Automate Where You Can

Each of us have our own ways of keeping organized with the monthly bills. For some of you this will be to cash your check immediately and use envelopes to budget everything from entertainment to power bills. My friend Danielle swears by this.

For me it was different. It seemed I could never, ever, get a payment in the mail on time. I even tried going directly to the local branches for places like Macy's and my phone bill. Time and time again I would glance at the kitchen table after work and realize I had forgotten to put the stamped envelope with check inside in the mail box or driven right past Macy's! I didn't mean to, I wasn't trying to be a jerk, I would simply forget.

When I started to really think on why the heck I would always forget to do such an easy thing, just to wind up feeling guilty and irresponsible, something hit me. I spend the majority of my time online! Everything from my car insurance and banks statements, to my correspondence with family, catching up on the news, even listening to the radio and watching movies. My life has over the years become very Internet centric.

The only activities I wasn't doing on the Internet were working out at the gym, socializing, and well various other human centric activities. Ask me to get a press release out, write a research paper, or know how much I had charged on a credit card...no problem. Ask me to use a stamp and...well, it never went so well. Make judgments if you wish but I understood if I was going to be serious about my budget - I had to know and take heed of who I was.

Enter the fully automated, responsible, sticking to her budget like clock-work women.

I bank with Washington Mutual, soon to be Chase. Hopefully the transition doesn't change their fees or their online account features. Right now, and for months and months, I have been able to automate every single payment in my budget. From individuals like my mother to insurance and credit accounts. I also have my paycheck automatically deposited. Then, all of my accounts, my savings, my checking, my 401k, my credit cards, are all linked into Mint.com's secure - and free - aggregation site. This may all seem mysterious but it literally takes a matter of minutes to set it up.

In practice, my paycheck is deposited every 1st and 15th. If those days fall on a weekend they are deposited the weekday before that weekend hits. Then, just to be sure my check has enough time to clear, I have all my automated payments scheduled to go out the 2nd and the 16th. This is important because I always verify my paycheck cleared before my bank starts writing checks.

With the payments set to go out the following day, I have time to cancel them if there is a mistake in my check or a delay in the posting of that check. After the paycheck clears and the scheduled payments on the 2nd and the 16th are sent out from my account, I know exactly how much cash I will have until the next paycheck and keep a close eye on it from there. I don't have to stamp any envelopes, write any checks or gather any late fees (unless its on a weekend or holiday - See my article on Credit Cards - The Basics.)

Here are the upsides to automation:

#1 You can set these payments up to be repeating or one offs.
Whether you have payments recurring monthly (like rent and utility bills), twice a month (when you really get rolling on paying your debts), every couple months (like car insurance), or just the occasional loan from a friend for 50 bucks, you can handle it all through automation. And remember, this is not the same as having one of your debt accounts deduct the money from your checking for you. I deal as little as possible with others pulling money from my account. For starters, it takes way to long to get your money back when they make a mistake.

#2 You can have your payments sent to a house address or an account number.
The first complaint I get from people when talking virtues of automation is the worry they can only handle certain types of payments through their bank. It makes sense at first, once you realize they are thinking about the other side of it. They are thinking about the few account holders they owe to who can automatically withdraw their payments from their checking account. But its not the same thing. I currently have checks sent to a friend who watches my dog during the day, to his house, twice a month. At the same time, I send checks through this system to my father and to my credit cards, car insurance, and even my savings account...everything.

#3 You can track your payments, in detail, for at least a year.
I can look up my past payments, who they went to, when they came out of my account, and how much they were for through this system back at least 18 months. What I can't tell you is the number of times I have watched my boyfriend furrow his brow in aggravation at trying to track down his check stubs, copies of checks, or the mysterious meanings of the transaction numbers associated with his paper checks - through the same bank. And he can only see photo copies of them for up to 90 days. For as hard as I was concentrating on paying my bills, the thought of spending that much time tracking down a check terrified me. Its scary enough to just be intentionally broke, let alone intentionally broke without a receipt.

#4 You have someone else who knows you sent that payment. Your bank.
There have been a couple instances where someone I owed to couldn't remember of they got a payment. While banks are not responsible for any glitches in the mail system they at least provided me with a conversation like this: 

"Really? Okay, hold on, let me check my records." 

Click click click. 

"Ah, it looks like that check was sent to you by my bank on this date for this amount. I can call them and see if there is anything else on the record." 

