and I have our electric bill, cell phone bill, and various insurance policies enrolled in autopay as well.
However, no one wants to deal with overdraft fees, either. When automating bill payments, you need to make sure you have a buffer in your checking account so you have enough money in there to cover all your expenses. Unless you know without a doubt what your monthly expenses are each month, leave some room for error.
3) Automate Your Retirement Savings
If you have access to a 401(k) or 403(b) from your employer, you’re more than likely already enrolled in automatic deductions from your paycheck to your retirement account. You can always ask someone from HR what the process is if you need to sign up for it.
This is one of the best things to do early on in your career. Why? Because the amount is taken out of your paycheck before you even see it. You don’t have a chance to miss (or spend) the money. You’ll get used to receiving $1,000 per week instead of $1,200.
If you get a raise, and you’ve been doing fine on your current paycheck, you can also increase your retirement contributions before you have a chance to think about what you’re going to spend the surplus money on.
Speaking as a freelancer, saving for retirement can be a bit of a struggle. You want to make sure your basic necessities are taken care of before you commit to stashing away money you won’t have access to for several more years.
Setting up automatic retirement contributions has been great for me. As someone who can get carried away with saving for emergencies, I tend to put retirement last. Yet, it’s one of the most important things we can save for. With automatic contributions, I don’t even have a chance to think about “backing out”. It’s a great way to force yourself to save.
4) Automate Your Check-Ins
I need to mention you shouldn’t use a “set it and forget it” mindset when automating things. Let everything run smoothly in the background, but keep tabs on your accounts to make sure transactions are being executed properly.
What do I mean by that? I know quite a few people who have been double-charged for something, or who have been at the mercy of a technical glitch, and their payment never made it through.
I think we all know technology is amazing, but it still has its faults. Don’t rely on it 100% to get the job done. Set a reminder using your phone, a paper calendar, or your email, and make sure to look at your account activity at least once a week.
If you have too many accounts and it’s too time consuming to go through them all, consider setting up an account with Mint, You Need a Budget, or Personal Capital. These online tools can help you “automate” your budget and your goals by sending you custom alerts when things happen. It’s a good way to stay in the loop wherever you are, though I’d still recommend checking into your actual accounts once a month.
Look them over so you know what transactions have occurred and how much money is in your accounts. You should be keeping track of any progress you want to make. Automating your finances doesn’t give you permission to stay in the dark about them!
Don’t Over-Automate
Along with that reminder, I want to be clear you should still be tracking your spending to know what’s going in and out of your accounts. There are a lot of people who do the “set it and forget it” thing only to facepalm themselves a year later when they see a charge for a subscription they meant to cancel. Look over your statements when they come in so you don’t get over-charged for anything.
Remember, your goal is to make managing your money easier. You should still be taking a hands-on approach when possible. If you don’t check in with what’s going on, you’re not really “managing” your money, you’re just letting it happen. You need to be proactive about improving your situation.
Think about automating as getting yourself into the habit of saving, paying on time, and keeping track of things. You’ve set the framework, now you need to implement it in a way that aligns with your financial goals.
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Putting your finances on autopilot is one of the best ways to adopt better money management habits. If you’ve been procrastinating with getting your finances in order, setting up automatic transfers to your savings, retirement contributions, and bill payments can help you get on the right track. Just maintain everything after you set it up!
Do you automate your finances? What do you automate? Do you think automating can be dangerous? How can busy people better manage their money?
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I like automation a lot because it allows us to be “lazy”. But with that, I like your last point – you can’t be too automated. You still need to check-in and know your stuff.
You’ve described our automation practices exactly. The one thing we can’t automate is our early mortgage payoff, in part because the servicing bank always messes it up, but it works out since the amount also varies.
I’m not the biggest fan of automating my finances (besides 401k and HSA contributions). I go in to my CC and student loans and set up the payment manually on a monthly basis. It only takes about 5 minutes total. I’ve never forgotten, and this gives me the opportunity to make sure all the charges on my CC are valid and to make additional principal payments on my debt. I’ve read too many times automated payments screwing up when the company changes some procedure, so I want to make sure I’m on top of that. Also I don’t want to just transfer a set amount to my investments each month because sometimes I can do much more, or sometimes I want more in cash for a certain expense I have coming up like travel. But for those who have a tough time saving/investing, automation can definitely help.
