Meet Bill and Jan. They are my imaginary couple that loves putting their personal finances on auto-pilot. They don’t worry about bill due dates, they never visit the bank, and only check their balances online once a month if there are no e-mail alerts sent to them. (Apparently they also don’t have lips or eyes, so it works well for them…) Let’s take a look at how they do it!
Income
Bill and Jan both elected to receive their regular income via direct deposit, so there are no checks to deposit. Even though Jan does some freelancing, she gets paid via PayPal, which she sets to automatically sweep any money into their bank account at the end of each business day. This feature is called Auto Sweep and is not heavily advertised, you must contact PayPal directly to enable it.
Long-Term Savings
Like everyone else, their 401(k) plans are funded via an automatic deferral each payday. For their Roth IRA, they simply take out $500 per month via an automatic transfer from their checking account for 10 months, which can be set up easily at Vanguard.com or any other major mutual fund provider. If you like individual stocks or ETFs, try automatic investing at ShareBuilder.
Short-Term Savings
For their annual vacation and other savings goals, they have an automatic transfer from their checking to an online savings account like the original Capital One Consumer Bank.
They do keep a certain buffer amount in their checking account, similar to this simple budgeting method. If the balance falls too low for any reason, an e-mail and text message alert are sent to both of them.
Housing
If they had a mortgage, most lenders will happily set up an automatic ACH from bank account each month. If they wanted to set up a biweekly payment plan and it isn’t free, they could simply take out 1/12th of their monthly mortgage payment each month automatically into Capital One 360. Once a year, they send one full mortgage payment to their lender.
If they rented, they would set their Online Billpay service to send a snail-mail check automatically each month and deduct the amount from the bank account.
Utilities
Most utility companies will allow to you sign up for them to automatically withdraw the full bill amount from your bank account. Contact them directly, and when available use your credit card to earn some extra rewards.
Insurance
Instead of dealing with large payments either annually or semi-annually, they have signed up for State Farm Payment Plan (SFPP), which groups their insurance premiums and divides them into one single monthly payment which is taken from their bank account. Check with your insurer to see if they have something similar.
Credit Card Bills
Most large credit cards issuers allow you to sign up a service like Citi’s AutoPay, where you can have the full amount sucked out of your bank account each month. Since the Citi Forward Card gives you 5x rewards on restaurants and Amazon.com, this most of their disposable income as well. To find it, go to CitiCards.com> (Login) > Payments Tab > Enroll in AutoPay.
What else?
With all this set up, all Bill and Jan have to do is show up for work and spend their money wisely. Is there anything else that could make their life even more easy? I thought about using an online grocery store like Peapod, where you can access past orders and possibly create default orders which you only tweak slightly each month.
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Thanks for the tip about the Citi Forward Card. I did not know that you could set it up to automatically be paid off every month.
I have all of this sort of automated payments and charges happening, but my financial life certainly isn’t COMPLETELY automated yet! I get bills from the kid’s school, plumbers and so on that require manual intervention to pay – I either have to write a cheque or make an online transfer for the amount on or before the due date. I unexpectedly get rights issues from some of my stock investments that require payment (or not). Even if I had a set menu of groceries purchased automatically online and delivered to our doorstep (I can be arranged, for a price), how boring would that be? A certain amount of automation of my finances helps simplify my life and free up time for more worthwhile activities, but becomming COMPLETELY financially automated sounds more like a curse than a blessing.
Check out alice.com. It allows you to set up periodic orders for all your favorite household essentials.
I’m not sure about State Farm, but most insurance places I’ve used will offer a decent-sized (5%) discount for payment in full rather than stretching it out into monthly payments.
Eventually we will not need people for anything. As technology evolves we may even have a robot go to work for us or is that put us out of a job. It will be interesting if society will find more time to be more social due to more convienences or will it isolate individuals even further. Whenever possible I try to maintain the human contact as well as I feel I am helping those people keep their employment by not using the automated systems and self check-outs. I know my post is a little off topic but it is a trend, it starts out automating your financial life, then on to the next automated way of living. I’d just like to know it these new trends are going to provide more free time to pursue other interests or will it just become harder to survive?
