How to Automate Your FinancesPersonal finance is filled with tedious transactions and having to remember to make payments, but you can ease some of that if you take some steps to automate your finances. Automating your finances can save you time, help you avoid late fees and make it easy to develop good monetary habits like saving and investing. Plus, with most financial transactions and bill paying occurring online now, it’s really easy to get started. If you’re interested in learning how to automate your finances, as well as some potential downsides and what you can do to mitigate them, keep reading.

How to automate your finances

When you think about all of the financial accounts you have to worry about, automating your finances in one sweep can feel like a pretty daunting task. If you break it up into three steps, though, getting everything automated is a very manageable project.

Set up direct deposit

The first step to automating your finances is to set up direct deposit for your paycheck if you have the option, so your money goes right into your bank account. This will make it so you don’t have to spend time going to the bank on payday to deposit a check, and ensure you have your money available to you as soon as possible. If you don’t have a primary checking account already, you’ll want to open one as this account will be the main hub for your money.

Automate your saving

One big benefit of automation is that it makes it really easy to separate your savings from your spending money, which is a practice nearly everyone should follow. Just set up a recurring transfer from your primary checking account into your savings accounts every week and you’re good to go. Make sure the transfer happens a day or two after you get paid, so the money will be out of your account before you get a chance to miss it, but you also have time to cancel the transaction in case you run into a problem. If you have multiple savings goals, such as building an emergency fund and saving for a down payment on a house, setting up a separate savings account for each of them can make your money easier to keep track of. Online savings accounts are great for this, as they tend to offer higher interest rates than savings accounts from traditional banks, which let your saving funds earn you a bit of extra money while you’re waiting to use them.

This works just as well for investments, too, as many individual retirement accounts and brokerage accounts let you set up automatic transfers from your checking, as well as automatic investment purchases. You can configure your investment accounts so that, when they receive money, they invest that money into the funds you want, which makes it really easy to steadily invest into index funds, bonds and target date funds. Sometimes these features can be hard to find, so if you need help setting this up, don’t hesitate to call your investment company for help. If you have a 401(k) account at your job, most of those are pretty much already automated for you. You just decide what percentage of your pay you want to contribute, and your 401(k) will take that money out of your paycheck.

Put bills on autopay

Take a look at your past bank and credit card statements and make a list of all the different bills you have to pay. Your options for automatic payments can vary across your bills, but these days a majority companies that you pay regular bills to, such as utilities and telecom companies, should have autopay features. This includes credit card providers, which typically let you set up recurring payments every month for a specific amount of money, your card’s minimum payment or your entire card balance. Most mortgage lenders should have recurring payment options, but if you rent your housing, your landlord may not have an autopay system in place. If this is the case, call your landlord and ask if you can pay your rent with some type of recurring payment. Landlords really value being able to collect rent on time, and if an autopay system makes that more likely, yours may be willing to work with you to set one up.

Some companies will let you pay your bills by charging them to a credit card, and if you have that option, you should use it. Routing your bills through a rewards credit card that you pay off in full every month will let you earn extra cash back, miles or points, effectively giving you money back for making purchases you would’ve made anyway.

Downsides of automating finances

Automating your finances comes with a lot of benefits, but it also comes with some negatives as well that you should be aware of. The big one is that putting your finances on autopilot without budgeting first can lead to major problems. For example, if all of your bills on autopay go through on the first of the month and you don’t get paid until the day after that, you could overdraw your checking account. The same thing can happen if you use a credit card as your primary payment method, but you tend to lose track of your spending. Another issue is that you may miss mistakes or irregularities with your cash flow, such as signs of fraud, failed autopay transactions or double billing. If you automate your finances, you also need to make a conscious effort to stay connected with your money by regularly reviewing your budget and checking on your accounts at least once a month to make sure everything looks okay. Doing that will help you minimize any difficulties you might come across, like increased bills.

It can take some time up front, and it doesn’t completely free you from paying attention to your money, but once you’ve finished automating your saving and bills, you’ll likely find your financial life is a whole lot simpler. To read more posts that make money matters easy, follow our personal finance blog.