Have you ever added up how much time you spend each month on your finances? Or, separate from the time you spend working on your finances, how much time you spend stressing about your finances?
When I first decided to change my financial situation, it felt like hours per week. Hours per week, and I never seemed to make any progress. And the more time I spend without progress, the more the stress would eat into every other part of my life.
Finally, I found one trick that saved me time, reduced my stress, and finally started making a difference: automating my finances.
Money doesn’t have to be hard. In fact, sometimes the easiest solution is also the one that makes the biggest difference in your finances. In this article, I’m sharing why it’s important to automate your finances and six easy ways to get started.
Why it’s important to automate your finances
I truly believe that automating your finances is one of the simplest and most effective ways to take your finances to the next level.
There are a few reasons I think it’s the best way to go:
- Automating your finances saves you time. Chances are, you spend more time on your finances each month than you think. There’s paying bills, checking your account to see how much money you have left, and so much more. The more you automate, the more time you save.
- Automating your finances saves you money. Have you ever forgotten to pay a bill on time and gotten stuck with a late payment penalty? Or maybe you didn’t realize how much money you had spent, and so your bank stuck you with an overdraft fee? You can avoid these things when you automate your finances.
- Automating your finances saves your credit. Anytime you miss a monthly payment, it could have a negative impact on your credit score. And your credit score is what determines if you can get loans and credit cards to help with future goals.
- Automating your finances helps you reach goals you may otherwise not. I didn’t start really saving money for my goals until I automated my finances. Whether you’re saving for a house, paying off debt, or something else, automating your finances will help you get there.
- Automating your finances reduces stress. For some people, managing their money is a huge source of stress. Imagine if you could eliminate the things that bring you so much stress, like paying bills each month or worrying about where your money went.
How to automate finances
Ready to start automating your finances? Here are the six easy ways anyone can automate. The best part is that each only takes a few minutes to set up, but altogether, they’ll save you tons of time each month.
1. SET UP AUTOMATIC BILL PAY
If you’re brand new to automating your finances, setting up automatic bill pay is the perfect place to start. It only takes a few minutes to set up and it will save you time each and every month.
I think just about every company allows its customers to set up automatic payments at this point. Some even offer a discount when you use autopay.
Using automatic bill pay has two big benefits. First, it saves you time each month since you don’t have to sit down and manually pay each of your bills.
The other benefit is that it could potentially save you money and save your credit score.
Things fall through the cracks — it happens to everyone! And unfortunately, sometimes, the thing that falls through the cracks is paying a bill on time.
When you’re late on a bill, you’re often stuck with a late payment penalty and a ding on your credit report. By setting up autopay, you never have to worry about that again.
2. AUTOMATE YOUR SAVINGS
I’m not kidding when I say that automating my savings was one of the most important changes I made in my finances.
Every month, I’d tell myself that I would save whatever money I had left at the end of the month. But somehow, there was never anything left when the end of the month rolled around.
I finally set up an automatic transfer from my checking account to my savings account the day after I got paid each month. I never had to think about it, and I honestly barely noticed having less money in my checking account, and yet my savings was growing.
You can use these automatic transfers for so many purposes.
If you’re still saving up your emergency fund, you can transfer money to a high-yield savings account each month.
Once you’ve got your emergency savings fully funded, you can use your automatic transfers to save for other big goals.
3. TRACK YOUR SPENDING WITH A BUDGET APP
Many people I talk to find the idea of tracking every expense exhausting. For those people, I recommend signing up for a budgeting app that does it for you.
With most budgeting apps, you can connect your budget to your bank accounts and credit cards, and it automatically pulls in all of your spending. You can also set it up to automatically categorize your spending, so it’s easy to see how much you’ve spent in each category.
I wrote a few blog posts to help you find the perfect budgeting app for you:
- The 8 Best Budgeting Apps for Individuals
- The 6 Best Budgeting Apps for Couples
4. SET UP EXTRA DEBT PAYMENTS
If you’re working on paying off high amounts of debt, you know how long it can take. And the best way to speed up is to make extra debt payments using either the debt snowball or debt avalanche.
When you set up an automatic payment, you’re committing to putting extra money toward your debt each month. And that commitment is what’s going to get you debt-free ahead of schedule.
You can do this two ways. First, you can set up an extra payment each month. Or you can just automate your normal monthly payment but schedule a payment that’s larger than your minimum required amount.
5. AUTOMATE RETIREMENT CONTRIBUTIONS
I’m almost certain that if my first employer after college hadn’t required me to put 7% of my paycheck into a retirement account each month, I wouldn’t have saved for retirement at all.
Honestly, it just seemed so far away, and like I had years until I had to worry about it.
Now, almost a decade later, I can’t tell you how grateful I am that my employer required automatic retirement contributions.
If your employer offers a 401(k) plan, by far, the easiest way to automate your retirement savings is to have your employer take money out pre-tax and put it into your account. If you’re lucky, they might even offer to match a portion of it.
If your employer doesn’t offer a retirement plan — or you’re self-employed so you are your employer — you’ve still got plenty of options.
For those with an employer who doesn’t offer a 401(k), I recommend setting up an individual retirement account (IRA) and setting up automatic monthly transfers.
If you’re self-employed, even if you just run the business alongside your full-time job, you’ve got even more options. I wrote an entire guide about how to save for retirement when you’re self-employed.
Not sure how much to save? There are plenty of online retirement calculators to figure out how much you should save each month to have enough for retirement — I recommend Personal Capital’s Retirement Planner.
6. SET UP FREE CREDIT MONITORING
Your credit score is one of the most important numbers in your overall financial picture. And anything that goes onto your credit report is likely to impact that score in either a positive or negative way.
Far too many people don’t find out about negative marks on their credit report until they apply for a loan and the bank breaks the bad news to them.
There are plenty of services — some of them even free — that automatically monitor your credit for you. I use Credit Karma, and one of my credit cards also offers this service for free for having their credit card.
If a negative mark shows up, you’ll know about it right away.
Final Thoughts
Automating your finances is one of the simplest and yet most effective ways to take your finances to the next level. You can start slow by setting up automatic bill pay.
