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Automation: Better Control or Loss of Control?

By: Green Panda | Date posted: March 10, 2010 (8:05 am) | Write a Comment (1 Comment)

I was reading Baker’s thoughts on automation in his new guide and he brought out something I hadn’t really thought about before. Many personal finance sites talk about automating your savings, retirement, and bill payments. It’s thought of as a great solution to your financial problems.

I definitely have seen the benefits of it. Before I got married, I’ve used automation to eliminate my credit card debt. It helped me to avoid late fees as well as create a record of on time payments (a big boost for your credit score). Automating extra payments lead us to paying off our car loan early and saving us money on interest. Not having a car payment boosted our monthly cash flow.

Have you ever considered,though,  if automation is complicating your life? How so? Let me run through some ways it can.

Organizing and Decluttering Finances

Automation can make it easy to focus how big your financial network really is. Do you have too many accounts to keep track of manually? Baker got me thinking, if I didn’t have automatic transfers and deposits, could I keep up with everything?

Looking at what we have, I think we have accounts many people have:

  • Joint Checking Account
  • Individual Checking Account – 2
  • Joint Savings Account
  • Vacation Savings
  • Credit Card
  • My Roth IRA
  • His 401(k)
  • His Roth IRA

While it seems a lot on paper, automating it really has me just focusing on joint checking and savings. Everything flows from and to those accounts.

Financial Consciousness

The problem for some people is that they ‘set it and forget it’ to the point, they’re not really conscious of what they’re spending. They don’t see where they are wasting money, instead they’re just checking to see if they’re in the positive or negative for that month.

Don’t let automation make you lazy; use it to your advantage. If you can get a better deal on your cable bill because you have more time to check you bills, then do it! Occasionally see if you’ve gotten a bit off track with your savings plan and adjust accordingly.

Tracking Spending Actively

Another concern of about automation is that you’re not actively tracking the spending, you’re just reading reviews from past months. While going over last month’s income and expenses is valuable, you’re really able to make quick adjustments. I find some personal finance tool very helpful.

I have Quicken to run reports and we like to see how all of our accounts are doing. My only grip is that Wachovia charges for me to have my business accounts downloaded to Quicken, so I have to enter that in manually.

I like how ING Direct can have emails sent to you as money is pulled from your accounts. It’s a way for me to see daily how money flows. I also like Mint‘s tracking of my accounts. If I spend more than usual in certain categories I get an email in addition to my weekly review on Fridays.

Pocket Smith’s calendar feature give a great visual on how income and expenses are dispersed during the month.

What about you?

Do you automate your finances? What tools do you use to keep track of everything? Do you think automation can be a hindrance?

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1 Comment
  1. Comment by Doctor S — March 10, 2010 @ 2:27 pm

    So I really feel you have to evaluate automating your finances from a before and after snapshot. At first, the work that you need to do to set everything up correctly is complex. Making sure you have buffers in each of your accounts so you do not over draft due to any date logic is imperative as well. The before snapshot can be complex to reach.

    However, once you have it all set up, it is totally worth the efforts. It is so much easier to budget and, more importantly, follow a budget, when everything is automated because you can only work with the money you have at the time. Its ironic because my federal student loan just kicked in this week for repayment since I just finished grad school, so now I have to rebalance my automated accounts in order to make it all work! It never stops!

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