How to Automate Your Personal Finances: 7 Easy Steps

You probably know how easily you can tap to pay for items when shopping and click to send a friend money for your share of dinner. Why can’t most of your financial transactions be that easy?

They can be. You can be freed from much of the usual day-to-day account activity by automating your finances. Doing so can eliminate your wondering whether you have paid bills on time, allocated the right amount to savings, and more.

Automating your finances can be a smart money move that saves you on late fees and reduces financial stress. It may also help you make a budget and stick to it, as well as get on a path to growing your wealth.

Deciding where and when to automate personal finances need not be complicated. Here’s a guide sharing what it means to automate your finances, the different ways you can put your money management on autopilot, and tips for making the process super simple.

What Does It Mean to Automate Your Finances?

Automating your finances means you use today’s technology to preschedule and preapprove transfers of your funds. It’s a “set it and forget it” way to pay bills, move money from checking to savings, and even enrich your retirement account.

The beauty of doing so means you can avoid late fees (which many of us, no matter how responsible we are, get hit with sooner or later). You may also become more organized and free your mind to ponder better things. Worrying about when bills are due is so last decade, after all!

Check out our Money Management Guide.

This article is from SoFi’s guide on how to manage your money, where you can learn basic money management tips and strategies.

What Kind of Accounts Can You Automate?

If you’re wondering what kind of accounts you can automate, you’ll probably like this answer: almost any kind. Here’s a list of some of the most popular:

•   Credit cards

•   Rent or mortgage

•   Utilities

•   Investment accounts

•   Loans (car, personal, etc.)

•   Insurance

•   Savings (from short-term vacation funds to your emergency fund to retirement accounts).

Automating payments can spare you late fees and overdraft charges. It can also help you streamline the process of staying active and accountable on your accounts (a great way to avoid winding up with credit charge offs).

It may also help keep your credit score from being impacted by missed payments. In fact, payment history contributes 35% to your FICO® score. You want to protect those digits.

(BTW, it’s a good idea to scan for common credit report errors on an annual basis, just to make sure nothing is amiss.)

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open a bank account online.

How to Automate Your Finances in 7 Easy Steps

When it comes to the set-up of automating personal finances, there are a few different techniques to try. Here, you’ll learn some of the most popular options so you can decide what’s right for you, whether it’s one method or a combination.

Step 1: Set Up Direct Deposit for Your Paycheck

An excellent way to automate and fund your personal finances is to set up direct deposit of your paycheck (the vast majority of salaried workers are paid this way). You’ll know your salary is getting sent to your bank account and when it hits. Some pointers:

•   You’ll likely need to share your bank account number and routing number with your employer in order to establish direct deposit.

•   You may also need a voided check to get the funds moving to the right place.

•   You can then schedule your automated payments for the right dates, when your balance is feeling especially flush.

•   A great hack to know about: Some bank accounts will allow you access to your paycheck funds a day or two early if you sign up for direct deposit with them. That’s another great way to keep abreast of those bills.

Step 2: Automate Fixed Monthly Bills and Utilities

Here’s how this works: Say your wifi provider or landlord of your rental apartment gives you an automatic bill payment option.

•   Through the company’s payment portal, you’ll set up an autopay schedule, connecting the service provider to your bank account. On the agreed-upon date (say, rent is due by the 7th of every month so you select to pay on the 5th), the company will automatically deduct the amount from your checking.

•   In some cases, you may be assessed a fee for this privilege; it varies with the provider.

•   When you opt into this kind of plan, you may be given the opportunity to have the payment charged to a credit card or deducted from an account other than your bank account. Look carefully, though; you may wind up paying additional fees for this.

Recommended: Guide to Automated Credit Card Payments

Step 3: Put Your Credit Card and Loan Payments on Autopilot

As you explore how to automate finances, you may find that some creditors don’t offer you the kind of convenience described above, but your bank may swoop in and help you pay automatically. Many major banks will issue payments on your behalf to a creditor or service provider, which can make your life infinitely easier. No more writing checks every month and digging around for stamps. Here are the steps to take:

•   Check with your bank about what it offers. Typically, your bank will need the name, account number, and potentially the address of the business you are paying.

•   You’ll also need to assess how long this process will take every month; it may not be instantaneous. You’ll want to make sure the money arrives on time and you are not charged any late fees so your credit score doesn’t suffer.