Is auto sweep available for all Paypal users, or only business/premier accounts? Does it cost anything?
Anyone know a way of auto-paying MBNA credit cards? I’d love to do that, but I haven’t had any luck.
Our mortgage is through Chase and they charge for auto payment.
I just needed to call them for my MBNA card (now BoA).
@DaveD – You might want to call Chase and see if they’ll waive that fee. I have a loan through Chase as well and they don’t charge me for monthly auto debit from my checking account. However, my loan wasn’t originally with Chase, they bought my loan from another lender who had already setup the auto debit, perhaps that’s the difference.
That’s great!
I personally prefer to pay my bills (with the click of a button) because it is so much easier to fix a billing mistake before you pay it, etc., then after. That’s my personal slant.
& just had to add that not all employers offer direct deposit. I work with many employers who don’t. Which I guess in this day and age is odd enough that few consider that a possibility – but it is.
That being said, um yeah, it would be rather easy to automate just about everything in my financial life, but for paycheck deposit. I am definitely into automated savings. I think it’s rather dangerous to put spending on auto pilot. But I can certainly see the benefits, too.
I personally have so much automated and online, that I find myself grumbling when I get little bills here and there (usually school donations or kid activities. If you don’t have kids these things are probably a lot easier to avoid!)
TIP: For any one individual who does not require payment up front (probably wouldn’t work for a plumber), you can set up to pay individuals in most online bill pay systems. Your bank just mails them a check. We pay our in-home preschool and our gardener in this manner. I hadn’t thought about it until someone mentioned it to me. But you can certainly automate these kinds of things too.
My wife and I do something like this, but with the central control being our checking-bank. We push payments to credit card, utilities, etc rather than allow everyone to pull from us. We have some $$ automatically go to savings each month.
I do the bills 1 time per month at which time I use the forward-looking feature in Quicken that tells me the low balance expected in the future based on recurring transactions. This allows me to adjust the buffer. In a good month, I can push more to savings.. bad month… well you get the idea.
We do all of our regular buying on credit cards so 1 time per month I adjust the auto payment from our bank to the correct amount based on the actual bill. If I would forget to do this, the credit card company would get either too much or too little but it would cover the minimum payment and avoid a penalty.
Like Alexandria, our bank will send checks to anyone for us.
I have to admit I am a little paranoid that if a company knows you are set up to automatically pay them they might take liberties. I recently turned off my auto-pay-by-credit card with Verizon for this reason.
I love the thought of not worrying or thinking about the money….or, at least, just doing the bare minimum…
How much time do each of us spend a month on this? I’ll bet I spend many many hours chasing interest rates, watching the market, worrying about when a bill is due, making sure the bill from the doctor’s office is correct, etc.
To some extent, we all need to do this, but I wonder if anyone has actually *tracked* the amount of time they spend on this. I’d be curious to know if there is an “average” amount of time and, for those that spend more time on this than average: is it a good use of time?
*sigh* I kind of start daydreaming about being a kid again and not having to think about any of this…. 🙂
I agree that everyone should pick and automate what they feel is helpful. I like paying my credit card bills manually, but recently set my water bill and cell bill on auto-pay.
@Steve – PayPal AutoSweep is free, but I believe only for business/premier users. It’s so hard to stick with a basic account when receiving regular amounts of money.
@Baughman – If your card is with FIA cardservices now, call them up and ask for an autopay enrollment form to sign and mail back. I don’t think it is advertised on the site. ( Jeremy said also for BofA)
@DaveD – That’s annoying! You should pay with nickels each month. 😀 How much? Try Neil’s advice?
No lips or eyes — thanks, that was funny. (The rest of it was useful, too, but I liked that touch.)
I have a somewhat minor point to make. Jonathan is correct that FIA Card Services (who manages Schwab, Fidelity, and BofA credit cards) does offer autopay if you call customer service, have them mail you a form, and then return it. They don’t seem to promote this option (hmm… don’t want you to pay your bill in full?).
