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Put Your Finances on Cruise Control, But Stay Alert

This article was written by in Personal Finance. 11 comments.


My Honda Civic has an option for cruise control. Unfortunately, most of my driving currently takes place on the New Jersey Turnpike and local highways during rush hour and construction, so I rarely have an opportunity to activate this feature. In the slim occasion I find myself driving on a deserted country road, I activate the cruise control and sit back, letting the car’s computer maintain my speed. I like to imagine cruise control is an auto-pilot device, so I can relax, close my eyes, and wake upon arrival.

If you’ve ever driven with cruise control, you’ll know it is not the same as auto-pilot. You have to be vigilant and aware of your surroundings, even if you’re not keeping your foot on the accelerator pedal. I have the same concerns with the topic of automating finances.

cruise controlMaking your finances automatic is a great way to put your savings into overdrive. I take advantage of technology’s ability to automate in a number of ways:

  • My paycheck is directly deposited into my bank account every pay period.
  • Several of my bills, as many as possible, are paid automatically and in full every month with the appropriate credit card.
  • My credit cards are paid in full every month without me writing one check or clicking one button.
  • A number of savings transfers and investments are programmed to occur at the same time every month, again with no intervention.

I would like to say that these features of automation have effectively put my finances on auto-pilot. It is true that I am now free to use the time I would have otherwise spent paying bills and depositing paychecks for other, possibly more worthwhile tasks. I am hesitant to call this system an “auto-pilot,” however. Like driving, I am still in charge and my brain needs to be engaged. If I stop paying attention, the likelihood of a crash increases.

I primarily use three credit cards, two for personal use and one for business use. Despite the cards’ close proximity in my wallet, their cycles have not converged. The payments are due at different times of the month. My checking accounts are debited automatically, so I need to ensure I have enough money in the appropriate accounts at the appropriate times to avoid an overdraft fee. The automation doesn’t permit me to to “set it and forget it.”

The same is true with my bills. I mentioned I drive on the New Jersey Turnpike every day. That’s an expensive commute. I use the E-ZPass system to make the drive go quicker and receive a discount on tolls, but this kind of automation lowers my sensitivity to increasing tolls. Since I’m not stopping at the booth and handing out cash, I don’t see that money leaving my wallet. I look at my quarterly statements from E-ZPass, but with 65 weekdays of toll charges, plus some on weekends, it’s easy to let the increases stay buried in my mind.

I’ve begun to offset the toll increases by opting non-toll roads occasionally but with more traffic lights on these alternate routes, I would have to wonder whether the extra fuel expense negates the savings in tolls.

Even though my utility bills like electricity, cable and telephone, as well as my credit cards, are paid automatically each month, I am sure to review the statement or transactions. It’s tempting to let cruise control handle everything. I mentioned that it’s important to ensure money is in the accounts prior to the automated withdrawals, but more attention is necessary. Reviewing statements and transactions is necessary to catch mistakes.

Mistakes can be on the company’s part or on the consumer’s; at least once I’ve forgotten to cancel a “free for the first month” service and was rewarded with a charge on my credit card. I would have remained ignorant of the charge if I didn’t review the statements and download my transactions into Quicken. And I have also experienced a number of mistakes, such as the cable company charging me for a service they didn’t provide.

Companies are quick to encourage automation because they know a certain percentage of consumers will let “mistakes” slip. That’s a statistic I don’t want to be.

What part of your finances is tackled automatically, and are you on auto-pilot or cruise control? Have you ever encountered mistakes you would have missed if you weren’t paying attention?

Photo credit: mhalon

Updated January 16, 2010 and originally published November 19, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 11 comments… read them below or add one }

avatar Rob Bennett

I see a big problem with the idea of putting your investments on “cruise control,” Flexo. Valuations change. A stock allocation that is just right for you at the valuation level that applies in Year X might be wildly over-risky for you at the valuation level that applies in Year Y. I think the goal should be to keep your risk level roughly constant. That means paying enough attention to changes in valuation levels to know when to lower or increase your stock allocation.

Rob

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avatar Lulu

I have my finances on cruise control now and I am so bored. I do not have to click or write checks or do anything. I do log in every day just to see that everything is going as planned and to have something to do.

