I also think it’s ‘out of site out of mind’ so in addition to your inconvenience factor people actually forget what they are paying. Here in the UK it’s very common for utilities companies to offer a very small discount if you direct debit. IMO this ensures people forget and so don’t regularly check who is offering the best deal.

@deegee – I pay my credit card online thus avoiding the stamps, and all that, but I log in and do it manually I rarely have it deduct the money automatically. This allows me to pick whatever account, etc. Same for paying into my broker account. I log on, click some buttons. The money gets transferred within 5 minutes typically.

I’m with you on this one Jacob. I rarely automate bill paying, although I love online bill pay. I find I pay less attention to bills if I don’t have to submit the payment every month. I definitely wouldn’t automate payment for bills that vary every month, like utilities. I’ve had problems with places like the gas company continually overestimating my bill. It was hard enough to get them to fix the bill; I can’t imagine what it would have been like if I had to get them to fix the bill AND refund my money.

Here’s what I automate:
1) paycheck deposit
2) transfers to retirement accounts
3) transfers to SmartyPig
4) Netflix and Renewable Choice
5) my mortgage payment
6) income taxes, mortgage escrow

#1-3 are to me, and thus good for me by your definition.
#4 are regular payments that cannot be made any other way to companies that I do not fear.
#5 is, well, let’s just say that this slimy company can actually do less damage when I let them do this; plus they bribe me by letting me wait until after the first but charging me interest as if I paid on the first.
#6 I have no choice about (until I pay off my mortgage).

Here are things I pay monthly, semiannually or annually that I do/did not automate:

1) phone
2) gas
3) other utilities
4) donations
5) credit card
6) car insurance
7) gym (old days)
8) ballroom dance lessons
9) flood insurance
10) other savings, mortgage prepayment

#1-6 I pay electronically somehow. #1-3 are variable, so I pay them myself to make sure I have enough. #4 has variable recipients, so I have to take charge of that myself. #5 is variable and slimy. #6 might be slimy. #7 is definitely slimy. #8 is backwards (and cheap) and accepts only checks. I think there’s no other way to do #9 either. #10 is variable, and the other companies can’t guess how much I want to save or prepay each month.

What’s sad is that some of us are our own worst enemies. We are more likely to forget to pay than to have late paychecks, etc., so it’s the lesser of two evils. I basically have a list of things that I double-check that I’ve paid each month and try to pay the same day I get the bill.

I do a variation. That is, I allow automatic debits of anything that is the same everymonth (my mortage, my car insurance, my security system,and my past due taxes for example). Then I pay electronically by pointing and clicking everything else (again, I pay bills once a month, period), like my utlities and so on (my utilities are not averaged so they vary each month(

I automate everything I can, which currently would be trash, sewer, water, phone/cell/TV. However, I know where every penny goes each month.

My investments aren’t automated – they probably should be.

I’m very forgetful. Therefore I automate all I can. But I read all my bank statements and invoices.

Interesting tangential point: The idea of withholding taxes from paychecks came from none other than Milton Friedman. Even more interestingly, Friedman claims that one of the major opponents of the idea was the IRS, because they thought it was impossible.

I think you have to see what works for you. Both arguments are valid but it depends on the person. It seems like Ramit has his ducks in a row so it works for him but also like Adam, I think it is important to be aware of what your spending is and automating can lead to bad spending habits.

I pay most of my bills by direct debit, from a particular account. Each pay cheque that comes in I ensure that NEXT month’s bills are covered. The only exception is my gas bill, and that will change soon as I’ve just switched supplier. I ‘trust’ both my gas and electric suppliers to bill me correctly because I read my meters every week 8)

So basically the boring day-to-day stuff just chugs along with minimal effort — but NOT without oversight 😉 All aided by the spreadsheet, of course – EXCELL – no scratch that – OpenOfficeCalc is your friend…

That leaves me to keep tabs on the credit card (yeah, 1% cashback…), cash and savings/investments. My savings cash gets shifted to a small holding account until I have enough to find a permanent home for it – I could automate this, I guess, but I think it’s more fun just skimming the excess out of my current account 🙂

So I definitely come down on the side of ‘something in between’ 8)

I’m in the fully automated camp, following Ramit’s method almost 100%. All our household bills are automatically paid if they can be. The only outlier is our sewer company, which I have to initiate the e-pay manually.

In 15 years, I can’t remember the last time there was a billing error from a utility company. If there is, the amount would stick out and would prompt me to call.

