How to Automate Your Finances – Get Your Finances on Autopilot Before You PCS, Deploy, or Go TDY
Military members are frequently on the move.That’s part of the gig, and part of the fun!...
Military members are frequently on the move. That’s part of the gig, and part of the fun! But that can lead to problems with your money unless you have a plan to automate finances or otherwise manage your money while you are deployed, or otherwise away from home.
I handle most of the finances in my family. But since I’m gearing up for a TDY in the near future, I need to make sure my wife and I are on the same page. Thankfully, there isn’t too much to go over. While our finances have grown more complex over the years, I’ve done a lot of work to automate them as much as possible. She already knows most of our personal finances and has access to all of our important accounts. But I also have a business, which complicates things a little bit. So I’ll go over those details with her later.
I’ll share a basic overview of how we manage our finances, and share some tips to make it easier for you to automate your finances. Once implemented, these tips will help you save time and money, and reduce frustration and potential for mistakes like late or missed payments.
How to Automate Your Finances
Everyone’s financial situation is different, so I’ll share an overview of some of the more common income and expense categories. Just modify your situation as needed. And feel free to leave a comment if you have any questions, tips, or suggestions.
Topics covered – This article will cover communicating about money with your spouse or partner, as well as show you how to automate or streamline the following:
- Paychecks & Other Income
- Housing & Utilities
- Common Bills, such as car payments, Student Loans, and credit card payments
- Irregular bills
- The Importance of Having Backup Accounts
- Other Tips
Get on the Same Page with Your Spouse or Partner
The most important step is to make sure you and your spouse or significant other are on the same page. This ensures you don’t let anything slip through the cracks or make any double payments. My wife and I have joint checking and savings accounts, and I have her name on our business accounts. This gives both of us access to our finances so we are on the same page.
I also maintain a spreadsheet with a chart of accounts we use. I update this spreadsheet each month with account balances. It’s a basic net worth spreadsheet, but it’s also helpful to see where our money is, and how that has changed over time. Sharing this with my wife gives her insight into the state of affairs. It’s also important to communicate how the bills are paid so nothing is missed or paid twice.
Each couple communicates differently, so it may take some time to find the best system for you. But take the time to do it. you won’t regret it!
How to Automate Your Income
If you are in the military, then you have automatic deposit for your paycheck. The DoD requires direct deposit, which is a good thing! This takes any guesswork out of your paycheck arriving to the right place. There are, however, a few tricks you can do if you want to make your paycheck go to more than one account.
The easiest way is through a payroll allotment, which will automatically send a portion of your paycheck to another account. You can set this up through your finance department. Many people do this to automate their savings or pay certain bills. This can be a good way to save money in your emergency fund, invest, save for your children’s college education, or any other reason you desire.
You can also automate your savings through your checking or savings account. Many banks will allow you to set up an automatic transfer each month to another account. Again, this is a great way to save, invest, or keep money in separate account so you don’t spend it each month.
Automate Additional Income
Many people have multiple sources of income. You should try to automate your income if you have other sources. For example, I mentioned I have a business. When possible, I request my payments to be made via direct deposit or ACH. This is faster, more convenient, and more secure than having payments sent by check. It is also easier to track automatic deposits through QuickBooks Online, which I use for my bookkeeping. QuickBooks syncs with my business banking accounts and credit cards, making it much easier to track income and expenses to the source.
Not everyone has a business, so you will need to modify your processes based on your needs. Other common sources of income include rental property income, freelance or contracting work, investment income, and income from side jobs.
When possible, I recommend automating this, even if there is a small fee. For example, many small business owners, freelancers and contract workers use PayPal or other payment processing services. They may have to pay a small fee to receive their money, but it’s faster and easier than dealing with checks, especially if you travel frequently.
Many landlords I know also use online payment processing to avoid the “check’s in the mail” routine. Again, it’s faster, safer, and more reliable than relying on checks. The site BiggerPockets lists many ways to accept rent payments online.
You will need to find the best solution for your situation. But put some thought into it. It doesn’t do you any good to earn extra income if you can’t easily cash or deposit your checks.
Military Friendly Banks Offer Unique Benefits
There are many great banks, credit unions and other financial institutions. I have a few different bank accounts for both personal and business needs. In general, I recommend military members open a checking and savings account with a military friendly bank. These financial institutions typically offer benefits to military members, such as free checking, free (or reimbursed) ATM withdrawals, and favorable terms for other products and services. They may also offer special terms while you PCS or deploy.
Here are a few different options for further reading:
- Best Military Banks, Credit Unions and Financial Institutions.
- Chase Bank – Free Military Checking (plus a limited time Sign Up Bonus)
- Best Online Savings Account Interest Rates (great for keeping your emergency fund separate from your primary checking account).