I am twiddling my thumbs now because my automated finances have left me with nothing to do. Hee hee. Your plan sounds like mine, direct deposit for paycheck, automatic transfers for savings and push payments from ING to cover credit cards (4 times a month) and all bills paid on credit cards (earning some rewards baby!!!!).

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avatar Dan

I was about to write that I still pay most things manually, but after starting the comment, realized it’s not true. I’m not totally automated, but don’t think I want to be either.

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avatar Erica Douglass

“The payments are due at different times of the month.”

You know you can call and change the due date, right? :) It’s the first thing I do when I get a new card.

-Erica

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avatar Eric

^Ding ding! I was gonna say the same thing as Erica. One of the first things I do when I get a card.

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avatar Luke Landes ♦127,490 (Platinum)

Eric and Erica — you are both right, of course. Just one of those things I haven’t gotten around to yet. It’s one of those things I’ll do as I have more than one reason to call customer service and sit around on hold… No option for changing this online as far as I can tell.

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avatar LeanLifeCoach

Flexo, I’ve taken it one step further, complete automation via…. the wife!

Seriously, we work as a team and she is a great teammate!. Everything that can be automated is from direct deposits of paychecks to transfers into investment accounts, retirement and even the kid’s college funds.

To your point, you must verify each transaction every month. In the last two years we have had one mortgage payment and one paycheck fail. In the case of the paycheck there was no big deal we still had more than enough liquidity to cover everything. But with the mortgage payment, if we didn’t check it could have been a blemish on the credit reports.

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avatar Jon

I’ve had most of my finances on auto pilot for quite a while now, using bill pay at my bank. I’m not sure how much time it’s saved me, though, as I still check on it compulsively, and spend time entering transactions into MS Money for all my accounts and investments. I do know it’s saved me some money, as I haven’t had to buy a stamp in ages.

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avatar vcmcguire

I used to have almost everything automated, but we just moved, and I haven’t re-automated our utilities yet. It’s sort of a nostalgic pleasure, sitting down with the checkbook to pay the bills.

One advantage to having paper bills come in the mail–it’s easier for my spouse to take over managing the money if I’m out of town or sick or something. If everything’s coming to my email and I’m the one who knows all the passwords and due dates, it’s harder to share the tasks.

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avatar Doctor S

I have automated the majority of my bills now and I must say it has been a huge stress relief. My car payments and one of my debt payments are no on autopilot. The only thing that is not is my credit card debt and student loan. The credit cards will be at $0 by year end which will make paying my student loan every pay period so much easier.

Next step…. integrate automating my savings!

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avatar Ed

Credit Card users!!! Did you know how your credit card purchases make the prices go up on every products and services you pay with your plastic? It’s true, you get that Airline ticket for free, or some other staff for free, But, that is nothing, comparing with what the seller has to pay to Visa and Amex just because you want those miles.
I am a small business owner and here is what I do. We are in a service business and we get paid per hour. Lets just pretend that we are rich, and we charge $100 per hour. We don’t just shoot rates out of our heads, we do calculations. This 100 includes our operating expenses, taxes, fees and of course the profit. This 100 also includes anywhere from 1.9% to 3.5% credit card charges that I have to pay to credit card companies just because you paid by card.
Now, you might say that “come on man, that just a buck or two, get over it” . Well buck or two, but there are Billions of dollars being spend on credit cards everyday by buying goods and services, which adds up to Billions of dollars paid to credit card companies like Visa and Mastercard.
Basically, to be short. Credit Card companies pay you to use your card, then they charge me the money they paid you plus their own profits, then I charge you the money I paid them. So At the end of the day, you bought the product or services and paid a little more than it cost.
As a business, I did not lose anything, YOU lost it and the credit card company made a huge profit.
Lets see… how many miles or points do you have to have to qualify for a $350 ticket? At some point I heard you must have about 55,000 points, right? I love math, wanna see how much You really paid for that ticket?
55,000 – 2%=1,100.
Guess what? YOU just bought a $350 worth of ticket for $1,100. Congratulations, You have saved -$750 Now go and spend some more on your credit card… collect those points!

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