Usually the conversation ended there and they find the check under a stack of magazines somewhere or it suddenly appeared on the teller's screen as 'Received.' On the flip side, it has helped me catch missed payments as well.

#5 The money comes out of your account before you can get your hot little hands on it.
Need I say more here? When I am working my budget, (which is only one paycheck from debt free as of today) I know, with the exception of a short 24 hour period, the money visible in my account online is it. I was, and still am for the next two paychecks, living off 120 dollars after all my bills are paid. Sound crazy? Maybe to those who aren't already doing it. 

With the exception of losing the ability to go out whenever I feet like it, I have had little trouble eating, drinking, buying gas, and even lunch once and a while on this. I don't recommend it for every one, its pretty risky to run that low in your checking account (I once landed on payday with .58 in my checking!), but for me it was working. It was even "Zen" like at some moments. And now, even 60 dollars can feel like a fortune.

Note: If you are going to run as lean as I am describing here, at least have some savings to back you up.

#6 You can adjust the payments whenever you need up to a couple hours before they go out.
As my budget progressed I was constantly increasing the amounts of my payments. I have the option to apply the amount change to only the next payment or to the entire set of repeating payments for that account. Its handy and I actually look forward to checking my account, adjusting my payments, and settling in for the next two week period knowing I am another paycheck closer to freedom.


Now lets talk Mint.com. While my boyfriend and I are both computer geeks of varying degree, I owe his furrowed, "I can't find my check stubs" mind for cluing me into this one. Mint is a financial aggregation system. First off, it uses HTTPS in its URL scheme before and while you are logged in to it's service. HTTPS stands for 'HTTP over SSL', not the commonly mistaken 'HTTP Secure', though it may as well be the same thing. While I am not going to go into the details of how encryption is your friend (I will leave that to our benevolent security leader Bruce Scheier), Mint gets points from me for it. Safe to say, no one will be able to pull your password and other financial details "out of the air" as you are managing your accounts with Mint. 

Mint will track, among others, your checking account. Every transaction will be piped to you, classified, and summed up in pretty little pie charts called "Trends." You can set up your budgets for everything from gas and power bills, to massages, mortgage payments and child care, even ladies night. What's more, they will send you text messages to your phone when you exceed those budgets, weekly statements to your email, credit card rate comparisons to save you money, and tally your net worth right in front of your eyes. Mint tracks your credit accounts for you, warns you when you have a payment due soon, and will even compare your spending trends to people in other cities around the nation. In addition, when you get to the point of investment accounts, it will track those for you too. And lets not forget the savings account. And no...they aren't paying me to tell you any of this. 

Aside from describing for you some of the advantages of automation, the other point here is to really know yourself. If you are committed to paying down debt, or just simply paying the bills on time, you'll be learning as much about yourself as you will about money management. Don't try to set up something that hasn't worked for you in the past just because it is what you're familiar with.  Experiment with your systems of organization and really consider your natural tendencies with money. If you make too many big promises and over commit yourself as you're figuring it out, that inflexibility may discourage you. Be ready to make mistakes but keep with it, those mistakes may be crucial to your future success. 

Credit Cards - The Basics

I intended to launch this blog with a back story of how I managed to pay off nearly $10,000.00 in debt in 6 months. How my circle of girlfriends and our financial meetings made all the difference to my follow through, and how automating my payments saved me hundreds in late fees. I will get to all that, but I could not help publishing this article first.

The more I talked to people around me the more it was clear how little many of us know about our own debt, let alone being ready to pay it all off. It seemed the perfect start to a site dedicated to women and our financial goals - no matter how well defined. And really this is not "women's only" information, not by a long shot. I hope these basics help you as I continue to write on my experiences, trials, failures, successes, and the oodles I learned in the mean time.


In college I went through a long phase where I had trained myself to immediately rip down any credit application displays readily found on announcement cork boards all over campus. As a women who had her first Macy's card (then the Bon Marche) at the age of 18 and dug several holes I could barely get out of on my coffee shop wages, the thought of others my age being targeted enraged me. Then, I was operating on limited knowledge beyond the visceral experience of having little money to eat and the looming cloud of possible collection should I fall behind on my $20 minimum payment. A part of me felt like I was paying the mob every month. Now, having paid all my credit card debt, asked lots of questions, and happily opted to close the accounts entirely, I am better armed in a crusade against credit cards.

