Automating financial tasks sounds like the perfect way to check mundane items like saving and paying bills off your to-do list with minimal effort. But there\u2019s a potential downside to giving up manual control.<\/p>\n\n\n\n
When you automate bills, you may be less likely to review them and notice errors, or to catch yourself overspending. When you automate savings<\/a>, you might forget to make adjustments as your goals or income change. As certified financial planner Catalina Franco-Cicero puts it, \u201cSomebody has to make a decision and it should be a human, not a machine.\u201d That\u2019s why she suggests using automation in conjunction with frequent reviews and updates.<\/p>\n\n\n\n While signing up for automated bill payments and savings transfers can be part of your financial spring-cleaning, consider these strategies from financial experts.<\/p>\n\n\n\n First, review your cash flow<\/strong><\/p>\n\n\n\n Ambus Hunter, an accredited financial counselor in the Baltimore area, encourages his clients to study their cash flow before setting up automatic payments. That means taking a close look at the money coming in and going out each month, including the specific dates of those deposits and withdrawals.<\/p>\n\n\n\n \u201cI don\u2019t like haphazard automation. If you aren\u2019t paying attention to cash flow and just set up a few withdrawals here and there, it can trip you up,\u201d he says.<\/p>\n\n\n\n Start with bills that remain the same each month<\/strong><\/p>\n\n\n\n The easiest bills to automate are the ones that don\u2019t change: car payments, condo fees, phone and cable bills, and insurance payments, for example. You can reap benefits, such as avoiding late fees without worrying about getting hit with an outsize transfer, says John Mason, CFP and president of Mason & Associates in Newport News, Virginia.<\/p>\n\n\n\n \u201cI would draw the line at variable charges such as your water bill, electricity and credit cards, unless you\u2019re disciplined enough to review those statements carefully even if they\u2019re automated,\u201d he says.<\/p>\n\n\n\n Ashli Smith, who lives in Atlanta and shares money tips through her Twitter handle @BadGirlFinances, automates bills that generate discounts for doing so. Many cell phone providers offer monthly discounts of $5 or more for using autopay, and insurance providers often offer similar discounts. Enrolling in autopay for student loans<\/a> can give you a 0.25 percentage point interest rate reduction.<\/p>\n\n\n\n Smith notes that you can often select the day for the withdrawal to ensure it falls before the due date but after your paycheck is deposited to prevent overdrawing your account.<\/p>\n\n\n\n \u201cStart small. Don\u2019t put rent on autopay if you\u2019re not comfortable with that, but try little bills like phone bills,\u201d she suggests.<\/p>\n\n\n\n With credit cards, Smith notes that you can set up autopay for a certain amount to guarantee that you pay at least the minimum \u2014 or set a higher amount to pay down any accumulated debt. You can use pay-minimum automation to ensure you\u2019re never late, then make additional payments throughout the billing cycle to lower your credit usage<\/a> and help your credit score.<\/p>\n\n\n\n Closely review all charges<\/strong><\/p>\n\n\n\n Erin Lowry, author of the \u201cBroke Millennial\u201d book series, recommends checking to be sure payments were made. She had been automating her rent payment for six years when she noticed her payments stopped processing earlier this year.<\/p>\n\n\n\n \u201cI never had an issue so had gotten a little lazy about checking to see if it went through,\u201d she says. Then she realized she had a much larger bank balance than she expected. She discovered her rent had stopped processing \u2014 a problem she had to scramble to fix.<\/p>\n\n\n\n Automating a bill also doesn\u2019t mean that you should stop shopping around for better options. Franco-Cicero, who is also a wealth advisor at Tobias Financial Advisors in Plantation, Florida, says that when it comes to car insurance, for example, it\u2019s worth checking for discounts and comparing options each time your policy is up for renewal.<\/p>\n\n\n\n Automate savings, with manual tweaks<\/strong><\/p>\n\n\n\n In addition to signing up to automate retirement contributions every paycheck, Mason suggests automatic savings for other goals. Every time he cuts costs to free up extra cash, he says, \u201cI try to capture it immediately so it doesn\u2019t get lost in the shuffle.\u201d He cautions that you\u2019ll want to review the savings regularly and make sure you have enough money in your checking account to support the transfers, along with all of your other bills.<\/p>\n\n\n\n Adrienne Taylor-Wells, an accredited financial counselor and founder of Tailored WealthSaver \u2014 a counseling firm in Houston \u2014 points to an additional strategy of auto-saving: \u201cI encourage clients to put the savings in a savings account in a separate bank so it\u2019s harder to get that money and easier to save.\u201d Apps such as Digit and Qapital<\/a> can help you automate those transfers, too.<\/p>\n\n\n\n Still, manual adjustments are often necessary. Taylor-Wells started off the year saving for laser eye surgery in August, and she created a spending plan to reflect that. But when her optometrist offered a $600 rebate for a 12-month supply of contacts, she opted to delay the surgery until January 2023, giving her more time to save and allowing more discretionary spending, too.<\/p>\n\n\n\n \u201cThere are certain things an app can\u2019t automate,\u201d she says.<\/p>\n\n\n\n More From NerdWallet<\/strong><\/p>\n\n\n\n Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.<\/p>\n\n\n\n The article Spring-Clean Your Finances With Some Automation originally appeared on NerdWallet.<\/p>\n","protected":false},"excerpt":{"rendered":"Automating financial tasks sounds like the perfect way to check mundane items like saving and paying bills off your to-do list with minimal effort. But there\u2019s a potential downside to giving up manual control. When you automate bills, you may be less likely to review them and notice errors, or to catch yourself overspending. 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