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Why Automating Your Money Doesn't Mean Set It and Forget It

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You've heard it a million times, automate your finances. It's a great way to save without thinking about it, it's a great way to pay your bills. You set it and forget it. Your financial life is under control, right? Well, not necessarily.

Why Automating Your Money Doesn't Mean Set It and Forget It

Few would debate the fact that automating your finances is a good thing. But as much as conventional wisdom says to automate your finances, it's not as simple as that.

Here's why.

There is nothing good about paying bills late. Not only will you likely be assessed a late fee, possibly a punitive one if it's your second late payment in six months, but your credit report is dinged resulting in a lower credit score, and your interest rate might go up, says Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling. "For people who are unorganized, travel or procrastinate, automatic bill paying is essential."

But for all the good automating your payments does, there are downsides. "The money will be pulled out of your account, and if funds are low, it could result in an overdraft," says Cunningham. You could get dinged with overdraft fees that can be $30-$40.

Know too, that once you automate, "While it's not difficult, it does involve a bit of work, to stop the pull. This is one of the reasons like you to set up auto bill pay, as it serves as a deterrent to moving your account to a different institution," says Cunningham.

There are some horror stories. For example, people have had money continued to be pulled from their accounts even after they stopped receiving the service they had set up the payment for.

As always, make sure the website in which you are setting automatic payments with is secure and can be trusted, says Leslie Tayne, an attorney specializing in debt issues with the Tayne Law Group.

Be mindful of your money

Payment notifications will help you know what's being paid when.

With things being "automatic" you can lose track of where and how much money is going out of your primary account each month. You can ill afford not to have your fingers on the pulse of your finances. One way to get around this is to "opt-in" for payment notification. This will keep you abreast of what's being paid when.

Work around challenges

It's easy enough to set up payments that are the same every month like your car loan, and more of a challenge to do so for bills that vary like utility bills. But that's not to say it can't be done. Take for example your credit cards. "Most people charge a similar amount each month on their credit card. Go back through six months of statements to review the minimum monthly payment. Now double that amount and set that up as your automatic payment each month," says Cunningham.

Keep your eyes on your portfolio

Automating your investments is a great time saver, but you don't want to stop paying attention to your portfolio

Just like you don't want to stop paying attention to your bank account balances and bills, you want to be mindful when you automate your investments. "Automating your investments is a great time saver, but you don't want to stop paying attention to your portfolio," says Kalen Holiday, a spokesperson for Covestor, an online asset management company.



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Comments
12 Comments.
Comment #1 by jshannon posted on
jshannon
I sometimes am unorganized and procrastinate, but will never automate payments for any bill. I keep a running list of bills for each month and check them off as they are paid in full. Cunningham should advocate paying off credit cards in full each month, or not use them. I guess that might cost her job though ; ).

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Comment #2 by Anonymous posted on
Anonymous
Wow, another lesson for the money illiterate people. The socialists are taking over the money issues. What is next, give it to your politicians in Washington to care for your money.

We all know that, do we need lessons like these or are we are part of the morons who need to be guided for everything we do in life.

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Comment #3 by Anonymous posted on
Anonymous
        I recently opened a auto: withdrawal on an account to pay a ymca bill but I made it a new acc. and only that one withdrawl from that acc.. I watch it close... 

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Comment #4 by Anonymous posted on
Anonymous
another reason not to set up auto payment is that there may be wrong charges on your bill, and once it's auto-paid, it's easily to be missed. Another thing that happens very often to me (my phone bill, TV, etc) is that they charge me the full amount (say Ifind some wrong charge and they credit you back, or there is a promotion with a credit) and credit will be apply to next month bill, even though you can see the credit online and you only need to pay (full-credit). When the credit is $100 or more, it makes a difference.

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Comment #5 by Anonymous posted on
Anonymous
Some people are just to paroniod!  I use an auto-pay set up for many of my monthly bills because it is convenient while I'm on the road quite a bit of the time.  Just like the title states:  "'Doesn't Mean Set It and Forget It".  I always check all of my accounts and statements regularly.  Never had one problem since set up several years ago.  And I never had to worry about missing a bill or be late paying a charge.  No monthly balances carried forword or penalties or interest charged.

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Comment #6 by paoli2 posted on
paoli2
Autopay was never meant for us to give up our responsibility in seeing that the bills are paid correctly and on time.  I found out something interesting recently about autopay.  I noticed my credit card payment was not paid on the due date so I called the CC company.  They advised me that if we have autopay and the due date falls on a weekend, they may not deduct it until the following Monday and it may show up on our account at a later date than when due.  As long as they get it paid within a certain time limit, it does not go against us or our credit.  I also agree with the poster who mentioned credit card balances being paid out fully each statement.  I would never charge more than what I knew I could pay in full each statement.

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Comment #7 by Anonymous posted on
Anonymous
The banks and utility companies move the due date very often and it is easy to be overcharged or penalized for no fault of your own. I pay manually.

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Comment #8 by Cracker posted on
Cracker
I use automatic bill payment from my bank.  I also get e-bills from all companies which offer them.  By using automatic bill payment I get to say who gets paid, when, and how much.  I don't allow any company to debit my account directly.

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Comment #9 by paoli2 posted on
paoli2
#8  What is automatic bill pay from your bank?  I never heard of this.  What is the difference from letting your bank autopay your bills than letting the companies withdraw the needed amount?  How do the banks know what to deduct?  Thanks.

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Comment #11 by Cracker posted on
Cracker
One additional advantage is the biller never gets my bank account number.  All they see is the amount, the account where the payment is to be applied and the name of the bank sending the money.  It adds one more layer of security to preventing identity theft.

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Comment #12 by paoli2 posted on
paoli2
Cracker:  Thanks for sharing the info and the link.  I seem to be doing ok with the way mine are set up but I really like the idea that your way does not allow the others from actually accessing my bank account. When I have more time, I may consider redoing the way I have. Much appreciation.

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