Granted, I understand having a credit card around for emergencies but that doesn't do you any good if you carry a balance every month. What good is a credit card for emergencies if you already have it sapped with other purchases? And don't fool yourself, if you aren't able, either financially or by shear discipline, to pay your cards off entirely every month, you shouldn't have them. Before you get mad at me for saying so, hear me out. Credit cards are your fastest ticket to being someone else's cash cow. So, say "moo" baby, and lets get to the part where you can start doing something about it.

NOTE: I strongly recommend you watch from start to finish the documentary Maxed Out. It is an hour and 26 minutes and you can view this documentary free online at sites such as: http://bestdocumentaries.blogspot.com/2007/10/maxed-out-full-documentary.html or get it from NetFlix if you already have an account - just don't go buy it. The idea is to get you angry at- and educated about- the scope of havoc credit cards wreak on the average person's financial life, you included. Even if you are one of the few who manages to pay their cards off every month and has never had a late payment, you will want to watch the documentary. Luckily, as of just before this blog went live, the government started catching on and is enforcing new rules in 2010.

So lets dive in shall we?

You wont even need to gather your statements to find this information out.

Take all your cards out of your wallet and toss them in a pile in front of you. Grab your cell phone, something to write with, a note book, cocktail napkin or a scrap piece. On the back of your credit cards is a number for the company, call that number and ask the following questions.

Here is a trick to keep in mind as you go: If someone is not answering your questions don't get upset just nicely say "thank you," hang up, and call the number right back. You'll get someone else and eventually you'll find someone willing to answer all your questions. If there is anything you are in doubt about after those questions get answered, do the same thing. I would often be suspicious about an answer or a representative's actions on my accounts and would call again just to have another person verify or disprove the actions of someone I just spoke to - it has saved me major grief many times. And ALWAYS get the confirmation number. Point being: don't just automatically trust what one person at the company tells you, keep calling until you are satisfied. But be nice, these people are still people and you can get the information you need by calling back instead of resorting to getting fierce with them...despite how tempted you may be.


#1: What is the current balance on this card?
Write this amount down whether you already knew it or not. Mental accounting is nothing but trouble so get this number now and keep going. The point of this phone call is to get all the information, including the info not on your statement(s), into one place so you can see it all at once. When my girlfriends and I first started our finance group not one of knew the answers to most of these questions. But the answers were motivating and powerful to the cause - if not shocking at times.

#2: What is the current interest rate (APR) on this account?
The interest on my card was a whopping 23.9%. Not only did I think the interest rate was much lower before I called, I learned I had been paying this rate for quite sometime. Your interest rate can get jacked to this level for something as small as one late payment. So don't assume your rate is where you think is just because you are "always good about paying it." My mother was recently paying just over 3% on a Barnes and Noble card she'd had for years, there was a mix up with a check she thought was resolved. She later found out this one instance, despite her responsibility, caused her rate to jump to 23%, and they hadn't bothered to inform her of this when the problem was solved. She was rightfully furious and canceled her card.

#3: Will you please lower the interest rate?
That's right, just come right out and ask them. Best case: you'll get your rate lowered. Worst case: you find out what kind of company you are dealing with here. If they say "no" to this question, ask them why. You want to know if its because you missed a payment a year ago, or maybe you simply need to request it in writing. When I asked this question of one of my credit carriers, Credit One Bank, they actually said they didn't offer anything lower than the 23+%, to anyone! I was shocked.

#4: What is the Annual Fee on this account?
Here is another rub, Annual Fees. You should not be with any company that is charging you an annual fee. Remember that cash cow statement? Yeah, well this is one your teats they are sucking on, just like those crazy interest rates. Before I started on this little crusade I never thought much beyond knowing what an annual fee was. Come to find out, that same credit company charging me 23 and some-odd percent was also charging a 78 dollar annual fee!! They were charging $6.80 a month onto my card for it!! And to make things even more aggravating they made no bones out of telling me they charge this even if I have a zero balance! Their explanation: "We charge this so it always looks like you have a balance you are paying to help you build your credit." They actually pitched it as though they were doing me a favor. Please.