Automate Your Investments
Investing is essential. The easiest way to invest in the military is through the Thrift Savings Plan (TSP). It’s like a civilian 401k plan, and contributions come right out of your paycheck. I recommend just about everyone sign up for and contribute to the TSP. Simply log in to your myPay account, select the TSP option, and choose a percentage of your paycheck to contribute. You can be done in about 5 minutes.
Automating other investments is also usually pretty easy. Most investment companies allow for automatic contributions, either directly through a payroll allotment, or from your checking or savings account.
Retirement Investments: I’d recommend starting a Roth IRA, which offers great long term benefits. This is a retirement account, so make sure you won’t have an immediate need for any contributions you make. Most firms allow automatic contributions each month. Making consistent investment contributions is the quickest way to grow your wealth.
College Savings: I have a 529 Plan for my two daughters. I also transferred the GI Bill to them, so I hope that college won’t be too much of a burden between the GI Bill and regular contributions to their 529 Plans. Check with your state to see if they offer a good plan, and again, set up automatic contributions so you can invest each month without having to worry about forgetting to make the investment. Bonus: some states offer tax deductions for 529 plan contributions.
- Related resource: How my wife and I plan to pay for our children’s education.
Taxable Investment Accounts: Taxable investments are a great way to invest for intermediate goals. These are typically funds you don’t need immediate access to, but don’t want to tie up until retirement. Taxable investments are also a good option if you have extra income after maxing out your TSP and IRA contributions for the year. Setting up automatic contributions can be done through your investment company’s account interface.
Tips for Automating and Tracking Your Investments
I track all my banking and investment accounts with Personal Capital. It is a free online wealth management tool. I love it! The tool is free and easy to use. Here are some of the primary features:
- Track Income and Expenses
- Bank Account Balances
- Track Investment Account Balances
- Asset Allocation Tool
- View Investment Management Fees
- Suggestions for Improving Your Investments
- and more
Personal Capital also tracks and updates Thrift Savings Plan account balances, which is not something available in many similar tools. So this is a great tool for military members.
Visit the Personal Capital website to learn more or open an account.
Other Resources: Mint.com is another good option for tracking your finances. It’s excellent at tracking your income and expenses, but not very good at tracking your investments, at least compared to Personal Capital. I have a good handle on my income and spending, and I’m much more interested in tracking my investments. So I strongly prefer Personal Capital. You should also check with your bank or investment company, as many of them offer ways to track your finances. USAA and Vanguard both offer services that can help manage your finances.
Housing & Utility Payments
This topic is more variable than the others we touched on so far and will depend on your housing situation and how your utility companies process bills and payments.
Automating Mortgage Payments: It’s a good idea to set up automatic mortgage payments through your lender. I created an automatic payment each month for my principal plus a little extra to help pay off the mortgage more quickly. Your bank or your lender should make this easy.
Automating Rent Payments: Renting is another story. More and more landlords are requiring their tenants to pay online or through an automated system. This is usually better for everyone involved.
However, not all landlords or apartment units are set up to handle digital payments. In this event, you can ask your landlord or management company if they are willing to set up a process where you can pay online. If not, try your bank’s online bill pay. Some banks will allow you to manually create a bill pay recipient, and the bank will send a physical check to the recipient each month. This makes it easy to send a rent payment even if you are TDY two states over or deployed and serving halfway around the world. And since most of the banks process these payments and send them from the US, the processing time may only take a few days. Many banks also allow you to schedule these payments, so you may find it possible to schedule all your rent payments for the entire duration of your deployment or TDY before you even leave home, reducing any complications that may result from spotty or non-existent Internet service.
Warning – Don’t Post-Date Checks: Whatever you do, don’t leave a stack of post-dated checks with your landlord or property management company. There is no law to prevent companies from depositing a check, even if it is dated a year into the future. So leaving a stack of checks could result in all the checks being deposited at one time – potentially overdrawing your account and causing bounced check fees and expensive overdraft penalties. It’s much better to mail the check each month, or use one of the above methods.
Automating Utility Payments: Utilities are the wild card here, as they vary by location. Some utility companies will allow you to make payments with your credit card. Others will not. If they allow it, setting up your credit card as the default payment option makes it easy to avoid any late payments and resulting penalties or fees. The bonus is you can earn rewards points or cash back each month (just pay the balance in full!).
If credit cards are not an option, then see what you can do. Some utility companies offer automatic bill pay through banks. Some will go so far as to sync with your bank so you can receive the bill right inside your bank account. This is a good way to streamline and automate your billing and payments.
Automating Other Bills
Many other bills are fairly easy to automate. But some may require a little more planning to automate, while it may not be possible to automate other bills.
Installment loans: Car loans, student loans, and other installment loans usually have a fixed monthly payment. This is easy to set up as an automatic payment through your lender or through your bank. Just make sure there aren’t any changes to the monthly payment, and you’re good to go.
Regular Bills: Auto insurance, life insurance, and other regular bills are best automated. The last thing you want to do is avoid missing a payment and losing coverage. I set these up directly through my bank.
