Tuesday, March 22, 2011

Automate, detonate

Many financial bloggers, authors, and gurus promote automating your finances. Stop receiving paper bills! Set everything up to auto-pay! Never be late again!

I say, however, that automation is good only up to a point. What if some additional charges get added on to your credit card, or even your phone bill? This happened to LivingAlmostLarge, and it took her a few months to catch it. If you automate your bills, how long will it take you to catch something like that?


My recommendations:
1. Turn on electronic billing and read the emails. 
There's no need to get paper statements anymore. Digital statements don't kill trees and they don't take up storage space. What's more, most legitimate companies that you're doing business with will NOT share your email address with anyone else, so at most, you'll have to make sure you don't sign up for promotional emails from them. However, you DO need to read the emails every time they come in. It doesn't take that long.




2. Automate only bills that remain the same on a monthly basis - but still read the statements before the charge goes through. 
I have no problem automating bills like my cell phone bill, my internet bill, the hosting for Peanut's website - those charges should be the same every single month, so it's very simple to quickly glance at the e-statement when it comes in and make sure there's nothing unexpected there. Then I don't have to worry about it; it gets paid automatically.

3. Only automate payments to a credit card - never to a checking or savings account.
One bill I do NOT automate is our electricity/gas bill, because the company requires it to be paid directly from a checking account. I don't know how much it will be from month-to-month (~$70 in winter to ~$200 in summer) but that's not what worries me. What worries me is what if they make a mistake - what if they accidentally charge me for the common area electricity charges, or add to my bill charges from three decades ago, or decide to ignore the agreement we have in place? It's all happened before. In that case, I'd rather have the time to argue with them about it than let them have full access to draining my account.

4. Review your credit card statement carefully every month before paying it. 
If you have all of your automatic payments charged to your credit card, you'll see them a second time when you review your statement for the month, along with any other purchases. This gives you one more chance to find anything weird and dispute it with your credit card company - they're usually great allies in fighting bogus or unauthorized charges.

5. Track your spending.
If you track all your spending, eventually you will have a very good idea of where your money is going on a monthly and yearly basis, and you'll quickly be able to notice fraudulent charges as well as trends.

6. Read the fine print.
I've said it before. Don't sign up for any kind of automatic renewal or payment without reading all the fine print.

6 comments:

  1. I'm SO with you on this. The whole automation thing is good for some things...but if we go overboard, then we're not paying attention and money is "automatically" flying out the door.

    I like to use DoughHound for my budget...because I enter and see what I'm spending. Not the best use of time as there are other ways to be more efficient, but, I like seeing what I'm spending and where I'm spending it. I'm a conscious spender that way.

    On Money "in" (ie savings and retirement), I like automatic, on Money "out" I like a combo of automatic and non-automatic.

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  2. I don't automate anything. I hate having to remember something has to come out on the 5th of every month, etc etc.

    I'd rather just get the bill, pay it and be done with it.

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  3. I absolutely agree with you -- I only have a couple of bills automated, and they're the ones that usually don't change from month to month. I want to actually pay the electric bill each month so that I'm forced to consider how much it's fluctuating.

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  4. We went back to all paper bills. We tried just paying by email for awhile, but since his phone bill went to his email account and the power bill went to mine and etc, we never had the full picture. Each of us were responsible for some part of the process and a little but each month slipped through the cracks. Now we get everything together, deal with it all at once, and have any important conversations about bills getting out of hand at the same time.

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  5. My car insurance is auto-mated and so is Netflix and my dental insurance but everything else I do myself. I feel like I have more control over my money if I remember to pay it for some reason. I actually get excited when I mail off my car payment!

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  6. I agree with you on this. I only have my fixed bills automated....the student loans, car loan, (and netflix). It's a lot easier to argue with someone about a charge if they haven't received your payment, as opposed to once they've already got your money!

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Thanks for commenting!