Eight Minutes to Financial Success – Minute #8: Bank on Autopilot

This week, The Simple Dollar is running a short series on some of the key moments in my financial turnaround and how you can experience those moments as well. For a full description of this, see the first article in the series.

As I began to get my financial situation under control, I began to find a few new problems.

First and foremost, even though I knew it made sense to start saving money regularly, actually making myself do it every week was a trick. I would often forget about it, or I’d talk myself out of it when the time came, convincing myself to throw it toward a debt or some other goal.

Second, I was simply not very organized when it came to bills. I’d get a bill in the mail and put it in a place where I’d hopefully remember it when it came time to pay bills, but even then, bills would sometimes slip through my fingers due to simple forgetfulness.

Thankfully, I found a very simple solution to both problems at once.

Bank on Autopilot
To put it simply, I began to trust my bank to handle both of these things for me.

Of course, in order to actually do this, you must have a bank with a robust online banking system. You need the ability to pay bills directly online as well as establish account-to-account transfers online. I use ING Direct, which allows both quite easily.

The first step I took was to simply set up an automatic weekly transfer from the primary checking account to a savings account. At first, it was a small amount, but over time it grew and grew. Eventually, I added transfers to other savings accounts for other goals, transfers for my children’s 529 accounts, and so on.

The key is to start off with small amounts that aren’t disruptive to your regular finances. You don’t want to start off with an amount that will force you to stop the transfers because of inadequate funds. Start with a small amount, then build from there.

Many people are hesitant to even start because they’re afraid of overdrafting. If that’s your concern, then the problem isn’t with the automatic transfer. The problem is with other money management choices in your life – bad spending decisions and so on. If you’re not willing to save for the future, your life will always be like the present.

The second step was to automate regular bill payments. Right now, I automate almost every bill we have save our energy bill and our cellular bill. Every other bill is a regular amount, so I have our bank set to automatically pay these amounts on a schedule. I don’t have to lift a finger for our mortgage payment, our insurance payments, our trash removal, our water and sewer payments, or anything like that. It’s all automatic.

Both of these moves contributed greatly to my personal finance success. The first one pushed me to start building a strong emergency fund and, eventually, to save for other goals. The second one helped me to get more efficient with my bill paying tactics, leaving late bills in the dust.

Simple moves, big improvements. That’s the kind of personal finance that can change a life.

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  1. Brad says:

    Great advice – but what we found works even better is to have my paychecks directly deposited into our SAVINGS account and than making one transfer at the beginning of each month from savings to checking – that is what we live off of for the month. I use Quicken to manage our checking account and watch our balance as the month goes on. If it looks like we’re going to run out, we need to cut back on things for the remainder of that month.

  2. Andi says:

    I would like to add one caveat. If you are on an irregular income, this may be a poor option. Ideally, you will have planned and budgeted so that there are no shortcomings. . . however, we are in agriculture and the rules are a little different. When I had a “regular” job, and received my paycheck every month, this would have been a great option. Now, with many variables in our income and outgo, I prefer to take care of bills when I’m confident the cash is there.

  3. valleycat1 says:

    I too have automated all the bills that we pay in full each month, if the entity allows it. I get an emailed reminder or statement at least a week beforehand so I can account for the amount. I also have gone paperless for credit cards, signing up for spending alerts, payment due date warning, statement available notices & payment processed confirmations. I also check the bank account history at least once a week to be doubly sure all the automated payments are being processed by the bank.

    With online CC payments (automatic transfers from bank to CC) you just have to be sure to schedule it ahead of the due date because both your bank and the CC company have a window of several days to process the request.

  4. kristine says:

    Hmmm,. my one character comment went through. My longer one did not. I suspect a character count bounce to moderation!

  5. kristine says:

    3. Rather than set to auto-payments, just have one day each month, after all bills are received, where you go online and OK the payments. It is far, far harder to get money back once gone, than to not pay an incorrect bill. This way you are never out the erroneous higher sum. Several of my friends have horror stories regarding double-billing that lead to bounce, bounce, bounce!

    In any case- I do not hand over direct access to my account to any company- I have not had a single utility or phone company that has not made the occasional billing mistake. By paying online yourself once a month, instead of automating, you retain control of approving, or not, what you are being charged, before your bank account is drained.

    I feel it is better to develop the habit and discipline of regular bill paying than to hand over the keys to the kingdom. My concerns may seem far-fetched, but no one ever expects a flood or a fire either.

  6. Leah says:

    I agree with Kristine — I have my bills set up to be paid online, but I’m the one who pushes the button. I too have had more than one occasion where a billing error was made, and I was always glad I could fix before the money left my account.

    Automating savings is brilliant. I do whisk away 10% of my income each month, and I totally don’t miss it. Nice to click over to ING every once in awhile and see the total building.

  7. valleycat1 says:

    The automatic payments we have set up give us ample notice ahead of the due date to review the statement & confirm the billing amount. We’ve been doing this for almost 10 years now with no problems. No double billing & no missed paymentes, and as far as I recall, no need to correct the payment amount.

  8. Tracy says:

    I’m another that has all my accounts set up to pay online, but I have to manually go in and review each one each month. It helps me pay attention to if any of my utilities are going up – either because if increased pricing or increased usage, and I like feeling like I’m regularly checking in. I have one set of bills I check during the first half of the month and one I check in the second half, so it really only takes a few minutes two days a month.

    I do, however, have regular transfers from my checking account to my savings.

    I think this tip and the one before it were really good.

  9. Andrea says:

    I did automate my electric bill as well. I took the last year of bills, added them up and divided by 12. Starting with the winter months (lower bills in Texas) I began paying this 1/12 amount and built up a credit so that in the summer months my credit was consumed, but my cash outlay didnt change. I do watch the bill to be sure that my credit + planned payment will cover the current charges, but once that is verified I can file the bill without another thought or step. If it won’t, then I do send in the difference, which is usually only 1-2 times per year.

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