Should You Automate Your Finances?

There are lots of reasons to automate your finances. With the right automation, it’s possible for you to stay on top of your bills without a whole lot of effort. You can arrange for automatic savings deposits, and save a great deal of time and energy.

However, automation isn’t for everyone. While automatic finances can work great for some people, it doesn’t work so well for others. Before you decide that automation is the way to go, make sure you think about your situation.

Do You Have a Buffer?

Automated finances are not for those with no financial buffer. While it’s true that automation can sometimes cut down on errors, it doesn’t always work that way. What if there is a clerical error and your paycheck is for less than it should be? You might not catch that problem until all of your bills have come out like clockwork… and triggered an overdraft.

If you live close to the bone each month, automated finances may not be the best option. Sometimes, you need to be able to let something float, or be able to make adjustments. If you don’t have a financial buffer of some sort, your automated finances can be more of a problem than a solution as the overdraft fees pile up.

You Still Have to Pay Attention

Don’t think that, just because you have automated your finances, you don’t have to pay attention with what’s going on with your accounts. Yes, you have a little less work in terms of paying bills and making sure that contributions are made to your retirement account. However, you still need to keep an eye things.

Filing cabinetIt’s a good idea to continue reconciling your account statements each month. Even if you have linked your accounts to your personal finance software, and it automatically pulls information on your spending, you should still check your accounts regularly.

One of the most important reasons to check your accounts on occasion is so that you can catch fraudulent purchases as early as possible. It’s also easier to catch errors when you take the time to regularly check your accounts. You don’t have to spend hours and hours absorbed in your accounts, but you should still check up at least once a week to make sure everything is running smoothly.

Know Your Cash Flow

Automating your finances shouldn’t be an excuse to stop paying attention to your cash flow. You can save a lot of time and energy with automated finances, but you should still know how money moves through your personal financial system. Understand where your money comes from, and where it is going. Take the time to map it out. Build your plan for automation around pay periods and bill due dates.

Even when you automate your finances, you should have an idea what’s happening. Automation can be a good thing for your money, but you have to use automation tools wisely. It’s still your responsibility to make the most of your finances, and to avoid some of the pitfalls that can come with poor money management.

Written by Tom Drake

Tom Drake is the owner and head writer of Canadian Finance Blog. While you’re here, consider signing up for the RSS feed or email subscription. Both deliver the latest articles directly to you everyday! Have a Twitter account? Then follow me for all the latest posts or to send me any comments or questions!

8 Responses to Should You Automate Your Finances?

  1. Automation is not for me. I like to pay my bills early, as soon as my pay is deposited, so that all my money is tied up and I can’t touch it.

    It is micromanaging but it keeps me connected with my pennies.

  2. I always recommend automating as much of your finances as possible, provided (as you say) you continue to reconcile and track what’s going on.

    One of the biggest benefits of figuring out and automating your regular expenses is removing the confusion of what’s coming out when, because that is when you should be changing due dates and setting up the automation to smooth out your cash flow.

    A lot of people forget that step and just live with enormous bills on the first of the month instead of taking what steps they can to regulate them according to when they get income.

    The biggest benefit to regulated and smooth cash flow is easier to track expenses, which in turn takes a lot of the stress out of personal finance, which in turn means you stop ignoring your statements because you’d rather go to the dentist than deal with them.

    Win-win-win.

  3. Frugal Guy with Balance says:

    For years I did not trust automation was not for me. Now that I travel to far off places
    I have most of my finances automated.

    The only exception are my c/c bills. My good wife has c/c must keep an eye on her spending. Lol

    I know where I spend my money for those that don’t I would not recommend automation.

    Start with a budget and track expenses!

  4. I automate everything — except for the loan of most disgust. That one I just kept throwing money on until it went away.

  5. krantcents says:

    For over 40 years, I have had a payroll deduction for savings. I live on what is left. About 5+ years ago, I started using online banking and making certain bills automatic. It makes my life easier and more effective.

  6. We automate most of our finances. I don’t have our credit card bills automated because we pay them off each month but the spending can vary. Savings, retirement, and other bills are all automated though. But you are right–you still need to keep an eye on everything. I have found a few mistakes that way!

  7. Bet Crooks says:

    You definitely need to keep an eye on bills even if they’re automated. Cable and telephone companies are great at sneaking in semi-annual increases. Unless you read your bill or watch your automated payments, you may not even see the rates creeping up.

    And even Banks make mistakes. I keep getting billed for a safe deposit box we don’t rent. Someone somewhere transposed a number and the bill comes out of our account. Every year they swear they’ve got it fixed, but so far, they haven’t.

  8. KBKG says:

    Automate finance works wonderfully when things are fixed like home loan, car loan or life insurance, water tax, etc., but sometimes it is very painful and hectic like your credit card payment which varies every month depending upon your transaction.

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