by Kate
If you haven't set up automatic bill pay - now is the time to consider it. I am a big fan of automation in personal finance (and life). Automation can be a huge boon to your schedule, your pocketbook, and your happiness (not to overstate things). Setting up systems eliminates a constant need for exhausting decision-making; whether it's eating the same thing for breakfast every day, having an organizing file for incoming mail, or going to the same exercise class every week. These are all ways we automate our life - we set up an efficient system that benefits our life and then we don't have to think about it again. We just do it. The same is true for personal finances.
In this digital age it's likely that you already automate at least some of your finances, but if you haven't - now is the time to consider it. Automation in personal finance is the process of setting up your bills, subscriptions, credit cards, and other accounts to be automatically paid out of your bank accounts. Instead of writing a check or clicking a few buttons to pay your bills each month, the money moves automatically from your account to the creditor. The vast majority of companies allow (and encourage) automatic bill pay these days, so it usually only involves filling out a quick form online to get set up. Of the 10 or so bills we pay each month, only one (the city water...*shakes fist*) is not set up for automatic payments.
Automation is a win-win for you and Big Business. In a financial world that urges you to "go paperless," what they really mean is "we don't want to pay for all this paper anymore, but in an amazing twist our cost-saving measures will actually also save you a lot of time and effort." They want you to pay your bills (because $$$) and you want to pay your bills on time (because you certainly don't want to give them more $$$), and automation makes both of these things happen. Win-win.
Of course, there are benefits and drawbacks to automating your personal finance, so you should definitely examine your own habits and preferences to see if it makes sense for you.
Benefits to Automating Accounts:
Set It and Forget It - Once you've set up automated billing, you don't have to think about it again. Every month your bill gets paid and you don't have to remember to write and mail a check, log in to your account, or call a company. You do the set-up work once and then you free that part of your mind to think about something else.
Saves Late Fees - Your bill is never ever late.
Saves Time - You eliminate the monthly bill-paying chore and can instead learn macrame or eat bon-bons (or other varied hobbies or tasks if you must).
Saves Paper - When you automate your accounts you can also select to have all your bills sent via email. Not only do you save paper, but you also save all the time of messing with that particular piece of paper when it arrives on your doorstep.
Drawbacks to Automating Accounts:
Set It and Forget It - Sometimes you forget things you shouldn't. I recently had a moment of panic when we canceled a credit card, but I forgot that it was set up to pay our monthly phone bill. So I received one of those threatening emails about how my account couldn't be paid. I was able to easily switch the method of payment to another credit card, but it did remind me that keeping track of what's coming in and out of accounts is important.
This is also extremely important when it comes to monthly subscriptions that automatically renew, like Netflix/Hulu, Audible, meal delivery, make-up boxes, and about a billion other things. For the most part automatic renewals are really helpful, because who wants to remember to re-start a subscription each month? But it's also REALLY easy to forget about these subscriptions and look up six months later to find you've spent $150 on something you don't really use, particularly for subscriptions you were just "trying out."
In addition, if you aren't looking at your bills carefully each month it's easy to forget how much you are paying for each utility. It's important to check periodically to make sure that your water bill hasn't shot through the roof for some unknown reason, or your internet provider hasn't suddenly upped your monthly costs without telling you.
Basically, "set it and forget it" has its limits.
2. Consistent Money Flow - You have to make sure that your automatic withdrawals are set on accounts that will always have enough money in them. Most of our bills are set up to withdraw from the checking account that Alex's paycheck is set to direct deposit in - this way we always have enough money in the account to cover each month's bills.
3. Disputing Charges - If you use automatic bill pay, money is taken out of your account even if there is a mistake on your bill. Manual payment allows you to check your bills each month to make sure you are not being over-charged or charged for a service you don't use. Disputing the charges can be more difficult once you've already paid. However, this also doesn't happen very often, so you should weigh the time you spend against the likelihood of mistakes for your particular bills.
For us, the benefits of automating all our bills far outweighs the drawbacks. The time and mental energy we save on paying bills each month is something we highly value, and we have some useful tools (such as Mint) that help us track our spending and accounts instead of looking at each paper bill that arrives each month. What kind of automation system works for you?
