Automate your finances to REALLY get ahead

You’ll have heard it many times: automate your finances to really get ahead. But what exactly does that mean, and why does it matter so much?

When things are time consuming or difficult to do they don’t get done often, especially when it comes to our own finances. Setting things up which are done without thinking or manual intervention will result in them getting done every time, on time.

Directing your money to go to which account is a game-changer as finally, you will be in control of the direction of your money.

The benefits of automating your money are:

  • It’s ‘set and forget’ – you set it up once and you know it’s done
  • Temptation is removed – your money is already allocated so it’s not waiting to be spent
  • Money is regularly allocated to savings – building your safety net
  • Bills are paid on time – you avoid late fees and keep your credit score healthy
  • Investments are stable – regular investments reduce the impact of market volatility (see dollar-cost averaging)
  • It’s a time saver – your monthly money management is much simpler
  • Your money mindset changes – once you automate, you take care of your financial security first.

Pay yourself first. On the day after  you get paid, have money automatically directed to a savings account and make it harder to access.  

Also have a regular amount of income set aside for fun money/personal spending. Then if you see something you want to do/have, you have a set amount of money to spend without dipping into savings or thinking ‘can I afford it?

To avoid the stress of falling behind on your payments, automate them.  Other key areas you should consider automating are:

1. Rent

Your rental costs are too important to risk going into arrears. If you fall just two weeks behind on your rent payments, your landlord can end your tenancy by issuing a non-payment termination notice. That basically gives you two weeks to find somewhere else to live.

2. Mortgage

Direct debit repayments are generally set up by the bank at the beginning of your mortgage. You can also still make additional repayments outside of your direct debit to get ahead. Either that, or hold any extra mortgage money in your mortgage offset.

3. Credit cards

This is something to really focus on when you automate your finances. That’s because paying late can trigger a number of penalties. You might be charged a late payment fee; interest on all transactions incurred during the transaction period; you’ll forgo your interest-free period if you don’t pay your balance off in full; you may lose any reward points you’ve accrued; and you’ll get a black mark on your credit report.

4. Buy Now Pay Later (BNPL)

If you make several BNPL purchases, you’re suddenly juggling multiple payments, all of which incur a late payment fee if you don’t pay on time. Those fees can add up really quickly when you have more than one BNPL account. So, to avoid nasty late payment fees, automate.

5. Utilities

If you haven’t arranged for automatic payment of your water and energy bills already, get onto it. Defaulting on a payment can result in your services being cut off, and no one wants to risk that. You’ll also receive a black mark against your credit score.

6. Loans

Personal and car loans can be a bit too easy to forget to pay, so don’t forget about them when you automate your finances. If you think you’ll struggle to meet your repayments, talk to your loan manager as soon as possible. 

7. Superannuation

Start a regular super contribution. The next time you get a pay rise, share half with Talk to your employer to set up an automatic salary sacrifice. You can also make extra super contributions out of your take-home pay. Set it up to transfer to your super the day after each pay day. There are some good tax savings to make by regularly contributing extra into super.

8. Insurance

If you’re going to automate your finances, you need to consider automating your insurance, too. That’s because if you’re late paying a premium, you won’t be covered for that period. And, of course, that’s exactly the moment that the tree falls on the house, or your car gets caught in a hailstorm. 

Next Steps

  1. Sit down and identify your  monthly spend with all your regular bills included
  2. Establish a separate savings account and set up an automatic payment each month
  3. Identify what other payments you can automate