•   Then you’ll sign up for the series of payments to be handled by your bank.

Step 4: Build Your Emergency Fund Automatically

Your emergency fund is another type of savings that can benefit from automated infusions of money. An emergency fund is a stockpile of easily accessed cash that can tide you over when unexpected setbacks hit. Perhaps you get a major car repair or medical bill or are laid off from your job. An emergency fund can let you pay bills without accessing a high-interest line of credit (say, ringing up too much debt on your credit card).

In terms of emergency funds, keep the following in mind:

•   It’s wise to have at least three to six months’ worth of basic living expenses in the bank. That means mortgage or rent, utilities, insurance payments, food, childcare, and other must-have goods and services, plus minimum debt payments.

•   Most people can’t create this fund with a single, lump-sum deposit. Making regular transfers into your account (even if it’s only $20 per paycheck or per month) will get you started. Any contribution is better than nothing!

•   Where to keep your emergency fund? Since you want it to be available almost immediately in urgent situations, a high-yield savings account or standard savings account can be a good option. Either way, you’ll earn some interest. A money market account, which combines some of the features of savings and checking accounts, may also serve this purpose.

Step 5: Direct Funds to Specific Savings Goals

Your non-retirement savings are another important account to automate. Again, if your salary hits your checking account, you may feel rich and go spend more than you should. By automating your savings and funneling money from your paycheck straight into an account, you may avoid going on shopping sprees. You’ll also foster the habit of paying yourself first — prioritizing saving for your future wants and needs.

This can be a very effective tool. In one study by financial psychologist Brad Klontz, people who visualized their goals and set up automatic withdrawals enjoyed a 73% increase in their savings after just one month.

Into what kind of account can you direct those funds? That’s up to you. Perhaps you want to have a few separate accounts that feed different goals. Think of them as separate vaults where you can save for your goals. You might have one account for a down payment fund, one for vacation savings, and one for a child’s educational expenses. You can direct how much and how often you want each transfer to be.

Of course, there are options about where exactly you keep your savings. Some possibilities to consider:

•   Standard savings accounts are good, but a high-yield savings account can be even better. These tend to pay a significantly higher annual percentage yield (APY) than a standard account.

•   Certificate of Deposit (CD) accounts can be another good option. These are time deposits, meaning you commit to keep the funds with the financial institution for a specific period of time, which may typically range from a few months to several years. In return, you are assured a specific interest rate. However, there may be penalties if you withdraw funds early.

•   A TreasuryDirect account can allow you to make recurring purchases of electronic savings bonds directly from your paycheck. You can learn more about this at the Treasury Direct website.

Step 6: Automate Your Retirement Plan Contributions

It’s all too easy to think, “I’ll get around to saving for retirement…someday.” Perhaps that’s why American households had a median balance of only $87,000 in retirement accounts, according to the Federal Reserve’s most recent survey. That’s probably not enough if your dream is moving to Hawaii at age 65 and spending your days with your toes in the sand.

That’s why learning how to automate your finances for retirement savings can be such a helpful practice. Many experts suggest depositing at least 15% of your pretax income into your retirement plan every paycheck. Some tips:

•   If your employer offers a retirement savings plan, you can authorize your HR or payroll department to automatically whisk away a certain amount of your pre-tax income every paycheck and put it toward retirement. You won’t miss what never hits your checking account, right?

•   Aim for the maximum amount allowed, or at least put in enough to get any company match that’s offered. Otherwise, you’re leaving free money on the table.

If you’re self-employed, you may be able to automate your savings with recurring transfers into such vehicles as a solo 401(k), SEP IRA, or SIMPLE IRA as you save for your future.

Step 7: Use an Automated Investing Account

If you currently have an investment portfolio or are planning to start investing in stocks, that’s another task that can be made simpler by technology. Automated investing can allow you to achieve consistency with minimal effort, which can help you build your net worth over time.

Some examples:

•   As noted above, you might set up recurring transfers into a retirement plan that invests the funds for you.

•   You may automate contributions to a 529 investment account, designed to help families save for future educational expenses, such as college.

•   You can automatically transfer money from your checking account into a brokerage account.

•   You might work with a robo-advisor that picks investments based on your needs and preferences and also rebalances your portfolio.

•   Investing apps are another possibility to help automate investing. These can be as simple as the ones that round up the price of purchases and then invest the change for you.