All other expenditures are paid via credit card and reviewed when the statement arrives. Again, I’ve never had a billing error as I recall. When the statement arrives, I set up an EFT payment and since this is a variable amount make sure the required funds are there to pay it.

I tend to agree with Jacob though that the best way to handle bills are to get rid of as many as you can.

‘It works for taxes too. How many people do you think would be as complacent about their taxes if instead of withdrawing their 10% state tax, their 8% social security tax, and their 25% federal tax, that is, approximately half their paycheck before they ever see the money and instead send a bill once a year which people had to pay with real money (not credit).’

Tax is ‘automated’ for almost all employees in the UK through the PAYE (pay as you earn) system. The self employed/rich/people with interesting expenses still have to complete a tax return. To be honest, people are pretty damn complacent about it – it’s just one of those inconveniences of the state that people whinge about, but largely tolerate.

That said, there have been stories of people being given the wrong tax coding etc. recently and that has led to some finance journalists working hard to fire up awareness of a) what we should be paying and b) whether we’re paying too much.

I’m not the best at reading for comprehension, but sometimes I do alright. To me this post seemed to be “should you automate your finances?”, not what your monthly bill pay set-up looks like. We all only have 3 choices: all, some, or none, so discussing your monthly bill pay set-up appears to not address the question of, “automate your finances?”.

Jacob argues you should stay away from scheduling anything that goes out. Taxes (and Milton Friedman and his parental libertarianism) are a great case for this. I don’t think your monthly water bill makes as strong a point. So back to taxes. If the “average” person, the teeming, huddled masses in the middle of the bell curve were given free reign over their paychecks and had NO taxes withdrawn all year and then had a $10k tax bill due on April 15th…well with doing no research on my part I’ll just say 75+% WON’T have $10k sitting in the bank earmarked for Uncle Sam’s fun-time tax bill. So know what do you do with these people who spent all their money? Debtors prison? Those were cool. Regular prison? Those seem pretty cool too. But prison costs money and the Govt still has no funds, so lose/lose. Should we fine the person who wasn’t bright enough to save $10k for taxes and is $5k in credit card debt? You can’t squeeze blood from a stone. Hmm, garnish his or her paycheck! And there we have it. Our current system (except for me since I’m self-employed and pay twice the taxes because I’m stupid) makes the most sense for the most people. If the government didn’t tax all our paychecks we would be worse off due to the overwhelming majority of idiots dragging us down by not paying their yearly bill. Of course none of us would screw up and not save enough for taxes because we’re all on this site, thus proving how handsome and smart we are. But the rest of those jerks…

You presume that the companies serve the average person, and then conclude from that presumption. Don’t companies serve the stockholders, CEOs, and boards or directors? I never heard of a company serving me, so the conclusion is may be erroneous.

You also assume companies make money from you automating your finances because it makes it harder for you to cancel. Following my theme of no research before 10am, I’ll guess that the bank gets paid by the utility companies for each automated transaction. I made that up. It was based on the fee merchants pay to swipe your debit/credit card (4 cents? 2%? something like that?). I bet the banks charge the companies a fee to ensure the company gets a “guaranteed” monthly income. If my fantasy holds water I bet they make more money that way (banks and companies that use the banks auto payment) then from making money by not canceling.

@JasonR
If after the first year 75% would not have the proper amount of tax and were sent to jail you can be quite assured that after the 2nd year only 25% would go to jail and after the 3rd year only 1%. It’s all about incentives. Speaking of incentives the income tax is a DISincentive for work – especially the progressive kind. The harder you work the less you keep of what you earned. The solution I’ve mentioned in my post about abolishing the IRS.

[…] Automate your finances? @ […]

Like many of the others, I do almost all our bill paying online; have automated any fixed monthly payments and utilities, go online myself to schedule payments for variables. I record all payments in my checkbook – I actually have a list I copy from month to month to be sure I’m not forgetting any of them. I make note of each notice of payments coming due that is emailed to me, and check my bank account online to be sure the payments are being processed. The online but not automated payments all send me a confirmation when the payment processes at their end. In the 5+ years I’ve been doing this, I’ve had no issues of unpaid bills or overdrafts. I think I actually write 2 checks a month (for local utilities that don’t allow online payments).

I’m currently doing the complete opposite of what most are recommending. Money out (bills) = automated, money to save = not.

I then put whatever is left into investment accounts at the end of the month.

Maybe I need to have another look at this but for me psychologically if I stash, say, £1000 away at the start of the month and end up with say £100 left at the end, I’m far more likely to just spend it. Whereas if I have £1100, that will go straight in there.

Maybe I’m just weird like that 🙂