Jan 09 2012

How I’m automating our money so I save time and meet our goals


Ever since Shane started getting bi-weekly paychecks instead of monthly back in May, I’ve felt out of my budgeting element. With a once-a-month pay cycle, I could just schedule bills to be paid out of that  amount and not have to think about it anymore. Our bank deducted the upcoming bill amount from our “available” funds so that we couldn’t overspend.

But with bi-weekly checks, my brain couldn’t process it. Some bills had consistent due dates, such as our mortgage. Bills such as electric, gas, and water/sewer were due a different day each billing period. One month, a bill might be due the 27th. The next, it would be due on the 23rd. Or something. And, some months (like this month, for instance) we don’t receive his first paycheck until the 13th.

I ran into trouble with this because sometimes the bill would come out of the second paycheck of the month, but other times it would need to come out of the first.

I felt frustrated with the bills. I could have called some billers and asked if they could move my due date, but I decided to go another route.

I’m automating bills in a way that will save me a lot of time. Also, I won’t have to scrutnize our cash flow each pay period: Will we have enough for this bill? Or do I need to float it with savings?

Right now, I’m listening to the I Will Teach You To Be Rich* audiobook that I borrowed from the library. The author is big on automating and I’m using my version of his techniques below (and some directly from him are linked to at the bottom).

I added up our fixed bills and looked at the ranges for what I could expect. Our gas bill, at its cheapest, was $25. The highest has been $110, and we’ve had an extremely mild winter so far. We don’t have a budget bill option yet, since we haven’t been here a full year.

So, I took worst-case scenerios for each category:

  • Mortgage $850 (PITI plus a tiny bit of extra principal)
  • Cell phones $56
  • Gas: $25-110
  • Electric: $86-100
  • Internet: $41
  • Trash & recycles: $18.30
  • Water/sewer: $63-94
  • Insurances (life, disability, car) $80/biweekly, usually $160/month

Total: $1300-1,429/month fixed bills

I rounded up the 1,429 to a full $1,500/month as an extra cushion.

I took that $1,500 and divided it by two: $750. Now, $750 by itself isn’t enough to pay our highest bill, so we’ll need some starting cushion in our checking account to cover everything until we have a few billing cycles going.

I’m going to have $750 from each of Shane’s paychecks deposited into our PNC bank account to cover our fixed bills.

We’ll also deposit our tithe (we write a check for this), IRA contributions, 529 account contributions, and a small general savings amount.

I tallied up this figure and we’re changing Shane’s direct deposit at work to cover this new amount. This is where our bills are already set up for online bill-pay, and I’ll make sure they’re automatically paid as they come due. The rest will go to our ING Direct account.

I’m scheduling our IRA to withdrawal 9% of our gross with each pay check, and I have it set up to do so a couple of days after pay day. The 529 plans will get an automatic contribution each month.

In essence, our PNC bank account will be for bills and for routing our investment funds to where they need to go. There will be some additional savings growing here, and we haven’t decided what we’ll do with it. We also haven’t decided what we’ll do with the third paychecks that will come this year. One is coming in June and the other will show up in November.

We’re having the remainder of Shane’s paycheck direct-deposited into our ING Direct account. Here, we have a checking account with debit cards, and a number of savings accounts all linked to one another. I’ve created several sub-accounts, such as home repair, car maintenance/tags, clothes, vision/dental, etc.

I’m trying to think ahead for the year on what we might spend in each of these categories, and we’ll set up automatic transfers to each account, occuring on payday. So, part of Shane’s check will deposit into ING on a Friday, and automatically $20 (or whatever) will be routed from there into our home repair category.

It’s a high-tech envelope system for budgeting. It’s taking the cash out of the process, and it’s also taking ME out of the process from having to do it manually each pay period. It does take time to sort and send money to where it needs to go, but also, by automating it, it ensures that I won’t just say, “Oh, we can skip saving for X this month. Let’s use the money for THIS instead.”

It’s a built-in protection for  our finances, while still keeping it loose enough that we don’t feel restricted. We know money is available and ready to pay our bills, and we know money is available to spend on things we need and want.

