Everyone needs a budget
If you don’t know where your money is going, it’s probably all going away — faster than you think. By tracking your expenses, you can understand what you spend your money on, how much you spend, and how much you’re saving. Budgeting is time-consuming and boring (for most), so it can be a great idea to automate things. Automating things can save you time, effort and money in the long run. Here’s a non-exhaustive list of budget items you can automate:
Your paycheck (direct deposit)
Your retirement contributions
Your utilities (water, gas, electricity)
You bills (internet, cable, loans)
Your credit card (please automatically pay it in full and never carry a balance)
Looking at the list above, let’s talk about the upside and downside of automating these major aspects of your budget.
By using direct deposit, you don’t waste your time going to a bank to deposit or cash it. You just get paid. For some people, this is not technically possible, and others don’t mind depositing a check. I’d still recommend automating the process of getting paid as much as possible.
- Retirement is a big deal, and any amount you can affect it for the positive is good. By automating deductions to a retirement account, you can contribute a larger amount than you would if you waited until you thought about it.
- Please do this. Automatically saving has been one of the best decisions of my life. Assign a percentage of your income you would like to save on a regular basis. Try for 10 percent. Set up an automatic transfer from your checking account to your savings account, and you won’t spend it. Why won’t you spend it? Because it isn’t in your checking account. This has saved my bacon for unexpected expenses in the past because I have automated transfers into an emergency savings account.
Here’s where things get muddy. You need these things, but do you need as much of them as you currently use? You can automate payments for your water, gas and electricity with few problems. But if you never see how much it costs you to shower for 30 minutes each morning, you may never wise up to the 5-minute version. Talk with your spouse to see if you are comfortable with your usage. If yes, then proceed to automatic payments.
- Sketchy, but potentially OK to automate. Bills can sneak up on us. Loan payments, cable, Internet, family cell phone plans, they can all add up quickly. If you are annoyed by paying them, you might start prioritizing which ones you should have anymore (i.e. is cable worth your money?)
- If you use a credit card responsibly, you are in the minority of consumers. Until you can prove to yourself you can spend less than you earn, you shouldn’t use a credit card. If you can be a big boy-big girl about only spending money you earned, then you can automate a payment to pay off your credit card each month. Otherwise, don’t use a credit card at all because you aren’t responsible enough to use it.
Consider your spending habits. Of anything you could spend a few minutes on, your money usage is a good thing to think about. Take some time, figure out what you should and should not automate in your budget and start enjoying some more free time and energy on top of your automatically growing savings hoard.