How Automation Has Helped Me Reduce Debt and Save

Readers often e-mail me for tips on how to keep their finances manageable. There are so many options out there that it can be overwhelming. I was speaking with my mom about this some time ago, and she felt the same way.

My mom has been responsible with her money over the years, but she felt that she could be doing better. After chatting with her, we decided that she should switch banks and automate some of her bills. It would free up some of her time and take a few things off of the to-do list… wins all around. I was talking with her the other week, after she had implemented the new system, and she said she’s really happy with her decision. She has saved both time and money with her new bank and online bill pay.

Why do I love automating my finances? Well, why wouldn’t I? Automating your finances can be a wonderful process, if done correctly. For one thing, it puts me in control of my bills without having to deal with paper, stamps, envelopes, and checks. But there are plenty of other reasons to love automating my finances, too. Here are my favorites.

I don’t pay late fees

I used to occasionally lose bills or forgot to send checks whenever I had a very busy week. Late fees definitely add up, and can be as high as $29 to $39 for credit cards! Sometimes I can pay my credit card accounts online for a same-day payment, but if I’m a day late, I may still get a fee imposed.

With online bill pay, you don’t have to worry about late fees because your bills will get paid on time every month, without any added work on your end. We’ll talk more below about different options for setting up automatic bill pay. But for now, just know that in exchange for a little effort up front, you can reap the benefits of avoiding late payments… forever.

Late payments don’t hurt my credit score

Getting rid of late payments isn’t just good for saving money by avoiding late fees. It also helps keep my credit score high. Payment history makes up the lion’s share of most credit scoring algorithms, and even a single late payment can quickly tank an otherwise excellent credit score.

Again, there are several options available for automating payments. But any of these options can keep you from having late payments recorded on your credit file, which helps you build your credit score or keep it high.

Resource: How to Check Your Credit for Free (and Avoid the Scams Out There)

I’m saving money, and I barely notice

In the past, I would save money for a few weeks and then have an emergency. After getting through the trouble, I’d neglect to re-start my savings. This cycle would repeat over and over. I felt like I couldn’t possibly save more money without cutting my budget to the bone.

How did I fix this issue? Automation, of course!

Now, I have a portion of my pay automatically transferred to a high-yield savings account each time my check hits my account. The trick to making this work is to make sure the transfer happens before you can even check your account balance on payday. It’s hard to miss money that you never had a chance to see!

But don’t be a hero. Start out with just a small transfer. Then, as you get used to that slightly thinner paycheck, increase the amount slowly over time. Just be sure you’re transferring those funds to a savings account with as decent a yield as you can find.

Retirement savings is a cinch

I started saving for retirement early on, while still in college. Unfortunately, I got distracted, and my savings became sporadic as I got into debt. Getting back on the wagon was tougher than I thought.

Saving for retirement automatically is easiest if you have an employer-sponsored retirement plan. But you can do it even if you primarily invest in an IRA or another individual account.

If you have an employer-sponsored plan, call your company’s Human Resources department and sign up to have 401(k) contributions automatically deducted from your account. You should especially do this if your company offers matching contributions. Even if you’re trying to get out of debt, contribute at least enough to maximize that matching contribution. Otherwise you’re just leaving free money on the table!

Related: How Much Should You Have Saved, Based On Your Income?

Want to increase your investments even more? Consider sending a small portion of your paycheck to a traditional or Roth IRA.

My bank account stays steadier

If you have plenty of padding in your checking account, this may not matter. But if you’re living paycheck-to-paycheck or just a bit beyond that, it can be a boon. By making automatic payments around payday, I keep my checking account balance from skyrocketing and then plummeting.

In fact, you can smooth things out even more by paying some of your larger bills twice a month if you’re paid bi-weekly.

Pay half the mortgage with your first paycheck, and half with your second paycheck. This keeps your account from taking a big hit when you pay the full mortgage. And it has the added bonus of paying off your mortgage more quickly, since you’ll make an extra full payment by the end of the year.

This doesn’t just work with your mortgage, though. Bi-weekly payments can smooth out your bank account balance and pay off just about any debt more quickly and efficiently — without making it feel like you’re paying extra.

Read More: How to Use the Debt Snowball to Pay Off Balances

Some drawbacks to automation

Even though I love automating my finances and the effect that this strategy has had, it’s not the be all, end all of budgeting and financial management. It does have some drawbacks to consider, including:

  • Possible overdrafts — If you’re on a tight budget or have an unsteady paycheck, you run the risk of having a payment drafted when you don’t have enough money in your account to cover it. Overdraft fees can be even worse than late fees! If your cash flow is really tight, you may want to find some breathing room (by cutting expenses, paying down debts, etc.) before you automate all of your finances.
  • Time to set up — Automation does take some significant time to set up on the front end. However, once it’s set up, you’re good to go unless you need to tweak something — which doesn’t take much time.
  • Missing problems with your bills — It’s much easier to miss being over-billed for certain services if you’re automating the payment. One way to avoid this is to only automate those bills that don’t change, like your mortgage or car payment. Or you can use a platform that gives you advance notice of the amount that will come out of your account. If you notice a bill is suddenly much higher than it should be, you can look into the issue as needed.

