If paying bills each month is one of your least favorite things to do, pretend you're Peter Gibbons from "Office Space" and stop doing it.
Yes, you read that correctly.
Stop opening envelopes, writing checks, and visiting your bank or credit union for every transaction. No, we're not suggesting you move back in with your parents. There's a better way, one that many people have already embraced: Automate your finances.
Services such as ACH/auto pay (Automatic Clearing House), direct deposit, automatic transfers, and online bill payment let you ignore your bills. "I'm totally paperless," says Nick Penzenstadler, 24, a newspaper reporter in Appleton, Wis. "No checkbook needed."
Putting your money on auto-pilot saves time, money, and the environment.
sign up for direct deposit
Step one is to find out if your employer offers direct deposit. Most do. Signing up is usually as simple as taking a voided check to your human resources department. You'll see your first paycheck appear automatically in your account within a few weeks, and you'll never have to manually deposit a paycheck again.
Use your credit union's website to track your accounts. Denise Winston, a financial educator and founder of Money Start Here, Bakersfield, Calif., explains some of the benefits of direct deposit: "There's no risk of your paycheck bouncing; direct deposits are funded before they go out. You'll save more by directing money each payday into a savings account."
Step two is to set up electronic payments. There are a few ways to do this, and you can use them all:
- Authorize a biller to take money directly from your checking account. These ACH payments can take a bit of effort to stop, so use them for regular, uniform payments that will continue for a long time—mortgage payments are a no-brainer.
- Pay bills online using a credit card. Paying with your credit card is ideal for bills that only pop up twice a year—like car insurance. It's also a good option for bills that change in amount, such as your cellphone bill. Be sure to pay off the card balance each month to minimize interest charges.
- Use your credit union's online bill pay service to pay bills by electronic transfer to a vendor or service provider. Or, if the merchant isn't set up to accept these, the credit union will issue a paper check debiting your account. You can set up payments 24/7, adjust payment dates to jibe with your paydays, and make optional extra payments when you can—say to your credit card.
With these three automated options, you can pay every bill you have.
Don't overlook automating routine savings, too. Set up automated transfers from checking to your credit union savings account(s), and you'll always be financially ready for an unexpected car repair and for infrequent but larger bills like insurance premiums.
"Automation takes out the flawed human element, a.k.a you," explains Tiffany "The Budgetnista" Aliche, author of "The One Week Budget: Learn to Create Your Money Management System in 7 Days or Less!" and owner of CLD Financial Life. "Automation is the new discipline. You no longer have to remember to do anything—just set it and forget it."
Aliche cautions, however, that you should check to make sure everything is in working order at least once a month. "Automate and allow your money to flow and grow without interference," she says. "I've automated everything: payments, bills, saving, investing...even giving to charity."
To help you achieve long-term goals, many employers automatically enroll you in a retirement savings plan like a 401(k) or 403(b) unless you decline. You always want to contribute at least the amount your employer will match. Then, you might choose to authorize your financial planner to pull money from your checking account each month to buy mutual funds, stocks, or annuities. You can set the withdrawal date and adjust the amount as needed.
avoid late fees and overdraft fees
Streamlining your finances with online tools is about more than just saving time. By helping you avoid late and overdraft fees, automated services save you money.
To make sure you're never penalized for overdrawing your checking account, for example, set up a savings account or line of credit at your credit union for overdraft protection. This type of account, unrelated to a home equity line of credit, is a good safeguard when unexpected expenses arise. There might be a small fee; talk to a professional at your credit union to find out what to expect. Late fees and bounced checks will become a thing of the past once you've got your system working for you.
And remember, because you use so many automated services and always can monitor the balance in your account online, you're far less likely to be caught short and even need to use overdraft protection. Another benefit: You can keep your eyes open for fraud and ID theft by keeping close watch on your accounts.
"My direct deposit goes in each week and half is instantly transferred into savings and half goes into my bill-paying account," says Ryan Holiday, 24, a marketing director in New Orleans. "Each month, my gym membership, credit card, and rent are paid through auto-bill pays. It keeps my expenses under control, I don't stress about bills, and I know each month that I am saving." Holiday also appreciates that these services help the environment by using less paper, and save him time and stamps.
Once you've set up online bill pay, use your credit union's website to track your accounts. You can transfer money online as well—for example, from your checking account to pay off your credit card balance each month.
Putting your money on autopilot saves time, money, and the environment. "One trick I use is to schedule minimum monthly payments on my credit cards," offers Sally Herigstad, a certified public accountant and financial columnist in Honolulu. "They're not big enough payments to upset my checking account balance, but they're just enough to keep me from having dreaded late fees if my full payment doesn't make it there in time. It happens."
streamline your bills, streamline your life
"I'd be a disaster if it wasn't for online bill payment," says Charles Parsons, 34, a product manager in Washington, D.C. "Most of my monthly bills are paid electronically on paydays; my credit union issues checks for those things that aren't, like rent. I can check the status of any charge at any time, including authorized vs. paid, and when an authorization will fall off if not charged. My credit union also has scans of all cashed checks so I can see when and who signed."
With an automated system working for you, your financial life can become a lot less complicated.
Laura Schaefer is a freelance writer and author of the young adult novel "Notes to Self" and "Planet Explorers: Travel Guides for Kids." She lives in Madison, Wis.