I think automating is awesome. It frees up a lot of your time. Automating bills makes it so that you won’t incur fees and automating saving makes saving much easier and pain-free. Of course like you said, you should still pay attention to them though and track your expenses because there can be mistakes.
Financegirl Exactly. It’s great to automate, but you can’t just forget about your finances after that! We always have to evaluate things after we implement them.
Pretend to Be Poor I imagine extra mortgage payments might be a little tricky to automate. I’ve even run into issues trying to make extra student loan payments. Automation works well for the basics!
ferventfinance That’s why I included the reminder at the end to always double-check your transactions. I haven’t ever personally had it happen to me, but I also don’t have a lot of accounts/transactions happening. But I also have a reminder to look at my account and ensure the payment is set to go out.
It sounds like you have a really good handle on money management already, though – like you said, automating is a good way to get people who DON’T like to do these things into the habit. =)
Andrew LivingRichCheaply Yep. My mom refuses to do anything online because she doesn’t trust technology, but I don’t have the patience to sit there and balance a checkbook like she does. It’s routine for her, but I’d rather manage everything online! It’s less paper to deal with, too.
Automating is the bees knees. A few years ago I would have told you otherwise, but now I have so much going on with a kid that I feel like my brain can’t process any more reminders of what I need to do, so I have definitely been automating my bill payments. One less thing to worry about forgetting!
I’m older than you, Erin, so I remember the “old” days when I used to have to write out a check, put a stamp on an envelope and mail my bills. So I really appreciate being able to automate so much these days. :) Frankly, it surprises me how many people still get hit with late fees when they can automate bill pay to avoid it. And your last point – about too much automation is spot-on. Automating can simplify our lives, but it doesn’t mean we can just let things ride. Even our savings and/or retirement savings because, hopefully, as the years go by, your salary also increases and so should the amount you put away.
I think pro-active automation is awesome, but I always do a monthly recap. We were having a horrible set of months where our HOA kept getting rejected from our rental company. It turns out that the company had changed to a new system, and we hadn’t read the letter letting us know. We managed to avoid fines because we kept careful records.
Now we’re running smoothly again (thank goodness!).
Christina@EmbracingSimple Hah, I definitely hear you on your brain reaching capacity at some point. I love being able to set reminders on my phone for that reason. I used to be able to remember when everything was due, but I’d rather not have the anxiety of wondering if I paid something or not!
ShannonRyan Yes! It definitely helps solve the problem of late fees. No one wants to get dinged $25-$30 every time a payment is late, and of course, if you forget about the payment entirely, that could lead to other consequences. Definitely agree we always need to go back and take another look at our finances when things like salary change.
Hannah UnplannedFinance Nice! Keeping records is an absolute must. It stinks to get a strike against you when you were actively trying to pay, but technology wasn’t cooperating.
I automate everything I possibly can. I still have to write a check to pay for my daughter’s dance lessons and that’s annoying enough. Thank goodness for being able to do most everything electronically!
Eyesonthedollar Ha, there are definitely a few things that still require checks, sadly.
I could not agree more. I’m a huge fan of automating savings. It’s particularly helpful when you automate to reach savings targets. Practicing automation techniques can also teach you to live on a certain amount of money. Leave yourself with a set amount each month. This way, you’ve “paid yourself completely first”, and you have no choice but to spend what you’ve left yourself with. Also, a super helpful tip is to put your savings in accounts that are hard to get. This way it’s tougher to cheat by accessing the money for when you want to break your budget.
The Mill Street Times Yes, love that! Setting up automatic payments at the beginning of the month is a great idea, along with putting the money in a harder-to-access account.
Not over automating is a good recommendation. Also, some people have different strengths for example I’m really good at saving in general but when it comes to retirement investing, it’s a huge fail. I have to automate that of I might never do it. My bank teller just said, sometimes you have tot trick yourself into saving that money.