How to automate

There are loads of ways now to automate everything from bills to savings to retirement investments. Here are a few options you might consider:

  • Paycheck deductions — For accounts like your employer-sponsored 401(k) or HSA, your easiest option is probably to set up automatic paycheck deductions. Talk to your HR department to get this done.
  • Bank bill payment — Many banks offer automatic bill payment services where they’ll cut a check or send an wireless transfer to cover your bills. You can normally set this service up online through your bank account management tool.
  • Third party services — Services like offer automatic bill payment that works similarly to your bank’s service.
  • Through the creditor or utility’s website — You can often set up automatic payments through your creditor’s or utility’s website. Log into your account, and set up automatic payments to recur on a set day of each month. Often times, new creditors, insurance policies, or other entities give you the option to set up automatic payments when you first open your account.
  • Automatic transfers — For automatic savings or investing, you can often set up automatic transfers from one bank account to another bank account or investment account. This is super simple when you’re transferring money from a checking account to a savings account at the same bank. But it’s not difficult to set up automatic ACH transfers to accounts at another bank, either.

Learn More: 15 Ways to Supercharge Your Finances This Year

How about you? Do you automate your finances? Let us know what works for you, and how it has improved your day-to-day finances, in the comments!


18 Responses to “How Automation Has Helped Me Reduce Debt and Save”

  1. Anonymous

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  4. Anonymous

    #11) that is interesting, I need to check my bank to see if they offer that — I think that does provide a good safety net to catch certain errors.

    #12) No way I could do that, and here are the reasons: if the company makes an error and “pulls” too much, you are gonna be in for a fight trying to get money back. Also, you should be watching your water bill closely: you could have a leaky toilet that is losing 21,000 gallons per month and not even know it. Most of my utility bills have graphs showing what my usage was compared to previous months and the same month last year. Also, as someone else mentioned, you may not be aware of rate changes — anytime a company raises rates on me, I immediately start looking for a replacement company.

  5. Anonymous

    One note….. by automating your bills your credit report will now reflect that you are a on-time payer.

    to @10 above – my utility bills are automatically paid from my account. the utility company sends me an email in advance, and automatically takes it out on a date certain. Thereby I’m not having to update anything. What a real time saver. I enter the amount in my software when the email arrives and I’m on my merry way.

    Good Posts!

  6. Anonymous

    Depending on how advanced your bank’s online bill pay application is, you can set up recurring payments for varying amounts with rules. For example I have a cell phone bill with a data plan that usually varies by a dollar or two each month. So, I set up an automatic payment rule to pay the bill when it comes in for the full balance as long as the balance is not above $95. If the bill comes in above that amount the bank sends me a email saying that the bill was recieved, but the dollar amount was above my automatic payment limits so it did not send a payment. I can then log in to my bank, review the bill and determine if I want to pay it or if I have to contact my cell phone provider because of an error. This saves me so much time! It is like someone else is looking out for incorrect bills for you. Virtually of my payments are automated through my banks online bill pay system or through Paytrust (which is a good option for those of you who pay bills from different accounts at different banks).

    I would never set up automatic pulls from businesses, simply because it is too much to keep track of if anything goes wrong. When you do it through your bank everything is in one place and they usually have more indepth alerts that keep you up to date on what is going on with your bill pay account.

  7. Anonymous

    My setup sounds similar to Dave’s.

    I use three main accounts for my automation – an online savings account, an online checking account that earns interest, and a checking account at a local bank.

    My paycheck is direct deposited to my savings account every two weeks. Twice a month, I have automatic transfers set up to the checking accounts (and various savings/brokerage accounts). The online checking account covers my “vital” bills – rent, car, student loans, insurance…all fixed amounts. I never touch this account, and all transfers into and out of it are handled automatically, so no more worrying if I have enough in my checking account to cover rent at the beginning of the month.

    The local checking account covers my variable bills and day-to-day money. I have easy access to it, and it’s connected to a local savings account for overdraft protection.

    The great part of the schedule is that twice a year, I have an extra paycheck left in my savings account that doesn’t get transferred into a checking account. Extra automatic savings!

    Like Dave said, it sounds a lot more complicated than it is 🙂

  8. Anonymous

    Dave) Maybe I was reading it wrong — what you describe is basically what I do: get a bill, go online and setup a payment to the business using my bank’s website for an amount that I manually enter and a date that I manually enter — I do this every month for each bill. The bank eventually wires (or cuts a check) to the business on my designated day. I am manually “pushing” the money to the businesses.

