Make finances easier with automation
Automating your finances generally means setting up automatic payments for bills and recurring investment or savings deductions from your bank account. It may sound tedious to set up, but once most bill payments are automated, experts say it can bring structure to your finances and set your budget up for success.
“Automating things and making your life easier goes a long way,” says Marques. “Even if you’re quite a proactive person, it just makes it easier to stay on track and make sure you’re making progress toward your goals.” She said it takes away the ability to negotiate with yourself. For example, people with a “spend-first” mentality may delay savings contributions. But if that amount is automated, it will be easier to treat it as a bill. “You just have to do it,” she said.
Automation supports budgeting and does not replace it
Another benefit is avoiding late fees or charges on bills and credit cards. Marques said everything from rent, to utilities, to savings and investments, can be automated. For variable accounts, such as a credit card, she suggested automating the credit card bill payment up to a minimum amount and paying off the rest manually each month.
But automation doesn’t replace the need for budgeting. Budgeting will always be an important pillar of personal financial planning, says Michael Bergeron, certified credit counselor and manager at Credit Canada. “The automation is just supportive. It’s a strategy that helps us stay within our budget,” he said. For example, if you’ve paid off your debt, that money can now be automated to be spent elsewhere, such as savings or investments – and that insight only comes if you keep track of your budget.
Know what can (and cannot) be automated
However, many people don’t know how to automate payments. Bergeron said the first step to automation is having a structured budget that addresses needs, wants and other priorities. “Once we have a structured budget, we can look at what we’re going to automate,” he said.
Marques said an easy way to know what can be automated is to list all your fixed recurring expenses, such as rent or mortgage, car insurance and phone bill, among others. Then look at the days you get paid and start matching bill payments and savings to your paydays. For example, fixed payments, such as rent, can be matched to the paycheck that arrives just before the due date and can be set up for automatic deductions. Most recurring payments for bills and savings can be easily set up through online banking platforms or utility companies such as network providers or insurance companies.
Bergeron said people should still keep a close eye on their bank statements to make sure there are no duplicate charges, technical errors or overdrafts. Additionally, some automation settings may have an end date, which means you’ll need to set up payments again. “If you don’t pay close attention to that, obviously there can be missed and late payments,” he said.
It’s probably not possible to automate all your variable expenses, such as grocery bills or fuel costs. “There’s always going to be some form of money management structure that you have to manually take charge of to make sure we’re following our budget as closely as possible,” he said.
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While automation will likely work for most people, Bergeron said it can be challenging for those who aren’t tech-savvy. He said if there is a barrier, he doesn’t recommend automating finances until they understand its value and benefits. “But for the majority it is a highly valued benefit,” Bergeron said.
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