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Un-Automating Your Finances Has Its Place Too

by J. Money on Wednesday, July 9, 2014

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“Automating your money is the bees knees” – every financial expert ever

If there’s two things you can count on in the world of personal finance, it’s that spending your money on coffee is dumb, and automating your finances is smart. While I can’t say I agree on the first one on the list (pauses to sip his Panera Bread coffee he just “blew” $2.25 on WITH FREE REFILLS, BITCHES!), I do happen to agree with the 2nd one. But only about 69%* of the way.

So let’s talk about the 31%** that rarely gets its due: the virtues of MANUALLY managing your money!

Virtue #1: Appreciating Your Money

We’ll start with something we all hate, but we have to do to keep living in this great awesome nation of ours we call U.S.A (or, any great nation for that matter): Paying taxes. We all have to do it, and it sucks, but nothing gives you more of an appreciation for money than having to manually send in a check every three months to pay your fair share to the community.

To give you a better sense of this, here’s how much I’ve paid over the past 3+ years of self-employment:

Do you know how HARD it is to send in a check for those amounts? Every 3 months? At first I bitched and moaned and called it the most annoying part about working for yourself, but as an older and wiser man now, I’ve actually come to really appreciate it.

Yes it still stings like a mother every damn time, but it a) gets me to STOP and soak in the reality of the situation (when was the last time you reviewed your tax %’s?) b) it gives me a small burst of “way to do your part” to feel good about for a hot 2 seconds, and then c), and most importantly, it gives me a great chance to revisit my strategies on ways to try and pay LESS before the next round hits ;) Nothing prompts your savings muscles as much as sending in a $8,000 check to your gov’t! Haha…

Virtue #2: Appreciating Your Success!

Similar to manually paying your taxes every quarter, every time you manually shoot some savings or investing money in your accounts you get a burst of accomplishment right off the back. In fact, you feel it the second you click that “submit” button. (Or, as I like to call, the “F*ck Yeah!” button). It’s a shot of endorphins like no other.

Now can you get the same feeling by automating all your savings? Of course. And, for a majority of people who’s especially lazy/forgetful/untrusting of themselves, that’s probably the smart move. But don’t underestimate the power of physically moving your money to better places too. I can’t think of much that gives you a better feeling than that, outside of maybe having sex ;)

This also works with paying down mortgages/debts off too. Yes you can automate the payments and have it do the work while you sleep, but this is the type of work you most certainly WANT TO BE AWAKE for! Don’t you want to see those numbers dwindle before your eyes? Wouldn’t it feel insanely satisfying chipping away with every click of the mouse?

For me it sure does, and for that reason I manually pay (both) of my mortgages manually every single month. Making sure to round up for extra pay off every last time too. You get double the virtues for your money this route: feeling the burn (aka appreciating your money) on TOP of appreciating your success! It’s a double whammy all good people deserve to feel :)

Virtue #3: Taking Control

The last of the three un-automating virtues is that of control. When you have the time to review and double check that all your bills or savings you’re about to release line up appropriately, you’re less inclined to get screwed in the end. I can’t tell you how many bills of mine were jacked up, or how many wrong purchases were applied to our credit cards over the years. And had they all been on rotation we would have paid for the mistakes ourselves and *hopefully* eventually caught them at some point.

So if you’re automating your entire life like most experts suggest (again, this may be better than the alternative of forgetting/spending all your money before you save!), just be sure you’re taking the time to *review everything* at least once a month too. Having stuff automated is supposed to make your life easier, not forget about your money altogether. If you’re not checking up on it every once in a while, you could be doing yourself (and your wallet) a great disservice.

Along these same lines, you also want to have a better grasp of where your money’s really going. My man Len Penzo said it best with his recent article on why he actively manages his money:

“Taking the time to track and analyze your income and where it’s going is a crucial element of managing your personal finances. That’s because doing so uncovers hidden money leaks that help you better allocate your resources, thereby ensuring you always get the most out your paycheck. It makes it easier to set financial goals too.”