5 Tips for Successful Personal Finance Automation

Now that you have a good grounding in the benefits and how-to’s of automating personal finances, consider these strategies for success:

Create a Budget Based on the Balance You Get Paid

Look at where your money stands after you deduct your retirement and savings amounts. With the remaining funds, you can plan out ways to budget. There are various types of budgeting methods out there, like the 50-30-20 budget rule, among others. Do an online search and see what resonates with you.

A budget will guide your saving and spending and can reveal how you are doing in terms of setting financial goals and meeting them on other fronts, such as a vacation fund or a retirement account.

It will help you handle good vs. bad debt more effectively. All are terrific ways to avoid excessive debt and build wealth.

Be Aware of All Your Bill Due Dates

As you automate your finances, do pay careful attention to the due dates on your bills. Who wants to see their hard-earned cash get drained by late fees?

•   Look at the calendar; check when your paycheck hits and when certain bills are due. Some creditors may set your due date in stone; others may have some flexibility. Similarly, some autopay portals may allow you to set the payment date; others may have a specific date on which funds will be debited.

•   Note whether or not there’s any lag with automatic payments so that you can ensure that they will arrive on time.

•   It can be better to stagger autopayments so you don’t risk overdrawing your account. See what best suits your lifestyle and money style to keep your account in good shape.

Review Your Bank Account and Bank Statements Often to Stay on Top of Your Transactions

One of the pleasures of automating your finances is that you are freed from thinking and worrying about your money and your bills on a regular basis. However, daily life involves all kinds of money blips, from treating your bestie to a fancy birthday dinner to (ugh) having fraudulent charges appear on your credit card bill.

So do review your bank account and other statements regularly to make sure everything is as it should be and that your balance isn’t too low. Check in with your accounts often. Should you check your bank account every day? Not necessarily. A couple of times a week can be a good cadence.

Increase Your Contributions When It Makes Sense

While you’re checking your finances and bank balances, don’t overlook whether it’s time to increase your contributions to help meet your savings goals. If you’ve gotten a raise or paid off a student loan, you may have funds available to save more.

Or you might find that a chunk of change has accumulated in your checking account which could do more for your finances if used elsewhere. There are times when you may want to increase your transfers to reflect your positive financial status.

Leverage Budgeting Apps to Monitor Your Automated Finances

It’s easy to track your spending and saving right from your phone when you use a budgeting app to keep tabs on accounts. There are many out there. To decide what’s right for you, determine if you want to link your bank account(s) directly to the app or input data manually. (The latter is obviously more labor intensive; ask yourself if you’ll do the work regularly.) Some apps are free. Some allow you to share tracking with another person, such as a spouse. Think about the features you want before choosing.

The Takeaway

Automating your finances can be a great way to take control of your money and make bill paying and saving so much more convenient. That kind of organization can let you breathe easier when it comes to managing your money and be more successful in meeting your financial goals.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the biggest mistake people make when automating finances?

The biggest mistake that occurs when people automate their finances is that they stop looking at their bills and bank statements. Costs can creep up and you may not notice that over time, more and more of your income is being eaten up by underused subscriptions. Or you could miss a case of fraud that depletes your account.

How often should I review and adjust my automated finances?

You should review your finances and automated transactions regularly to monitor your payments and balance, which for some people may mean a couple of times weekly; for others, it might be every other week. Also, it’s wise to check in when you have significant changes in your life, whether you got a raise, took out a mortgage, or moved to an area with a higher cost of living. You may want to recalibrate your automated transfers.

Is it safe to automate my finances?

By and large, it is safe to automate your finances. You should, however, check in regularly to make sure you are not overdrafting or getting close to it, and also to keep in touch with your money. It’s possible that a glitch could delay a payment and, unfortunately, it’s important to be aware of any potential signs of fraud when conducting any type of financial transaction.

What are the best tools or apps to use for automating my finances?

There are an array of tools and apps for automating your finances. A good place to start may be with your own financial institution. It may offer automated savings and investing products, roundup apps, and other tools to help you make the most of your money and grow your wealth.

Can I still make manual payments even if I have automatic payments set up?

In many cases, you will still be able to make a manual payment even if you have automated payments set up. This could occur when you have an additional bill for an account that is set on autopay, or when you have a credit and want to pay a lower amount. Check with your creditor or the financial institution handling the transfer for details on how to do this smoothly.

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