I enrolled in it, but be careful. Say your bill is $3000 and you make an early payment of $2000. Instead of autopay deducting $1000 on the due date, they will take the full $3000 that was on your statement, leaving you with a credit of $2000.
I do a lot of the auto payment similar to what you mentioned above. However, my bank once made one mistake and it impacted all my other transactions. I was charged overdraft fee by the bank and late/finance charge by my credit card for unable to withdraw money from the bank.
Having automatic payment is nice, but it is still necessary to keep an eye on it as automatic systems are created by humans hence they are also prone to mistakes.
Good, but slightly EVIL.
I had some credit cards on an auto pay and it failed on two accounts. Might not be the best thing in the world.
I love to automate just about anything I can. My credit is much better now with autobill pay online. It’s so easy. I do receive money through paypal and didn’t realize that they could auto transfer it to my account.
Thanks for the tips.
I just enabled my premier PayPal account for Auto Sweep. The initial customer service rep had not heard of it, but I persisted, saying I had a friend with it enabled. The manager was able to set it up after raising my monthly transfer limit above $500.
Auto billpay is great; autopilot is not. There are still mistakes (not to mention fraud) to watch out for, so you still have to review every month. In this past year alone I have caught credit card fraud and my phone service trying to double-bill me.
Seconding “friend” with the no lips or eyes comment. Kept me reading the rest! 🙂
Autopay pulls by vendors that pull funds the day before due date are great if the connection is made to the financial institution without problems. If the paying financial institution is down (or power failure due to storms, etc), and the transaction could not be completed, you most probably will be held liable for late payment & all the subsequent fees that come with late payments (unless you can find otherwise in small print). Living in hurricane area, this word of caution as the area has experienced long sustained outages during hurricanes.
Online banking bill pay service is the alternative to consider.
This may fall apart when you need to switch/close accounts or change jobs. We closed one of the credit cards that was connected to utilities and toll road tags, and BOTH kept drawing from the CLOSED account for months, which caused interest rates to reset … took weeks on the phone to reinstate credit card interest rate, and apply credits to the account.
Careful when you put all eggs into one basket … there’s nothing wrong with punching a few numbers into your online billpay interface on your kitchen netbook when bills arrive.
Question for all of you on the autopay “pay bill in full” option…did you have to sign up for “ebills” for that feature? The only recurring option I see that is compatible with paper statements (I am paranoid and prefer to have hard copies) is when you have a fixed payment on a schedule. That’s predictable for things like cell phones, but not so much for cc or utilities…
What is most people’s experience with ebills? Seems a bit too easy to lose it in the inbox or spam filter if you didn’t have autopay…and you’d lose your statements when your computer crashed…and if someone hacked your email, they’d have your financial records…right?
I’ve been using autopay for 7 years on probably 20+ credit cards and never had it fail. Once or twice it was out of synch with the start time (it didn’t start and I didn’t make a payment). A quick phone call to customer service cleared the issue.
Thanks for the post. Automating payments can be a good method for those looking to get out of debt. It can definitely help consumers get into the mindset of always paying off each month.
I work for PG&E, the gas/electric utility in most of California (north of Bakersfield). One of our billing options is a Balanced Payment Plan that levelizes monthly bills. The amount you are charged does adjust (not more than once every four months, according to the FAQ), but it’s supposed to eliminate the huge swings in, say, June, when the AC goes on full-time or December, when the furnace starts cranking. My bills are pretty tiny so I don’t bother, but my parents like it.
PG&E also had a pilot program last year that allowed payment by Visa card. It worked just fine for me, but it was discontinued because our regulations require the transaction fees be passed on directly to each customer using the service. Again, my bills are tiny so auto-paying out of checking isn’t a problem. If I was paying a couple hundred bucks each month, then running it through a rewards card would be much nicer (unless I had to also pay the ~2% transaction costs, of course).
I’ve been burned by automatic payments, but am slowly ramping up my usage again.
I had a $3000+ automatic transfer go WAY wrong. The bank took 10 business days to correct it, and was giving me flak over their admitted mistake. They were upset I was bothering them over a MERE $3000+.