Credit card payments: I strongly recommend setting up automatic payments for your credit card(s). I made the mistake of missing a payment two or three times before I set up autopay. Thankfully, the companies were good about waiving the late fee and not reporting the missed payment to the credit bureaus. That simple mistake prompted me to set up automatic credit cards payments. This was one of the best decisions I ever made. Not only do you avoid any late penalties, fees, or interest payments, but you also never have to worry about it again. The peace of mind is liberating.
I am an advocate of using credit cards, and I use my credit cards for most purchases. But I only recommend this if you can pay the balance in full each month. If you carry a balance, then set up automatic payments for your bills (try to pay more than the monthly minimum), and use other means to pay for everything else.
Other bills: Some bills aren’t easy or possible to automate. For example, you may have work from a general contractor for some recent home improvements. Or medical bills that arrive in the mail a couple months after you see the doctor. Child care or education costs may be variable, or the companies may not be set up for automatic payments. These types of payments may not be easy to automate, and may present a problem if you deploy or go TDY. Try to keep a list of any bills you may owe in the near future, and the contact number for the company. Then reach out to them if you don’t have a family member or trusted friend who can monitor your mail or pay bills for you. Many companies are understanding if you explain the situation, give them notice, and are proactive with making payments.
Things to Consider With Automated Finances
The most important thing to remember is to continue tracking your finances. Automation is great. It saves time, money, and helps avoid missed payments and the resulting penalties and fees. But it can also be dangerous if things get messed up, if your account runs low, payment amounts change, or something happens to one of your accounts in the mix.
Set Up Overdraft Protection
You don’t want to get into a situation where your account is overdrawn and each new transaction creates a $25 – $35 overdraft fee. That can quickly spiral out of control and cause you to accrue hundreds of dollars in penalties. Instead, try to maintain a decent cushion in your checking account and set up overdraft protection with your savings account, or if necessary, an external banking account or a credit card. I would use a credit card as overdraft protection as a last resort, as those usually incur a cash advance fee of a percentage of the amount transferred to your checking account (but this is still usually less expensive than a $25 – $35 overdraft fee).
Have Backup Financial Accounts:
In general, I prefer consolidating financial accounts to reduce redundancy. But sometimes, having secondary financial accounts can be a good idea. While adding more accounts can add a layer of complexity to your finances, having a backup account can actually save you time and money if something happens to your primary account.
Backup Checking and Savings Accounts
Many people can get away with only having one checking and savings account. But as your situation gets more complex, you may find it better to have more than one set of accounts. I have done my primary banking with USAA since my first duty assignment, which was overseas. But USAA doesn’t have many physical branches, so I opened an account with Chase Bank for those times when I need to visit a local branch. Both of these banks have a great online presence, allow for remote check deposit, and offer great products and services.
The other benefit for having multiple accounts is in the unlikely event your account is compromised and your account is overdrawn or you need to close your account. For example, a friend of mine was on vacation and had his debit card stolen. Thieves drained his account. It took several days before the bank restored his funds. Having access to a credit card or another account would have prevented a lot of problems. Instead, his vacation was ruined and he had to beg his bank to put enough money back into his checking account to afford gas to drive home.These problems could have been avoided if he had a back up account or a credit card for emergencies.
More Banking options:
- USAA Federal Savings Bank
- Chase Bank – be sure to look into the Chase Bank Military checking, which doesn’t have any monthly fees.
- Best Military Banks – USAA, PenFed, Navy Federal Credit Union, and more.
Backup Credit Cards
I strongly recommend having at least one backup credit card. Data breaches are too commonplace these days to rely on just one credit card. I’ve had three credit card numbers compromised over the last 5 years. I didn’t lose any money due to the credit card fraud protections. But the credit card issuer cancelled the credit card and sent me a new credit card each time. That meant being without a card for a few days, and going through my automatic payments and entering new credit card payment information. You don’t want to have a credit card cancelled when you are away from home, as a replacement may be difficult to receive.
Featured Credit Card Options:
Always Review Your Financial Statements!
Automating your finances is empowering. It’s a great way to save time, avoid late payments, penalties, and fees, and it’s a great way to make sure you pay yourself first – for savings, investments, or other goals.
But don’t make the mistake of setting things on autopilot and ignoring your finances.
Many companies want you to set up electronic statements. I do this for some, but not all of my accounts. I use electronic statements for my investments and a few select accounts, because I don’t need a physical reminder to check them each month. But I do not set up electronic statements for my credit card or utility bills. The paper statement is a physical reminder to review my statement each month. This helps me monitor my spending, utility usage, and other aspects of my finances.
Electronic statements can be a good, and many people prefer them to paper statements. Just be sure to review them and not let them pile up in your inbox. Failing to review your statements could cause you to miss something important, and could cause you to end up spending more money than you should.Related posts:2009 Veteran's Day DiscountsThe Case for Automating your Finances $100 Bonus for New USAA Checking Accounts Benefits of Consolidating Financial Accounts