While most people would vomit at updating spreadsheets for over 20 years in a row (that Len is a beast!), you can’t help but appreciate the reasoning for it. Every number you punch in and update forces you to stop and think about what’s going on with your hard earned money. Sure you know you pay $150 for cable/tv/internet, but would your feelings towards it change every month you type it out into your budget? Would you eventually get sick of seeing the $150 and *do something about it*? Maybe, maybe not. But by automating everything odds are you’ll think about it a lot less frequently.

For this reason I still manually pump out my own budget and net worth every month so I can see, appreciate, and know everything that’s going on with my money. The likes of Mint and Personal Capital are great – and people love ‘em – but it does take away a little hard work that can sometimes make the difference.

How I Manage My Own Money

True to the 69%/31% ratio, I automate a lot of my own money, and I actively manage the rest. As much as I love Len’s “track everything” style, it just doesn’t work for my life anymore.

Instead, I cheat a little and use a credit card to automate a bunch of my expenses, and then at the end of every month I have *one* spot to review and check up on stuff before manually paying the bill in full. Not only does this hit all 3 virtues for us, but it also reaps free money in the end by milking the credit card rewards for purchases we were going to make anyways :) It’s the perfect concoction of both management styles for us.

If it helps, here is everything we automate on this card (we rock USAA Credit Cards):

  • Cell bill
  • Cable bill
  • Electric
  • Water
  • One-off expenses
  • All other utilities

And here is everything we manually pay purposefully:

  • Our two mortgages
  • Credit cards
  • Daycare
  • Roth Ira contributions
  • SEP Ira contributions
  • Quarterly taxes

In Conclusion of Un-Automating…

So to recap, automation is good and you should definitely do lots of it to keep your finances (and sanity) on point, but also be sure to find ways to STOP and appreciate your money as often as you can too. Whether that’s monthly sit downs for an hour, weekly 20 min pings, a half automation combo like we do, whatev.

As long as you’re aware of the benefits and drawbacks of each, and pick the route that works best for you regardless of what the experts and/or I say, you’ll be treating your money with respect. And nothing sucks more than when your money bitch-slaps you back, believe me ;)

Now go on your way and OWN that money, friends! If you have any good tips for us in this department, please do share below. Pros and cons all over the place with this stuff, but it never hurts to re-consider the game plan if it gets you closer to that freedom in the end. Always a work in progress…

——
PS: I once received my paychecks in straight up cash, and I can tell you for a fact it’s a lot harder to spend holding all those $100 bills in your hands vs electronically. The whole situation back then was a bit sketchy (the company went out of business and we ended up suing ‘em), but the point still holds true: physically receiving your paycheck vs auto-depositing can heavily skew your actions… Always good to challenge things!

* I did indeed make up this percentage. You may recall it from sex 101?
** Also, studies show odd numbers come across as more “real.” Especially studies that are made up by anonymous personal finance bloggers…

[Photo cred: randychiu]


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{ 58 comments… read them below or add one }

1 Kirsten @ Indebted July 9, 2014 at 5:50 am

I do not have my smallest student loan on auto pay or I’d probably never make an extra payment. So I pay it each month and am now figuring out how much extra I can pay, too. It’s working so well, I think we will undo the autopsy feTure for each loan we are actively focusing on paying off that month.

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2 J. Money July 9, 2014 at 11:05 am

Yeah, once you know you’re good at paying the bare minimum on things like a responsible adult, it’s always great to move to stage II of stepping on the gas and paying off more – no matter big or small. And by manually paying them it gives you an opportunity every single month to send a little extra in while you’re there! Even if you skip months, you still THINK about it every month which is key.

