Meet Bill and Jan. They are my imaginary couple that loves putting their personal finances on auto-pilot. They don’t worry about bill due dates, they never visit the bank, and only check their balances online once a month if there are no e-mail alerts sent to them. (Apparently they also don’t have lips or eyes, so it works well for them…) Let’s take a look at how they do it!
Income
Bill and Jan both elected to receive their regular income via direct deposit, so there are no checks to deposit. Even though Jan does some freelancing, she gets paid via PayPal, which she sets to automatically sweep any money into their bank account at the end of each business day. This feature is called Auto Sweep and is not heavily advertised, you must contact PayPal directly to enable it.
Long-Term Savings
Like everyone else, their 401(k) plans are funded via an automatic deferral each payday. For their Roth IRA, they simply take out $500 per month via an automatic transfer from their checking account for 10 months, which can be set up easily at Vanguard.com or any other major mutual fund provider. If you like individual stocks or ETFs, try automatic investing at Sharebuilder.
Short-Term Savings
For their annual vacation and other savings goals, they have an automatic transfer from their checking to an online savings account like the original ING Direct.
They do keep a certain buffer amount in their checking account, similar to this simple budgeting method. If the balance falls too low for any reason, an e-mail and text message alert are sent to both of them.
Housing
If they had a mortgage, most lenders will happily set up an automatic ACH from bank account each month. If they wanted to set up a biweekly payment plan and it isn’t free, they could simply take out 1/12th of their monthly mortgage payment each month automatically into ING Direct. Once a year, they send one full mortgage payment to their lender.
If they rented, they would set their Online Billpay service to send a snail-mail check automatically each month and deduct the amount from the bank account.
Utilities
Most utility companies will allow to you sign up for them to automatically withdraw the full bill amount from your bank account. Contact them directly, and when available use your credit card to earn some extra rewards.
Insurance
Instead of dealing with large payments either annually or semi-annually, they have signed up for State Farm Payment Plan (SFPP), which groups their insurance premiums and divides them into one single monthly payment which is taken from their bank account. Check with your insurer to see if they have something similar.
Credit Card Bills
Most large credit cards issuers allow you to sign up a service like Citi’s AutoPay, where you can have the full amount sucked out of your bank account each month. Since the Citi Forward card gives you 5x rewards on restaurants and Amazon.com, this most of their disposable income as well. To find it, go to Citicards.com> (Login) > Payments Tab > Enroll in AutoPay.
What else?
With all this set up, all Bill and Jan have to do is show up for work and spend their money wisely. Is there anything else that could make their life even more easy? I thought about using an online grocery store like Peapod, where you can access past orders and possibly create default orders which you only tweak slightly each month.
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