The following is a guest post from SB, who blogs at One Cent at a Time, where he teaches about getting ahead in life, encompassing personal finance and productivity related topics like How to be rich and How to increase salary.
When it comes to automating your finances, from phone bills, to electricity, to mortgage and car loan repayments – you can automate it all and enjoy the time in more productive activities with family or in other income generating activities.
But is it the wise thing to do? Should you allow your billers access to your bank account information? Isn’t it risky?
Two risks are there in automating your finances
- Risk of you billing company overdrawing from your checking account, or drawing money after your account cancellation.
- Risk that you will not pay enough attention to scrutinize the bills you receive.
If for any reason you open an account with a fishy service goods/provider, the first risk becomes the major one. Usually the companies we do business with for our loans, utilities, phones and movies are well respected with respect to security and safeguard of your bank account. Even if some of them try to rob you off your money, they do it in legal ways. In terms off fees and penalties.
That makes the second risk much bigger than what we could think off. The problem starts happening when careless people automate all their bills at once, especially the bills that fluctuate each month.
It can be overwhelming and can easily go out of control if you are not diligent in scrutinizing and keeping records of your spending. Since you no longer have to worry about paying, it becomes “out of sight, out of mind”. We tend to get lax when we don’t have our hands and eyes on the bills. Making us vulnerable to machine error or policy changes on our service provider’s side. We fail to notice an unusual charge hidden in the bill.
The point is, if you decide to automate your bill payment, you need to be hands on. You have to budget to make certain you can cover your expenses, you must keep track of your spending, bank withdrawals. In reality, the only process that is “automated” is the process of money being taken out of your account. You are not physically writing and mailing checks.
If you master this skill, you should go for automating bill payments as it is one of the ways to pay your bills on time.
An easy way to keep track of your bills if you decide to automate is to use the billers’ website. I won’t recommend you to opt for any bill paying services. Still, there are few exceptions, I keep track of net worth using Yodlee, and they offer bill pay service which I like to use.
They offer complete bill management services, payment features and they will support if you are face a problem. You can setup alerts if your bills are higher than a limit you set. It will also send you alert when the bill is due. Thus, keeping you on track of timely bill payments and help you exercise control/caution when a bill goes too high.
You can also pay bills directly to billers using their own bill pay service. I pay off all my credit card accounts using their own auto pay program, which deducts the total due amount every month from my bank account. This ensures zero credit card debt round the year. yes, I denote an hour every month to go over all my bills.
If you just started with automating your finance, you should start slow and proceed cautiously. Initiate the process by automating your smallest bill, perhaps the water or cable bill. Or the ‘not very greedy’ utility companies. I started with FPL (Florida power and Light).
Only after I gained confidence and figured out that I hadn’t lost any interest in scrutinizing monthly biils, I went ahead and automated rest of my bills.
Only if you are comfortable then add more bills but don’t forget to keep track of each bill, every items on the bill, every charge in it. At the end of it you are the only person responsible for your finances. If a mistake is made on a bill and you don’t catch it, you will have to do a lot up followups later on to resolve the problem.
Readers, which part of your finances do you automate?
Crystal’s Comments: We automate all bills except for the credit card bills themselves – those I pay after entering every single item into our budget.