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3 Louise July 9, 2014 at 7:14 am

I have a spreadsheet where I project how I want to allocate my paycheque for the next month. When I get paid I really enjoy keying in my actual numbers then doing the few transfers I have to :)

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4 J. Money July 9, 2014 at 11:11 am

Old school baby, love it! Make sure to add a category in for me, k? :)

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5 Lance Cothern July 9, 2014 at 7:56 am

Automating your finances can save you a lot of time, but like you mention, if you forget about your money it’s really doing you a disservice. I know I’ve caught a TON of errors and price increases on my bills over the years and saved thousands by noticing them (mainly with my cable bill).

I track my day to day finances in quicken, but I always type out my own monthly spending after the fact in my custom format. I also track my net worth in a custom format every month in excel. I probably only do all of this because I’m an accountant haha!

One thing with the USAA credit card, what’s their cash back these days? I just got a flyer from Navy Federal saying their credit card is now offering permanent 1.5% cash back on everything. You might want to check it out if you’re eligible.

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6 J. Money July 9, 2014 at 11:26 am

I’m sure that is better than USAA’s (haven’t checked in a while), but I like having all my banking under one roof so I’m okay with not having the *best* one out there. I pick simplicity over max rewards most times :) Appreciate the heads up though!

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7 Stefanie @ The Broke and Beautiful Life July 9, 2014 at 8:10 am

I know that every time I do a manual transfer of my freelance income from paypal into savings I feel like a total rockstar. I only have my savings account connected to paypal rather than checking, which is my automated way of forcing myself into savings.

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8 J. Money July 9, 2014 at 11:26 am

HAH! Brilliant!

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9 John @ Wise Dollar July 9, 2014 at 8:17 am

I’m with you on the taxes J! When we first started having to do that it was like pulling teeth to send those two checks out each quarter. Then, about a year ago, I stepped back and saw why we were doing it. First, I don’t want to go to prison, but more importantly, I saw it meant we were being successful and made me thankful for what we were bringing in. Ultimately it just drives me more. It’s the same thing with the SEP contributions each month too. I feel that contribution a bit more because I have to take that check in, but it’s a good feeling.

We don’t automate our credit cards either and that has helped us see, along with our budget, what leaks we may have going on so we can stop them.

I’ll second what Lance said in regards to NFCU, I got the same flier the other day. It might be worth checking out if you’re eligible.

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10 Dave @ The New York Budget July 9, 2014 at 8:22 am

I think there are different levels of personal finance. When someone is just starting out and lacks discipline, automating EVERYTHING is the way to go. If they ever dig deeper, much like people reading this blog, I completely agree that it’s time to start looking at un-automation.

Of course, there is a final level, for people that hate finances. Once you have a gajillion dollars, you can automate everything (I would still advocate being frugal, of course) and then things like leaks, etc don’t matter quite as much. Essentially, you are paying to be free from worrying about that.

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11 J. Money July 9, 2014 at 11:29 am

You pretty much summed up my entire blog post in two paragraphs – with an extra level to boot. Well done, sir :) Also, I’m totally going to be one of those gajillionaire non-carers one day, haha… gotta have a dream!

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12 Brian @ Debt Discipline July 9, 2014 at 8:31 am

I tried recently using mint and YNAB, but found old school excel works best for me. I have a few bills on auto pay, but generally like to know what’s coming in and what going out on a regular basis. It really doesn’t take more then 1/2 hour maybe twice a month to manage.

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13 Will July 9, 2014 at 8:56 am

It’s like the mom who let’s her kids run around the neighborhood freely but has them check back in at the house every hour to know everything’s okay.

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14 J. Money July 9, 2014 at 11:31 am

HAH!

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15 Natalie @ Financegirl July 9, 2014 at 9:13 am

Great post, J. I really stopped the auto-debit on my student loan payments because I found that I pay more on them if I have to pay them myself. My standard auto debit was about $1,600 / month, but when I have to do it myself, I always find a way to pay more – even if it’s just an extra $100 – it’s still more than I would have auto debited.

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16 J. Money July 9, 2014 at 11:33 am

Work it girl, you’ll be saving *thousands* in the end this way too – very smart.

