Back In February I wrote an article on the benefits of financial Automation. Since then it really got the cogs spinning in my head and I began to automate every aspect of my financial life. Some people may have a fear of setting up all these automatic payments, withdrawals and transfers. However, to me this is a much welcomed tool into my financial life that is not only going to save me time but also, will lead me towards a more predictable flow of funds throughout my accounts. I'm going to highlight a few of my newest automation's in my life that will only help me in reaching my financial goals.
This was a really Important one that was harder for me to automate. For some reason I have always felt in control and at ease when I made my monthly mortgage payments. I typically set up the withdraw date a week before my mortgage due date which is one the first. This one was particularly rough for me to give up due to the importance of this payment being met. I guess I short of always had a fear of a mortgage payment not going through or even worse forgetting one. I no longer have to worry about this monthly bill however as I know it will always be payed on the exact date that I have set.
Another aspect that always kept me away was that I like to add extra principal towards my mortgage payment every month. I didn't really have a set amount however and I would add a random amount from $50-150 depending on how much money I had at the end of the month. Keeping up with my goal to automation I did some research on making extra principal payments towards ones mortgage. I happened to fall upon the Bi-weekly mortgage payment idea. I really like the facts that this idea was putting out. Paying off the loan on average 5 years sooner, and paying less in interest.
I wasn't a huge fan of the part where I was going to be required to make a mortgage payment bi weekly however. I did some more research and found out that the bi-weekly mortgage payment idea came out to roughly the same thing as making a full extra principal payment towards my mortgage per year. I crunched the numbers and came up with what that extra payment per month would be to gain a full extra principal payment of $526 was. $526/12 gave me close $43.83. I rounded this up and set up my new automated mortgage payment to reflect this additional principal. I know have a automated withdraw amount of $570 that will take place on the 27th of each month!
I've also taken the next step and finally set up my credit cards for auto pay. This was a big and personally harder step for me to take. For some reason I have always had a common fear of the auto pay not going through and being charged a late fee and also having it impact my credit score. Both would be a big eyesore so I always just kept matters in my own hands and set up the payments myself. This is not a set and forget mindset for keeping track of my spending though. I keep track of all my expenses and I log onto my credit card apps almost weekly to keep tabs on where I'm at for the month.
Capital One Venture card the due date for this card is one the 7th of each month. I have set this card off to pay the statement balance of every pay period since their is no point in paying of the full balance of a credit card every month.
Chase Sapphire Proffered card the due date on this card is set on the 13th of every month. This card likewise is set up to pay off the statement balance every month.
These may seem like very minor steps to some but to me, this will allow me to have one less thing to think about at the end of the month and it will also apply more consistency with my payments so I can better allocate my funds at the end of the month into my Independence Fund.
This was a big one to me. with so many random bills all the time it made it hard to remember to pay every one. I remember getting dangerously close towards the due date on a few of my utilities just because I forgot to. I went through all my utilities and my cable company to set up automatic payments to one specific credit card. I will only be using this card to pay for my utilities so it makes it easier for me to calculate my monthly expenses just on that one segment. I now have a credit card set aside just for my utilities and another one that all other expense will go on such as groceries and other expenses.
This is going to really have an amazing long term effect on my finances. I now have a clear and concise payment set day for all my accounts and it makes it so simple for me to keep track of exactly how much money I'll be able to put into my brokerage account each month.
I'm sure some may be thinking, "Why not automate my brokerage account also?" The reason I'm not automating my brokerage account is because my expenses fluctuate from month to month and what I end up doing after all my bills are payed is transfer almost all of the money from my bank account into my brokerage account. Since I will never have the same amount of spending as I did last month, it makes it easier for me to just transfer the left over money in my checking account at the end of the month.
It's nice to know that I wont have to ever log on to pay a mortgage bill or even log on to set up a credit card payment. I'm embracing this automation with arms wide open and I'm hoping it will have a positive effect on my life. It personally feels like I have had a weight lifted off of me mentally and I have less stress around making sure these payments are'nt missed.