#5: What did it cost to open this account?
Yet another insidious practice of many card issuers. By simply opening a credit card many companies will charge you a fee. Mine was 69 dollars. So before I had even used the card I was charged the 69 dollars plus the 6.80 for the first month of my annual fee. That is 75.80 before I even swiped it the first time...and they were already getting their 23% on that! Never mind that my limit was only 200.00 at the time.

How did this happen you ask? How could anyone open a card like this? Its simple, I didn't do my research first. Like millions of others I didn't take the time to sit and read the several pages of fine print in the contract. I wanted a card and I wanted it now. I was having trouble getting a credit card through my bank...I never suspected my bank was, in a way, protecting me. I didn't look to see what sort of complaints and reviews have been posted by others about the company online before signing my name in a bliss of ignorance. And most importantly, I believed the hype. I believed that a credit card was tantamount to my inclusion into the wonderful world of a high FICO score...which is nonsense.

#6: What is my minimum payment?
Its clear you should know this amount. Likely you already do if this is the amount that you already pay every month or you are reading your statements. But go a head and get this amount to keep track of it as it pertains to each card. You will need it for the calculator section at the end of the questions.

#7: What is the Minimum Payment Percentage?
For my card this amount was 2%. This is the figure they use to determine, based on your balance, what your minimum payment a month should be. You are going to want this number later for the calculator as well. If the tellers seem like they don't know what you are talking about you can call back or simply use the "worst case" scenario of 2% when you walk through the calculations later.

#8: When is the due date on this account?
This date is important, not only to remind you when your bill is due but because as the days and month's go by these dates may occasionally fall on weekends and holidays. You will want to be very careful that if your due date is the 20th, and the 20th of this month happens to be a Sunday, you have your payment in their office by Friday the 18th...and not Monday the 21st. See where I am going with this?

#9: Is that due date changeable to something that may be more convenient for me?
Some companies will allow you to move this date to one which fits your monthly budget the best. This can be an excellent way to even out the amount you pay out per pay check. Instead of having one or the other paycheck taken up mostly with bills, you can spread the bills more evenly between your checks. As far as I am concerned, its a good sign if companies are willing to let you change this date. See my article on "Automate Where You Can" for more about this as a handy way to get it all under control.

#10: What happens if that due date falls on a weekend or a holiday?
Be aware that some companies will enable their customers to be late and then collect an additional late fee from you by the "coincidence" of your due date falling on weekends and holidays. To some extent this can't be avoided, after all the 20th will be a different day of the week every month. But it can still cost you money. Find out whether the payment is due before the weekend or holiday your due date falls on. This will most likely be the case.

#11: Is that due date a postmark date or an arrival date for my payments?
I have not yet encountered a company who uses the due date as a postmark date. None the less, ask so there is no doubt.

#12: What is the late fee on this account?
An obvious important detail, but none-the-less there are a lot of you out there who don't know yet. And that is okay, now is the time to find out all these details. Better now than Never.

The late fee on my card was $29.

#13: What is the limit on this account?
Some of you may be surprised to find your limit either has been lowered or raised. Much to my surprise, about 2 months into my crazy budget to pay these off, my card issuer had raised my limit. I had no idea until I happened to have a few questions some weeks ago. Initially you may think, 'Great! That has to be a good thing. A reward for paying all this money.' Think again.

While having a raised limit can be handy it could count against you when applying for things like home loans. See, even with a zero balance, some lenders will look at your potential for debt. By potential I mean, they look at the limits on your cards and consider the scenario that you could go out tomorrow and charge each of them to their max limit. This would drastically change another important factor to them: your debt-to-income ratio. Which is as it says: What is the amount you owe in debt compared to the about of money you bring in every month? Danielle Cheatle, a friend and real estate agent made clear to me that she has seen it important to consumers to have below 15% of their income in this "potential debt." That means, add up all the limits of your credit cards and focus on getting them down to collectively below 15% of what you net every year.

#14: What is the over-limit fee on this account?
Imagine the scenario where you have, say, a $2000.00 limit on your account. And suppose you have charged $1990 on your account and the due date for your bill is coming up. You don't realize your next due date falls on a Sunday, making the real due date the Friday before. So, you mail your check for your 40$ minimum payment but because of the mail system it doesn't arrive until that following Monday.

