Every once in a while, I look up from my computer screen, and I shudder to think about what life would be like if I'd been born a generation ago. That's not because I'd be hankering for some Starbucks coffee, or struggling to entertain myself without Netflix or TiVo. It's because my financial life could be a mess.
There are many marvels of the Internet age, but my absolute favorites are online banking and automatic bill payment. I did have a checking account and a credit card once upon a time, before these magical conveniences were invented -- and I've erased that entire terrible era from my mind.
The electronic age has helped me so much because anyone struggling to get a hold on their finances can take chores that require some effort, and make them much easier or even automatic. I've become a financial robot of sorts. If it can be automated, I automate it.
In this wonderful era, bank deposits, saving, investing, bill payment, and even comparison-shopping for insurance or mortgages, can be made easier. If you're striving to improve your record in any of those areas, keep reading.
Automation lets you manage your financial world without thinking. It's a low-discipline, high-reward way to meet your goals. If you hate thinking about money, or you're just really busy, you can get the magical Internet to do most of the work for you.
There are a few downsides. First, you have to set up all this automation. That will mean reviewing the options you already have at your disposal, and considering whether you want to move your money someplace with more flexibility. You'll also need to set up all these automated payments and deposits, which can take a little time. Once in place, you'll be glad you did.
There's only one other downside I've noticed. When you write a check for every little bill that comes your way, you may be apt to scrutinize your spending more carefully. When the money just disappears from your account, you may overlook places where you can save a little here and there. The ease with which you make progress toward your saving goals may more than compensate for this little disadvantage.
The early precursor to this golden age of electronic financial management was the direct deposit of paychecks into bank accounts. If you're still living in the Stone Age of paper paychecks, call your human resources department and see whether your salary can be deposited directly into your checking and/or savings accounts. It makes the money available immediately, and it saves you innumerable trips to the bank.
Once your money's in the bank, you have plenty of electronic options for paying bills. Tired of writing those monthly checks and mailing bills to DirecTV or Verizon for television and phone service? Ask them to automatically draw your monthly bill straight from your checking account. In some cases, you can even have your mortgage payment drawn directly from your account, to avoid late fees and the associated dents to your credit report.
And with so many banks offering online bill payment, you could almost go through the rest of your life without having to write a check or put a stamp on an envelope ever again.
Automation isn't just good for getting rid of your money. It can also be a struggling saver's best friend. You're probably already well-acquainted with the automatic saving features of retirement accounts like 401(k)s, which take money right out of your paycheck before you even see it.
Take a lesson from those accounts and set up your own automated system for your other savings goals. Some online banks will let you set up a schedule of withdrawals to a savings account. If your financial institution does not offer that perk, the many options for moving money electronically can at least make saving a little easier.
Automated saving is a great way to fund an IRA, a college savings account, or an emergency fund. If you wait until the end of the year to go looking for $4,000 for your IRA deposit, you probably won't find it. (Even the most overstuffed couches can't hold $4,000 in quarters under the cushions.)
Ditto for the emergency fund. If the money is sitting in your checking account, it's still within reach, even if you've mentally earmarked it as "emergencies only." That leaves it vulnerable to those "emergency" video games or shoes. If you can automatically set aside a small sum in a savings account every month, you can build a healthy emergency fund without having to exercise a lot of discipline.
The same can be said for investing. Send a small sum each month to your brokerage account, and build up an amount to make your first investment. In some cases, you can add incrementally to your holding in a mutual fund. A dividend reinvestment plan (also known as a Drip) allows you to build investments in stocks by making small, regular contributions. Read more about those plans in the Fool's Investing Center.
In fact, our personal finance centers can help you investigate banks, brokers, and college savings plans that can put you on a path to automatic financial sanity. They're just some of the many ways that roboinvesting can make minding your money a whole lot less stressful.
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