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17 EL July 9, 2014 at 9:59 am

Automate or unautomate, as long as you get your finances in order is what really matters. Line up the preferred system and stick to it. One auto trick that works is, paying yourself first before any bills. If you can do that you will be ahead of many people.

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18 Mom @ Three is Plenty July 9, 2014 at 10:17 am

I automate most things – including my mortgage and daycare (and all utility bills are automatically paid as long as they’re under a specific amount – otherwise the bank notifies me). *but* I manually enter everything into YNAB on at least a weekly basis – more like daily. In short, I let the automation do it, but I monitor it closely :)

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19 J. Money July 9, 2014 at 11:34 am

Double whammy!

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20 Addison @ Cashville Skyline July 9, 2014 at 10:24 am

Like you, I automate things like utilities and cell phone, but I LOVE manually transferring money to Vanguard every month. It feels amazing to save, even if it’s the same amount every month.

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21 the spunky banker. July 9, 2014 at 10:31 am

Most of my stuff is not automated just so that I feel like I know where my money is going. My auto loan is automated and I tried to change that but I got a call from a lady at the bank (the bank I used to work at) and she said if I changed the way the payment was set up that she would raise my interest rate from 3.50 to 3.75… not gonna happen. I was pissed!

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22 J. Money July 9, 2014 at 11:37 am

You bring up a good point actually – a lot of places will hook you up pretty well if you automate things. In those cases I almost always choose automation and then try and remember to go back at the end of the month to “check in” while paying all my manual bills.

A quarter of a point in mortgage interest is no joke, so glad you’re staying put!

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23 Crystal July 9, 2014 at 11:16 am

We’re in your position – $7500 estimated quarterly tax payments based on last year’s taxes (next year will be way lower I bet). We automate all of our bills except the credit cards and our water bill since they charge for setting it up for auto-pay.

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24 Shannon @ Financially Blonde July 9, 2014 at 11:40 am

For the record, I don’t think coffee buying is bad (as I take sip from my overpriced latte) what I think is bad is not having a plan for buying the coffee. If coffee can fit in the life plan, then by all means indulge. I would rather by coffee and pluck my own eyebrows than no coffee and a wax. Anywho, I digress, I think that automated savings is good, but un-automating expenses is also good. When we un-automate, we are required to think about things and I think that every expense should be thought through.

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25 J. Money July 11, 2014 at 10:43 pm

True that. A plan is a must.

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26 Christine @ The Pursuit of Green July 9, 2014 at 11:56 am

Your breakdown of what you automate and what you don’t basically matches what I do perfectly!! I love manually putting money into my savings and pressing that button! For the stuff that isn’t so exciting, like utilities I just automate it. It’s a pretty small amount too so I don’t worry about not having enough in my checking acct to pay for it. Things like credit card bills change month by month and I always feel better manually paying it. Hurts more too…

We used to love paying extra on our mortgage every month. It just got sold to another company though and unless you set up automatic payments (with any extra towards principal lumped in) it costs $12 just for one time payments. Argh!

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27 J. Money July 11, 2014 at 10:44 pm

Well that blows!

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28 Amanda July 9, 2014 at 12:57 pm

I don’t automate anything (especially bills!) because I like knowing how much of my money is leaving my pocket and when and can update my spreadsheet.

It’s also helpful for knowing when Comcast believes your rate should be hiked up so you can punch it back down.

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29 J. Money July 11, 2014 at 10:46 pm

Oh man, they’re the worst aren’t they?

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30 Rick July 9, 2014 at 1:05 pm

Ok.. here’s something new that’s REALLY bothersome. What’s this “F” Like, Tweet, g+1 side bar that BLOCKS the left side of the page as I scroll down? I can’t read anything J.. fix this pls….