Now, before your payment can be applied to your account you are charged a 29$ late fee. Your current balance plus the 29$ late fee bumps the balance on your account to $2,019.00. This is no good. Because now, with your payment still not yet processed, your account balance jumps again from $2,019.00 to 2,048.00 with the "over-limit fee" for going above $2,000.00. Ah! That is $60 they just milked from you! Whats worse, that $40 payment about to be processed on Monday now isn't enough to bring you below your 2000.00 limit! You can see how nasty that would get...heaven forbid the next due date also falls on a holiday or weekend.

It is shear abuse and opportunism. These companies, from at least an ethics point of view, should not allow you above your limit in the first place. They are sloughing all responsibility onto you and raking in the cash the first time you aren't paying attention. And you can count on slipping at least once, unless you are an alien. But they wont have much sympathy because, after all, that really long, tiny-print, convoluted contract their lawyers drew up spelled it all out, right?

But lets face it, in the same way allowing some one to step all over you is half your fault if you let it continue, the same is true here. Those companies are taking advantage of you because they rely on you not knowing better, not wanting to know better, not wanting to put in the effort - just simply putting up with it. And they hope that by the time you wake up, you are already in too deep to do anything about it. This should make you angry...very very angry.

#15: What happens if I make a payment on this account before my billing cycle?

Yet another trick you are held responsible for. In one case with my card, I was so proud to be making my payments early and they were 5 times larger than the minimum! The problem was I made a payment 1 day before my billing cycle turned over. This was December 4th, say. So technically I was making this payment in the same billing cycle as my previous payment made in November. The payment I made on the 4th ended up considered an "extra payment" for the November cycle. It went directly to the principle. As far as I knew I had made December's payment, not only on time but, early.

Only, that payment wasn't counted for December's bill because it was made "too early". Instead, they considered the December payment "late" and charged me a late fee. When I realized I was charged a late fee I called the company and asked to them to check their records for the "early payment" on the 4th. They saw the payment in their system and agreed to retract the late fee, but not before they told me it was my one free "courtesy" fee removal for the year. (Remember the mix up which caused my mother's interest rate to jump from around 3% to 23%? That would have happened to me here if it wasn't already at 23%.)

#16: Can I manage this account online?
The ability to manage your account online can not only be handy and more current than your statements, but your account can be tied to your aggregation sites as well. I will get into this in the "Automate Where You Can" article. You can check your account any time, and most importantly, you can check your account's current status just before you pay your bills.

In short, if you can manage your account online you can link it to sites such Mint.com along with all your other accounts (bank account, 401k, etc) to see an all-in-one snap shot of your net worth at any time. I have had huge success with this approach and enjoy seeing all my accounts and balances in one place.

Now that you have gathered the basics of your cards, for further perspective on your accounts and what they really cost you, plug the numbers you have in front of into a calculator such as this one: http://www.calculatorweb.com/calculators/creditcardcalc.shtml.

These calculators, found all over the Internet for free, will calculate for you how long it would take you to pay off your cards based on the amount you pay per month. The site I listed will also tell you how much interest rate you will pay over that same length of time. For example: Suppose you have a credit card with a balance of 600.00, a minimum payment of $20 a month, a minimum payment percentage of 2%, and a 23% APR. With these stats it would take 3.83 years and $301.00 in interest before the sucker was paid. And this is if you never used it again and only paid the card down in that nearly 4 year period. You may as well just keep mooing - or start working to get the debt evaporated.

Finally, once you have taken a good look at where you are at, what its costing you, and hopefully you are at least a little angry, don't forget to OPT OUT. This means you register to no longer be getting credit card offers in the mail. They can be tempting, a waste of paper, and become an easy target for opportunistic identity thieves if you don't usually shred them. Aside from simply not tempting and annoying you, you will likely get a couple-point boost on that illusive FICO score we seem to care so much about these days. You can do this for free here: https://www.optoutprescreen.com.

As an ending note, I want to make it perfectly clear I am not a licensed financial adviser of any kind. I am simply pointing out to you some basic steps I found crucial to my own quest of getting out from under my debt. I encourage you, implore you even, to question the things I say in these in these articles, to ask around, to ask multiple professionals such as accountants and financial advisers. And you shouldn't have to pay for this kind of advise, its out there and its free. Not all professionals can be trusted even in minor details and you certainly should not blindly trust any information unless it is from at least 2 reputable sources...and sometimes even then. The rules of the financial game will also change but keeping current doesn't have to be a nightmare. The more questions you ask and the less you take for granted the more powerful you will be as a consumer and fiscally responsible woman.