And, if things go well, we should end up with quite a bit extra in our PNC account by the end of the year, with the two extra paychecks and also the cushion and savings I’m allocating. We can take those  bigger chunks and further fund our IRAs, college, use for Christmas gifts, a vacation, whatever we want.

A caveat:

As noted in some of the articles I’m linking to below, you do have to be careful with fully automating things. For one thing, it’s important to still at least look at the bill to make sure there aren’t errors in charges. And, it’s important to make sure you’re not automating bills you don’t even need in the first place.

Further, it doesn’t mean I’m just setting it up and forgetting about it. Far from it. I’ll still make sure the system is working for me.

Here’s some more on automating your finances, or perhaps some warnings to consider if you do automate:

*affiliate link

Posted under Uncategorized | 8 Comments »

8 Responses to “How I’m automating our money so I save time and meet our goals”

  1. For some irregular bills, you could do the budget billing yourself. I have a separate electricity account I transfer $150 in each month (it has a buffer now since the winter has been so warm!) but it sounds like you have a pretty good system in place.

    I hate budgeting and watching where every dollar goes. I like to have a general idea. Like, I don’t want to know I spent $370 in food versus the $350 I budgeted. I feel like if we NEED groceries, we need them. So yeah, maybe I’m not the best budgeter. ;)

  2. I made a budget last week for us to follow. Eugene gets paid biweekly as well, and what i had always done with our budget is take his hourly wage times 40 times 52 then divided by 12. problem is, unless you’ve been on top of things, you don’t really have that in the bank. So our budget has never worked and I never tried to figure something else out. So this year I decided I know what is paychecks are for (what we actually bring home) so I took that amount and looked at our monthly bills and expenses and set up our budget based on two pay checks a month. I have it to the point of what we pay with each check, what goes into savings, what goes into the gas tank and what goes into buying household stuff like toilet paper. We were a bill behind in December so we had to pay that with his first check this month, so we didn’t get the money in savings out of his first check. But I am excited that it makes sense to me, AND that twice a year we will have a whole two weeks of pay going straight into savings/towards debt! Now the hard part- sticking to it!!

  3. Mrs. Money — yeah I think in a way I’m doing a giant budget bill for everything, since I don’t yet know which months might have more for one category. I guess rather than splitting it into separate gas or water, I’m just lumping it all together.

    The water bill will probably be higher in the spring and summer, and the gas higher in the winter.

    I don’t like tracking every dollar, either. Just too much work and too easy to screw up!

    Jes — sounds good! I think your system of using the actual net take-home is key, since it’s the exact amount you’re working with.

    It might take you a pay cycle or two to get everything caught up and working with your new system, but stick with it. I think you’re onto something good here!

    Email me if you want.

  4. Kacie when we made that transition from monthly pay checks to bi-weekly that was the hardest thing for me! I LOVED getting paid only once a month. It can be confusing with the bi weekly because of the bills and the due dates.

    I use the DR method of budgeting each pay check ot the penny, but that means every 2 weeks I have to figure out a new budget. Sometimes all of our utilities might be due on the same paycheck (which makes it very tight!) and other times it is split evenly. It can be very frustrating. I just try to look ahead and behind (I keep all of our old budgets in a notebook) and sometimes will set aside money for a bill even though I know it won’t be due for 3 more weeks to help even things out.

    I like your idea of automating things though, I will have to think about doing something like that myself.

  5. Jennifer — I really was frustrated when several bills would be due out of one check, and we had nothing left for retirement accounts or savings or fun money. It’s like…ugh, I don’t want to wait two more weeks for that stuff!

    I do hope this new system of mine will help cash flow a lot better.

  6. I love your blog! I found you the first week in Jan. this year and been addicted catching up on older posts. You are a good financial role model and your honesty helps me set Real goals for my family. I was wondering what are the advantages with using ING vs. a credit union or traditional bank?

  7. Thanks Christine! I just sent you a big ol email. It would have been a super big comment here.

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Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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