You already work hard enough making your money. So give yourself a break when it comes time to pay your debts, recurring monthly bills, savings, and retirement accounts. Who wants to keep track of all that? Automate your finances so you can set it and forget it.
Here’s a rundown of everything you can automate, along with the pros and cons of this strategy.
- Never forget a payment. Avoid late fees, disrupted service, and hits to your credit score.
- Set automated payments for any amount you choose. This really comes in handy for paying down big balances and building up savings.
- Take the decision-making out of how much you pay every month. In this way, autopay keeps your financial goals in check.
- It’s easy to forget auto payments are scheduled. If you haven’t left enough money in the bank to cover them, then that could mean insufficient funds fees, overdraft fees, late fees, and, in some cases, interrupted service.
- You’re stuck with whatever payment amount you set up. Certainly you can make arrangements to change it, but that takes time. If you don’t realize until today that you can’t cover the payment scheduled for tomorrow, you’re out of luck.
Automating student loans comes with a pro all its own: Most student loan servicers offer a .25 percent interest rate reduction for setting up autopay. You can set the recurring payment for the minimum monthly amount due or a higher amount if you are trying to pay off your student loans early.
Of course, if you want to pay your student loans off faster, you may not have the same amount to put toward the debt every month. In that case, set it to the minimum and then just send in extra cash as a separate payment. Just remember not to include your minimum payment in the extra payment, as that is already going to come out automatically, no matter what.
For instance, let’s say you have the automated payment set for the minimum amount of $300, and you want to pay an extra $100 this month. If you manually send $400, it’s not going to prevent the $300 from coming out automatically.
Don’t know who your servicer is? Find out.
Though your credit card balances may vary from month to month, that’s no reason not to automate your finances on this front, too. When you set up automated payments through your credit card issuer, you can choose to pay the minimum amount due every month or the full balance.
Alternatively, if you’re paying down a high balance — and want to pay more than the minimum, but not the full balance — you can specify a set monthly amount.
There are a couple of scenarios in which you could run into trouble:
- You charge a big purchase to your credit card and have the recurring payment set to the full balance. That could do some damage to your bank account if you weren’t prepared to pay off that charge right away.
- You have a high balance on your credit card that you’re paying down with a set monthly amount, but you’re still using that card, too. A big enough charge to the card could push the minimum amount due higher than the amount you have scheduled.
One solution is setting your autopay to the monthly minimum, then manually paying any extra — either to pay off the full balance or to pay down a high balance. Worst case scenario, you forget to pay the extra, but you’ll never miss the payment entirely.
The best solution, though, is never charging more to your credit cards than you can afford to pay off by the due date. Stick to that rule and you can set it to pay the full balance without worry.
Utilities and other bills
How many bills do you pay every month just to keep your household running? It may be half a dozen or more, all with different due dates that you can’t afford to forget. Fortunately, pretty much any bill you pay on a monthly basis can be automated these days:
Be careful, though, about which payment option you choose. Only have these bills charged to a credit card if you are committed to paying your balance in full every month — the last thing you need to do is pay interest on your phone bill. Consider playing it safe and having bills like these come directly out of your checking account.
Visit the company’s website for details on setting up autopay. If you don’t find any information on the site, give them a call. If the company doesn’t offer such an option, you’re not out of luck. You can always look into setting up bill pay through your bank.
Up until now, we’ve been talking about bills for which there are consequences if you miss payments, like late fees and interrupted service. That’s not the case for savings, but that lack of urgency is the very reason you should set it and forget it.
When you manually contribute to your savings account, you give yourself an opportunity every single month to change your mind. But when you automate your savings, it takes a few extra steps to prevent that contribution from being deposited. Sure, you could dip into it if you wanted, but once it’s there it’s a tougher sell to spend it instead.
You may already be entered into automatic retirement contributions to your 401(k) through your employer. Just keep in mind that, unless you specified otherwise, you are having the default amount deducted from your paycheck.
The default is usually around 3 percent. While that is better than nothing, it’s worth checking in each year to see if you can afford to contribute more. And remember, you’re limited to how much you can contribute every year. The 2016 401(k) contribution limits are $18,000 if you are under 50 and $24,000 if you are 50 or over.
Contact your employer’s human resources department to make changes to your 401(k) contributions.
If you are self-employed, look into an IRA (Individual Retirement Account) as a way to automate your finances. As with the 401(k), revisit your contributions at least once a year and ensure it still makes sense for your financial situation.
Of course, IRAs come with contribution limits as well — much smaller, in fact, than those of the 401(k). The 2016 IRA contribution limits are $5,500 if you are under 50 and $6,500 if you are 50 or over.
By the way, you don’t have to be self-employed to contribute to an IRA; they can be a good supplement if you max out your 401(k) contributions.
Automate your finances, but don’t ignore your payments
Mistakes get made and when it comes to your bills, you need to catch them right away.
Pick a day every month to check all of your statements, just to be sure your payments are being made on time and for the right amounts. You can set and forget your payments, but when you automate your finances, remember to follow up.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.