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31 J. Money July 11, 2014 at 10:47 pm

Yikes! I’m so sorry man, that’s def. annoying… Unfort. having a hard time duplicating it in all my browsers :( Not sure why it’s showing that way to you and not others? Will look into it further!

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32 Ryan @ Impersonal Finance July 9, 2014 at 1:15 pm

I’m way too comfortable with my automatic transfers into my savings and investment accounts, and for my mortgage. The others, I keep tabs on because I don’t trust comcast, or the electric company, or other people I owe, enough to give them unfettered access to my accounts. But I’m right with you man, if you have the time, and patience, it’s a solid plan.

And seriously, how good is Panera’s hazelnut coffee?

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33 J. Money July 11, 2014 at 10:48 pm

Answer: BEST EVER.

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34 Free To Pursue July 9, 2014 at 1:51 pm

I was happy to read this post today. We tend to behave like automatons because we’re encouraged to with “don’t worry about it” or “set it and forget it” messages. It’s good to have triggers now and then to make sure we’re awake and aware of the effects of how we behave. We need to slap ourselves on the forehead or pat ourselves one the back and feel the “warm fuzzies” once in a while.

Autonomy, not automation, is what make life exciting and makes us feel like we’re actually in charge of our situation.

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35 Rob July 9, 2014 at 2:40 pm

“pauses to sip his Panera Bread coffee he just “blew” $2.25 on WITH FREE REFILLS, BITCHES!” J$, I think that’s a first in the world of personal finance blogs. Love it!

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36 J. Money July 11, 2014 at 10:49 pm

Coming from you that’s high praise! Bitch! :)

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37 Jon @ Penny Thots July 9, 2014 at 6:13 pm

I hate sending in quarterly estimated taxes. But, I stop and remember that the more I pay also means the more successful I have been. Though I do make it a point to get out of paying as much as I can by deferring most of my income.

And I agree about the part about actual cash being harder to spend. Swiping a card doesn’t even make you think for a second if you have the money or not.

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38 Kassandra July 9, 2014 at 7:00 pm

I roll the way you do with automating the cc for our bills/utilities/other expenses. Then we make online payments for the cc statement after I review the charges. I also don’t automate our Vanguard transfers for our investments or for quarterly taxes. The lone ranger is the silly cheque I need to mail every month for the rent.
I need to ask the management company to get themselves set-up for on-line bill payments!

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39 J. Money July 11, 2014 at 10:50 pm

Yeah, what century do they think we’re living in now? ;)

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40 Alyssa Peterson July 9, 2014 at 7:22 pm

I actually don’t have anything automated. I’ve recently buckled down to pay off my credit card debt, and every personal finance book tells me to automate my finances. I don’t know if it’s just me, but doing that would make me feel like I have even LESS of a handle on my money than sitting down once (or twice a month) to take a look at all the balances and bills I have coming up. It also allows me to pay more toward a certain card or loan each month when I can. And I write everything down for my budget and bill paying, so I’m super old school (but if I don’t write it down, I don’t remember it at all…I’ve tried excel and I could never remember to use it or update it!).

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41 The Phroogal Jason July 9, 2014 at 9:47 pm

There are definitely lots of things that are automated but I also do have a spreadsheet I input values in monthly. That’s my way of keeping control. I think that’s one of the issues with all these great budgeting apps is that we lose some control and they lose their novelty.

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42 Karen July 9, 2014 at 9:59 pm

A+ on attending to details. I wish I was that motivated. Keep up the good work, Mister. I’m going to do something positive with my money after reading this.

I have unautomated. I just didn’t pay attention as much. When I refinanced a couple of years a go, the lawyer at the closing told me he doesn’t feel comfortable giving access like that. I just followed suit. I actually like paying my bills. I do automate fixed amounts when possible though. . .my daughter’s braces for example.

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43 J. Money July 11, 2014 at 10:56 pm

I like paying bills too – feels powerful! :)

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44 Dee @ Color Me Frugal July 10, 2014 at 12:25 am

We automate most of our regular payments including mortgage and student loans, BUT we automate it so that we pay extra on both AND we make payments on these things every two weeks when we get paid instead of monthly as required. This way we “automatically” pay extra amounts of money, and we pay it extra times too! We hope to be out of debt soon so we can begin working on being gajillionaires too!

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45 Holly@ClubThrifty July 10, 2014 at 8:55 am

I hate paying quarterly taxes! It’s so different than having it deducted from a regular paycheck! The first full tax payment I sent in was so painful I almost cried =/

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46 J. Money July 11, 2014 at 10:57 pm

It gets better over time – promise :)

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47 Alicia @ Financial Diffraction July 10, 2014 at 9:38 am

It’s funny, my automate/manual are mostly completely backwards to yours. I automate the insurance/mortgage/rent/etc, but I manually do the bills like cell phones/internet, etc.

Manually having to pay the internet bill just earned me $9/month loyalty credit for 12 months because they kept upping it. Not a big savings, but I would not have seen it if it was automated.

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48 J. Money July 11, 2014 at 11:01 pm

I’d manually pay more stuff if they gave me free money too :)

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49 Deb @ Saving the Crumbs July 10, 2014 at 10:25 am

I am less likely to spend time checking automated bills. When I have to pay it manually, I’m more likely to notice errors in charges or bills that are abnormally high that I should look into.

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50 Joe July 10, 2014 at 12:18 pm

I don’t have a lot of automation anymore since I left my job. I contribute to my i401k manually. Some bills are automated, but I enter it in to my spreadsheet manually every month. It takes a lot of time to go over my cash flow and net worth every month, but I think it’s worth it. I agree with Len and it’s the best way to get a grip on your finance. Personal Capital is really useful for a quick day to day check, though.

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51 Grayson @ Debt Roundup July 10, 2014 at 12:55 pm

I actually don’t automate most of my bills. I think I only have two automated. All of the others I do manually every month. I want to make sure I know where my money is going. I want to make sure it is paid and take some time to review my expenditures. It has been very helpful in managing my finances.

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52 Lisa E. @ Lisa vs. the Loans July 10, 2014 at 3:37 pm

My finances are part automated, as well. I don’t have my loans automated mostly because I like to see the progress every single month when I log in to pay my monthly payments.

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53 Zee @ Work To Not Work July 11, 2014 at 1:07 am

I’ve only automated a few things, my mortgage…. and that’s about it now that I think about it.. I always log into my accounts to pay bills just to see exactly what I’m spending my money on and I prefer it that way. When you see the stupid stuff that you’re spending money on you look back and say, “man that was dumb.” and next time something similar comes up you don’t do it.

I also like seeing my cable bill, I don’t track when promotional offers end so when I see my bill go up I know I need to re-negotiate.

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54 J. Money July 11, 2014 at 10:59 pm

It sucks we have to do that all the time too! I’m investigating better ways to save/watch in this department… Will post about my findings soon :)

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55 J @ the expat investor July 11, 2014 at 6:48 pm

I automate my rental house, personal home mortgage, and savings. As far as investment goes I manually contribute every month. Wish I didn’t have to pay taxes but they take a big chunk out of my paycheck also.

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56 Mr Ikonz @ Project Ikonz July 13, 2014 at 7:55 pm

I try to focus on only automating investments and savings, but have attempted to “un-automate” debt increases (like using my credit card).

I do find that automating investments etc enables me to take a lot of the emotion out of investing.

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57 J. Money July 15, 2014 at 12:08 pm

That’s funny – I LIKE my emotions when it comes to the investments part – it’s fun! :)

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58 ShuuCai August 22, 2014 at 6:29 am

I recently read, and summarized a book on automating finances (see -> financebookblog.blogspot.sg/2014/07/the-automatic-millionaire.html).

I believe as a start it’s good to cultivate discipline, or for the undisciplined, to simply automate to protect yourself from (over-rewarding) yourself! =)

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