    The way I was reading the article (perhaps incorrectly) was that they were setting up payments to be made to the businesses (automatically) based on whatever amount the business tells the bank is due (via an online bill). Specifically in case a bill is lost or whatever, it will still be paid.

    Reading the other article that is linked on this one — it clarifies the matter: only the “fixed” bills are truly automated (paid even if you are dead), the variable amount bills are still manual (but paid via online bill pay): that’s exactly how I do it too.

  9. Anonymous

    We’re totally automated as well, and it’s wonderful. The only note of caution is to keep an eye on statements. We have our phone, TV, cable and wireless all on one bill, automatically paid by credit card. Convenient yes, but it can quickly become a little “out of sight, out of mind”. I recently looked and noticed that the rates had gone up considerably. Nothing that a phone call didn’t fix, but still important to take a look.

  10. Anonymous

    Oh, also, we use multiple accounts for different reasons. We have a main account that our pay goes into automatically. We each have an individual (joint) account that we debit an “allowance” each payday. We also have a “bill payment” account that is used as stated above (using online bill payments), that way EVEN IF we wound up in a weird situation where a payment was screwed up, it would never touch our primary money pot. My wife figures out the bills for each pay period and transfers over the $$ amount required into the bill account and sets up the automated payments as soon as she finds out what the amounts are for various bills. All our bills are paid within a few days of payday, out of one dedicated account. We even pay our car loans to the same bank out of the bill account’s savings account, so that is separate from even the rest of the regular bills.

    Doing this also means we can do things like split the mortgage payment in half and pay half on each pay period into the bill account, and still remain 1/2 to 1 full payment ahead in the account at all times as a buffer.

    Works great and I sleep very well at night now that I gave up tinkering with her daily money management.

    *EDIT* I realize the above may sound very complicated, but its actually ridiculously simple in practice once you get over the “one big pile of money” mindset and divvy it up for specific purposes. And like I said, we don’t really lose sleep over money anymore because of this process.

  11. Anonymous


    I think you misunderstood or it wasn’t clear in the original article — you can use online bill pay for variable bills as well. Setting up a payment date and set amount are entirely optional, and at NO TIME does the business have any access whatsoever to your account. Online bill pay is a PUSH from your bank, NOT a pull by the other business.

    My wife handles our main account and all bills, and uses online bill pay for all bills. At our credit union site you can go into the bill management section of the site and set up a bill, say a credit card payment. You put in the name of the card company and it looks in its database to see if it can handle electronic payments. If so you only enter the account number, and then whenever you want to pay a bill you type in the amount you want to pay and the date you want it paid on and on that date the bank will electronically send that amount to the company. If the company is not in the database, then you type in the address and they will then cut an actual paper check for you and mail it.

    No business has electronic access to our account at any time. The entire process is strictly under our control, at our convenience, at all times. I really can’t imagine going back to the bad old days.

  12. Anonymous

    Automation has been the best thing I ever did for my finances. I have a free personal finance account at, which links all my accounts. I get bill reminders, daily updates, and net worth statements. It saves the information for all of the linked accounts so I can look up the password for some obscure account that I rarely use. I get all of my bill electronically that are available that way. I pay my monthly HOA dues via a monthly scheduled online bill pay. I automatically transfer money to savings (both emergency and short term for things like vacation) each month. I love being able to check all those things at once. I feel very on top of things and I have started setting net worth goals for us. It’s been great.

  13. Anonymous

    I only have a single bill that is a fixed amount every month (mortgage) — that one can be automated. The other 6 bills are utilities (varying amount) and a credit card (varying amount), so I absolutely do not automate them. For those, I still receive the paper statement, so I can study them for errors, and then I use the online bill pay (manually) so the bank sends them a check for payment. I also pay my bills twice a month (when I get payed), so I keep track of which bills I pay so I can catch any missing bills.

    I do not allow any company direct access to my accounts — if they erroneously ‘pull’ to much money out, you are already in a bad spot trying to get money back.

    But, I do know other people that set things up the way you describe — just not my comfort level. The ‘automatic savings’ idea is a must!

  14. Anonymous

    My financials are almost completely automated and paperless; I’ve even set up my credit cards to automatically pay off the full balance each month. Although American Express required me to request and mail in a paper form, so they don’t always make it easy.

    I find that this saves time and keeps me from paying late fees when I’m traveling and forget to pay a bill (although they would always reverse the fee as a “one-time courtesy” when I called, it was still a hassle.)

    The only $ decision I make each month is what ETFs to invest in based on how my allocation is looking against my targets.

    To be more fully automated, I wish there was a program that would download the PDF statements from each of my accounts and save them somewhere each month. Do you know of anything?

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