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 to 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 eye things.
It’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 of 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.