My other concern is that what happens after you’ve been using all these automatic payments/transfers for years without any difficulty, and then something big happens in your life, like a layoff? Now you’ve got to go remember/figure out how to turn off all these things before they kick in and really mess things up after your stream of income is disrupted.
I’m also a little concerned about putting things on auto-pilot — especially with the chance of being overdrawn and oblivious to the fact.
I prefer to pay all of my bills on-line, manually, with a few stragglers (like my water bill and dentist bill for instance), which I pay the old fashioned way. Still and all, I only spend about 20 minutes, maybe twice a month, paying bills. I feel the control is worth it. It was nice when I was a kid who didn’t have to worry about the bills, but really it’s the earning part that’s stressful — paying bills is fun, as long as you have the money.
Can anyone explain how the automated payment would work for vanguard? So if I ask $1000 to be deducted from my account every month; is it automatically used to purchase the index funds I designate, based on my asset allocation?
Eg: I want 30 % international exposure and 70%domestic and I chose the ticker symbols. Does Vanguard automatically divide my $1000/month and use it to purchase the required # of shares based on the 30:70 ratio?
Similar to the method mentioned for saving up 1/12 of your mortgage payment and paying it at the end of the year is a method I use for “smoothing out” lump sum payments like auto insurance and property taxes. I have a separate account (e.g. Ally Bank) and I have it set up to auto-withdraw an appropriate monthly amount for each of those items.
When it comes time to pay them, I transfer the amount of the payment back out of the account and enjoy the meager amount of interest it has earned in the interim. I count the monthly withdrawals as the payment and the actual payment ends up counting as nothing for budget/tracking purposes.
Hi…
Thanks for the post. Automating payments can be a good method for those looking to get out of debt. It can definitely help consumers get into the mindset of always paying off each month.
Very strongly agree with Mark. I *push* payments via a central checking account. Autopay and companies pulling money is great until something goes wrong, then the onus is on YOU to get them to correct it. Once someone has your money, it is much harder to undo it and get them to transfer it back, and in the meantime your balance could be too low to cover other obligations. No thanks.
I don’t use an autopay with any company as I want control over the amounts paid. I have set up nearly every routine bill with an automatic check from the bank. I usually set up the bill either as an exact payment, or if it varies, I shoot for slightly over. I do have to be careful when the cable company decides to increase rates or my cushion at the gas company is eaten up with an exceptionally cold month. I would never give a company the power to debit from my accounts.
I don’t use autopay either for the same reason as Lisa above. I don’t want any company taking money out of my account without me initiating the transaction. I have a bill reminder app on my Iphone that notifies me when a bill is due. I have no problem going online and making the payment but I want to check and make sure everything is correct.
– SingleGuyMoney
I’m almost there… One more step the Gas Bill. They require a form to be mailed in and I haven’t gotten around to the post office (haven’t used a stamp in forever) But luckily all I have to do is look at the bill and enter it into my bill pay. probably a 2 min job from mail box to confirmation. The Buffer is the only way this works. Many people are fearful of the autopay deduction, but any overpayment slides into the buffer and deserves and email…. after that I call right away, hasn’t happened yet, but I do double check every now and again for my own sanity.
I dont like anything automatic pulling from my bank account. But I do pay all bills once a month online. I like being able to see balances, statements, etc online. I rather be in control of the payments that way instead of every month companies are directly touching my bank account.
Another note about autopay. I had an automatic withdrawal set up once. It was very quick and easy to set it up, all I had to do was go on their website and put in my bank account information then every month the money came out. I assumed it would be just as easy to stop the auto deduction. WRONG. They required a written letter to stop it, I could not do it online. So if you decide to do autopays, always check to see what the procedure is to STOP an automatic deduction. It might be much more difficult than it was to start it.
I find this quite interesting. I am always looking for cheap yet effective ways to build my business. And having everything on automated will give me more time to concentrate on my business. I also know some good ideas on online business that might be of help to maintain automation for an endless income.
Bill and Jan? ahhaa how about John and Jane? this is hilarious…. that’s why this is my favorite money blog!
Interesting. Thanks!