Checking Account Automation Simplifies Financial Decision Making
October 29, 2009
The Advantages of Automating your Checking Account
Managing a checking account can be a hassle, especially for active accounts. Writing out checks, reconciling your checking account, making sure each check was cashed--the word "laborious" comes to mind.
Now, with careful planning, you can automate many functions of your checking account. Certainly, full-scale automation is not for everyone. But the concept of automation is worth a look no matter who you are.
Checking Account Automation Poster Child: Ramit Sethi
To begin to grasp how automation can simplify your financial life, it's instructive to look at someone who has embraced automation fully: Ramit Sethi, author of the best-selling book I Will Teach You To Be Rich, a treatise that vehemently recommends automation of your financial life.
Sethi has set up an elaborate system that uses his checking account as the gateway for all income, with automatic payments sent out from the checking account to pay bills, buy discretionary items, and save money through a savings account. For a full breakdown of how Sethi's system works, visit IWillTeachYouToBeRich.com, but the broad strokes of this brilliance can be found in the automatic payments of bills and automatic deposits into his savings account.
Money-Rates.com has consistently advocated the wisdom of saving money rather than going into debt. There's no better way to save every month than to save automatically, just like paying a bill to yourself.
Checking Account Automation Viewed as a System
Sethi talks frequently about the "psychology of automation," and rightfully so, because automation really is a mindset. First and foremost, checking account automation asks you to think of your financial life as a system.
You'll need to do some work on the front end--for example, coordinating payment dates and linking your different accounts together--before you can benefit from automation. That initial round of work can be worth it, yielding measurable savings, both in terms of time and money.
But in order to reach a level of automation that fits your needs, you must first see your financial life as a system, rather than as a collection of discrete financial activities.
Billing Dates, Phone Calls, and Negotiation
Automation may seem like ivory tower philosophy, but at its best, the practice is exceedingly concrete.
For example, it's very important to coordinate the payment dates for your bills if you're going to automate your checking account. Otherwise, bill payments may come out of your checking account in a haphazard rather than orderly fashion, creating confusion and possibly generating unnecessary fees.
Coordination of payment dates requires calling your bank, your credit card companies, your investment company, and anyone else who receives payment from you via check or debit payments. Remember when dealing with these companies that you are the customer, and you have a right to ask that your financial products and services work for you.
No need to take an "all or nothing" approach, either. Indeed, the most appealing aspect of bank account automation is that you can build your system slowly, piece by piece. As you do so, you may just realize how powerful automation can be in reducing financial stress and keeping you disciplined, effortlessly.
Source:
Automating your money ? especially entrepreneurs and freelancers • http://IWillTeachYouToBeRich.com • http://www.iwillteachyoutoberich.com/blog/automating-money-for-small-business/
Timothy Ferriss • The Psychology of Automation: Building a Bulletproof Personal-Finance System • http://FourWeekWorkWeek.com • http://www.fourhourworkweek.com/blog/2009/03/26/the-psychology-of-automation-building-a-bulletproof-personal-finance-system/
