Happy Budget, Happy Life: Lay Back and Put Your Finances on Auto-Pilot

Today, we're going to talk about a great way to keep you accountable to your budget. It's something that I discovered years ago and leverage it anyway that I can because it makes me not have to remember certain dates. AUTO-PAY....aka DIRECT-DEBIT.....aka Awesome Sauce

The beauty of Auto-Pay is that you get to take out the human element of paying bills. So you don't have to worry about missing a payment, logging into all your online accounts to schedule a payment every month, and/or mail paper checks (what's a check?) to businesses and waiting for them to cash.

I'm going to go over some of the major categories of a budget and how we've used Auto-Pay to make the Budget Family's life easier.

Charitable Giving

Many churches that I've been to have it setup so that your monthly contributions can be taken out of your bank account instead of you having to put money in the basket every week. This helps in the situation of forgetting to bring cash to church or losing envelopes so that you and the church can keep track of your giving. You typically fill out a form and they take care of the rest. Unfortunately, the church that the Budget Family attends doesn't have this so through my credit union, I have it automated so that a check is sent to the church from our credit union each month with our envelope number on it.

For donating to other non-profit entities, I'd suggest reaching out to see if they have any type of Auto-Pay type of program or if they are okay with mailing checks to them.

Retirement Saving/Kids College

I'm fortunate that my work offers a matching 401(k) program, so I contribute up to the contribution through payroll deductions.

I also have a Roth IRA which is after-tax dollars (the money I actually get in my paycheck). So I contribute another 10% of my take-home pay to that retirement account. I set that account up to also do an Auto-Pay type of arrangement so that money automatically leaves my account each month.

We also have a college savings plan for the kids and that also is setup via Auto-Pay to be paid monthly.

Mortgage

If you read my previous post, we recently refinanced our mortgage to a 10-year mortgage. When we signed up for it, I set it up that the mortgage gets paid directly from my bank account on the 1st of the month when it's due.

Gas/Electricity

This is where it gets interesting. Our energy provider, DTE, does a "Budget Billing" type of program where it takes the previous year and averages the total energyt cost for that year over 12 months. This allows us to pay the same amount each month, regardless of how much the actual bill is that much. About twice a year, there's a reconciliation type of analysis done by the company to see if the budgeted monthly amount needs to increase or decrease. This typically is a change of less than $10 so I've seen the amount from like $118 to $125 per month. So while there are fluctuations in your energy needs based on the seasons, there are ways to average it out so you pay the same amount each month.

Water

This was the last thing that I setup for Auto-Pay. I wished for this for a long time for my city and repeatedly email the city to ask when it was coming. Then the day came when I got the notice that the program finally arrived and I wept. My city sends water bills every other month so Auto-Pay is only setup to take the money every other month.

Cable/Internet/Phone

We have AT&T for our internet, cable, and Mrs. Budget's iPhone. So I pay one bill once a month and it's set for Auto-Pay. One thing to note is that the amount can possible change because of cable. So when we order movies or other "On Demand" videos for the 3 Little Budgets, the bill can go up. Same thing goes for Mrs. Budget's iPhone when she uses too much data.

Car Insurance

We use AAA for auto insurance. I used to pay monthly through Auto-Pay but now I just pay the 6-month premium all at once and I save a little money on the premium doing it this way. So we only have to pay this in May and November.

Life Insurance

I have a 15-year term life insurance policy on me. In case something happens to me, Mrs. Budget has already stated that she's going to Rome. This was also setup for Auto-Pay because who wants to manually pay this?

Gym Membership

Mrs. Budget has a membership at LifeTime Fitness and has the 3 Little Budgets on her membership for daycare. This also setup for Auto-Pay

Vacation/Christmas Savings

For savings that accumulate over the year, we have savings accounts setup. So for example, to save up for Christmas, we have it setup so that a certain amount gets transferred automatically from our checking to savings account at the end of each month. We do the same thing for our vacation savings.

Student Loans/Debt

Back when we were paying off our debt, we had all of our accounts setup for Auto-Pay for the minimum payments. When we made extra payments to pay the debts off quicker, we'd make manual payments because the amount of extra payments typically varied month to month. One thing that was cool was that for the student loans, the company we worked with had a .25% decrease in the interest rate if you signed up for Auto-Pay. So this is something to look into if you have student loan debt.

Keeping Track Of It All

So this is an overview of how we've leveraged the beauty of Auto-Pay to benefit our lives. It took some time to set all of these up but we've been doing it for a couple years now and I can say that it's awesome. It sounds like a lot of effort, but trust me that it's worth it. There's great peace in knowing that bills are being paid on time each month. You don't have to worry about setting reminders and trying to remember which bills you did or didn't pay. Just use the many tools at your disposal. I typically only have to check one a week to see what bills were paid that week and checked to make sure that the big payments happened. If you're worried about bills coming in at weird days during the month, one thing that I also did was make sure that the bills were paid at the end of the month once I got at least one paycheck in. I did this either on a form or called the company directly and asked for it

Another thing to keep in mind is that when you setup Auto-Pay for your bills, it also forces you to control your spending. So you can't just go out of control buying things because you have those bills that are automatically coming out of your bank account. And it's not simple to just call the company the day that the payment is do and tell them to stop the payment. You usually have to call a couple days in advance. I also tend to keep some money floating in our checking account so that we don't bring the account down to $0 at the end of the month. We have payments hitting our account at different times so it's good to have some money sitting there to protect us.

Question(s) of the Day:

How are you with paying bills? Do you have a history of not paying bills on time? Is it an issue of forgetting or just not having enough money?

Video/Song of the Day: