Automation for Your Success

Creating a budget can be quite challenging for many of us. Those of you who have already completed the steps to create a working budget, or those who are currently making a budget, know how difficult it can be to list everything. However, once you have all of the items associated with your budget, there are many tools out there, like this Free Budget Planner to help you succeed.

There are online systems such as Mint.com or software such as QuickBooks for those adventurous types. These are both good, but there is a simple tool built-in to nearly all of your online banking sites. It is automatic transfers and payments. Many of you may have used this function of your online banking before, but others tend to shy away due to lack of control. I would stress the importance of using this free tool. I won’t be able to tell you exactly how your online banking system will work, but I can tell you how mine works and how I use it.

If you do not have a working budget, you can still use these techniques for automation; however, it would be better to have a structured budget plan for how the money is moving. Another item to note, I have 12 accounts comprised of both checking and savings. What I am about to explain can be done with fewer accounts or more accounts. It can also be done using the cash envelope system that has gained popularity. I am simply relaying what I do.

The first part any budget should have income from somewhere. All of my family income is deposited into one account every two weeks. Most banks allow you to nickname your accounts, thus we nicknamed ours “Primary.” Every two weeks there is money automatically moved from our primary account to one of our other 11 accounts. This feature is easy to setup. Simply go to the place in the online banking which allows you to “Transfer” money. Within this section, there should be some form of “Schedule” transfer or “Future” transfer button/drop-down. This is where you will automate everything from.

Let’s start with the first section of the budget. Again, if you have the Free Budget Planner the first section will be HOUSING. I have another account named “Bill Pay” which I use for all external bills. Therefore, housing expenses such as Electricity, Water/Sewer/Trash (WST), HOA, Mortgage, Netflix, internet/cable, and Verizon are all setup to be paid from this account. Since I have had a working budget for many years, I have narrowed down the value associated with each bill. The budget shows the total from the category for each month. Every two weeks, half of this total is transferred to this “Bill Pay” account. I have also taken the time to ensure due dates for each bill are in line with when the funds are coming out. In some cases, I was able to call and get the due date switched to meet my transfer dates. It took some time to get everything in line. If you are going to automate like this, be sure to monitor your accounts when the transfers happen and when the bills are paid. We set up overdraft protection at this point (transfer from our savings – NOT credit), to protect against mistakes made in our auto-transfers. Just as we did, make adjustments as needed.

With the “Bill Pay” account out of the way, the rest of the automatic transfers should be fairly simple. The next four accounts you will see will deal with your grocery, cars, insurance, and debt. Each of these has their own accounts. Just as it was seen with the “Bill Pay,” the total transferred every two weeks is half of the total seen in the budget spreadsheet. To clarify the last two accounts: “Other Insurance” is referencing self-paid or additional insurance for you or your pets. The “Debt” account was created to allow us to set aside money for debt payoff as well as normal credit or loan payments. The rest of the categories on the right side of the budget are next.

As mentioned, there are some savings accounts setup. One of these is labeled “Emergency Fund”, which you should have $1000 set aside in already, or working towards completing. Another savings account is named “Life Savings” which has a set percentage of my income transferred over to every two weeks. This savings account is for the future or for certain things in which I need to save for. Next, there is a savings account for “Medical” which is used to set aside funds for smaller expenses not covered by insurance. Typically, my wife and I use this fund to pay for prescription medication and cover the cost of new glasses. This account is to be used for those expenses that you can plan for, like new glasses every year, prescriptions, doctors co-pays, etc. The last three categories should be personalized. Some choose to donate money to certain causes or even tithe to church. This “Donation” account has funds moved over automatically to ensure they are donated appropriately. “Entertainment and Recreation” and “Personal” accounts should have money transferred over based on your lifestyle. I currently have money moved to accommodate a weekly date night with my wife as well gym memberships. To ensure we have money to buy shoes, clothes, or haircuts as needed, I have created a smaller transfer to the “Personal” account every two weeks as well.

There are many different transfers which take place every week. Although at first, it may seem difficult to get everything setup and ensure everything is appropriately transferring, it is well worth it. Automating your budget is one of the best things you can do when freeing your life from the burden of managing your money. It has given us the ability to “set it and forget it” – meaning that it is managed much easier, as we don’t have to spend time every month making transfers, pulling out cash for groceries and gas, and remembering to pay the bills on time.

After setting up my automation over 3 years ago and ensuring it was setup correctly every month, there have only been a handful of times in which we have had issues. The occasional holiday or delay in paycheck deposit has resulted in short accounts or negative balances. However, these were due to unforeseen circumstances and were easily fixed once alerted to. Again, this is where overdraft protection can come into play. A simple “opt-out” of overdraft coverage (a bank regulation – that will not allow you to overdraft your account with a debit card purchase) as well as overdraft protection – a simple transfer from your savings to cover a small overdraft, can save you money on overdraft fees ($35 per occurrence, on average).

This leads me to the last item to get setup on your accounts and transfers: alerts. All of your online banking systems should have some kind of an alert system for all transactions which take place. They have the ability to be setup to send emails and text messages when there is any kind of movement or for a certain dollar amount. If you are unable to have unlimited messages sent to your phone, I would suggest having an email sent out.

If you are like me, having this automation might provide a bit of anxiety for you as you are not physically clicking the button to moved the money from one account to another. The overarching benefit of this automation is the ability for you to STOP THE ANXIETY and free up your time to work on something more important. Having automation has also re-affirmed our budget in our account activity. It is no longer numbers in a spreadsheet, but now my real money! Being able to see it now in action and working provides a a sense assurance my numbers in my budget are correct. Lastly, although I created the budget based on what I thought was the correct numbers for our lifestyle, it also provides a limitation for my wife and I to use our money. If there is only $100 a week for groceries, we are not going to be spending $150. We will be forced to stay within the budget.

Automation may not be for you. It may even cause more of a burden for you. I cannot speak for anyone else except for my wife and me, but we love the automation. I hope you will check into this option for your budget and your online banking.