I think I first heard the term, auto-magical, over at GetRichSlowly. What he means by auto-magical is having all your bills setup to be deducted from your accounts automatically, so you don’t have to write checks or anything like that. He was talking about how it helps him organize his finances and makes everything very easy. Since then, I’ve been thinking of doing the same, because, hey, who doesn’t like easy, right? Slowly, I started converting little things here and there to just come out of my account when it was due. I got to the point where most of my bills were automatic. Most of these were not only easy to setup this way, but almost required to be like automatic. An example of this would be my Netflix account, which I currently have on hold (a nifty little feature). When you sign up, you basically have no other method of payment then to setup automatic monthly drafts.
All in all, I think having all of my accounts handled automatically is convenient and simple. But now, I’m having second thoughts about whether I should be going this route. After talking to my mom about this, she made a very good point about things coming out of your account causing all sorts of problems. I thought that through for a while, and I really think she is right. Although automatic bills is simpler and effective, it can cause some stress, fees, and other problems. This is what caused me to re-think having my finances auto-magical.
I think the stress comes in during those times when I’m short on money. Since the bills coming out of my account are setup to come out of my account, I have to prioritize those because they are getting paid no matter what. I might be stressed because the money is coming out of my account on Wednesday, but I’m not getting paid until Thursday. That’s not a big deal, unless, you don’t have enough money in the bank to cover the amount until you get paid. Then you have to sweat and figure out how to come up with the money a day early. If you can’t, you will get dinged with fees from the bank, and possibly the bill people as well. Unfortunately, I have experience with all of this happening, and it is definitely not fun. Even if you plan for the money to come out, it might cause problems. An example of that would be a cell phone bill that is a lot more than you expect it to be. If it comes out of your account automatically, it makes it difficult to budget for the overage.
The big problem with this is when fees come into the equation. This is where the convience of automatic withdrawels can really hurt you, when they start to pile on overdraft fees and returned check charges. All in all, you can plan to avoid this, but, chances are if you are like me, part of the inability to plan for these types of things is a reason your in a predicament to begin with.
But, I still think having my finances auto-magical would be an ideal setup. What I think now is that I have to be in the right situation to do that. Before I can safely let my bills come automatically out of my accounts, I have to be setup where I have the money in the accounts beforehand. What that means is I can’t be living paycheck to paycheck to have my finances auto-magical. I have to get to the point where I’m a whole month ahead in paying my bills, so the money can be sitting in the bank account waiting to be used for the bill. Once I get to that point, then I can take advantage of having everything auto-magical. I can sit and relax and not have to worry about having a late bill. Until then, though, I think it would be best for me to keep manually paying my bills and make myself aware of what’s going on with MY money.
I just have to take the steps to get there…

Filed under: budget, finance