Almost every bank and credit union nowadays uses direct deposit. Instead of receiving your wage from your employer and taking it to the bank, your employer deposits your wages directly into your checking account. Not only does this make getting paid easier, it also eliminates the risk of losing a check or having it stolen. This is only the first step. You must have money in your account before you can manage it.
Paying Your Bills
For monthly bills that are a fixed amount, such as mortgage payments, making them automatic is easy. Most banks offer an automatic bill payment system. What they require are the names, addresses and account numbers from each of your billing statements. You then set up a recurring debit for a specific amount on a specific date each month from your checking account.
Recurring annual expenses, such as car insurance, automobile club fees and registration and license fees can also be automated. Since these are usually fixed, you can take the annual lump sum and divide it by 12. This gives you the amount you need to save each month so you will have the money when the bills are due. Set up an automatic debit each month into your savings account.
Savings and Investment Accounts
Automatic debits are not just for paying bills. You can also use them to transfer money every month into your savings and retirement accounts. With a savings account, you can start with a small amount and if you want to increase it, just login to your account and change it. A retirement account often has a cap on the amount of money that can be invested each year. Divide the cap by 12, schedule an automatic monthly debit for that amount into your retirement account, and you are set.
Having direct debits from your checking account raises the concern about potential overdrafts. Many banks allow you to set up a savings account specifically for overdraft protection. Should the balance of your checking account ever hit zero, the bank will automatically debit your savings account with the outstanding amount.
Sometimes money just gets screwy. You can tell your bank or credit card company to notify you if anything strange happens, like an unusually large debit over a certain amount. You can also have them notify you if your entire balance goes over or under a defined limit.
There are some transactions that simply can't be automated if you are self-employed. An example is invoicing a client or supplier. For these, use a calendar service to send you emails or text messages reminding you of what needs to be done.
Does Automation Help?
Automation helps in the following ways:
- cuts down trips to the bank teller
- reduces check writing
- saves postage costs
- erases worrying about due dates
- eliminates scheduling your monthly cash flow
- reduces stress
- saves time
- makes bounced check and late fees obsolete
About the Author
Matt is a blogger who works for an Australian-based credit card comparison website, which is designed to help Aussies compare balance transfer offers and low rate cards to reduce the amount of interest they pay per month.