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.