Why Automating Your Finances Makes Sense
Managing finances isn’t just complicated, it can also be quite time consuming. For most people, life is busy enough and it’s easy to fall behind or let things slip. For example, it can be difficult to keep track of when bills are due and remembering to put money into your savings account can be easy to forget.
That’s why automating your financial life can be a good idea. Not only does it free up time, but it also ensures that bills get paid when they’re supposed to while helping you meet your financial goals without added stress and anxiety.
What Does It Mean to Automate Your Finances?
Automating your finances means setting up systems to take care of your financial tasks. For instance, you may be able to pay your bills automatically or set up your accounts so that a certain amount of money is transferred to your savings each month. This can often be done online through the website of your financial institution.
How Do you Automate Finances?
There are many different ways that you can use automation to improve the money management process. The first is to automate bill payments. Most financial institutions allow you to automatically pay bills on the same day each month. Figure out when each of your bills is due, and set up an automatic payment to happen before the due date. This way you won’t miss any payments.
For bills that change each month (such as your credit card bill), you can set things up so that the minimum payment is made automatically. You should always try to pay more than the minimum (since you’ll end up paying a lot of interest if you only make the minimum payment), but at least this strategy will keep you from missing any payments.
You may be able to arrange for these automatic bill payments to happen on the same day as pay day, so you know you’ll have the money when your bills are due. You may have to talk to your creditors and request that they change the due dates on your bills so they make sense for your payment schedule.
You can also automate your savings. For example, you can set it up with your bank to have a certain amount transferred from your chequing account to your savings account each month. If you have an RRSP or other retirement savings plan, you may even be able to get your employer to deposit a percentage of your income into this account each time you get paid. This is a low-stress way to save for retirement.
Benefits of Automating Finances
There are a number of reasons why automating your finances works. First, as mentioned, people tend to be very busy these days and that makes it easy to forget to manage your money. When you set things up to happen automatically, you don’t have to worry about making payments on time or remembering to put money into your savings. This makes managing your finances much less stressful and time consuming.
It also ensures that you don’t miss paying a bill. If you miss payments, you can seriously harm your credit rating, and your credit rating is important. Whenever you apply for a loan, lenders look at your credit score to determine their risk. If you have poor credit, you’ll be much less likely to get a loan and you’ll pay a higher interest rate on loans that you are able to get. In some instances, having a poor credit rating can even make it difficult for you to rent a home. Therefore, it’s important to do what you can to make sure you don’t miss any payments to maintain a good credit rating. Plus, automating bill payments keeps creditors from calling or collection agencies from bothering you.
Automatically transferring money into your savings account or your retirement fund is a great way to save because the money leaves your account without you doing anything (once the process is set up). This means not only do you not have to do anything each month, but you’ll probably soon forget about the money entirely. This means your savings will grow and you won’t miss the money at all (since you’ll probably forget about it). A lot of people have difficulty saving because, if they see money in their chequing account, they’re tempted to spend it. When this money leaves your account and goes right into your savings without you doing anything, you solve this problem for yourself. Your savings will grow quietly and you won’t have to worry.