Why aren’t you auto-paying all of your bills?

Quick read bullets:

  • Set up autopay AND paperless billing for all of your recurring bills, directing them to be paid in full by your credit card. Do this from the website of each individual company, and not your bank account’s bill pay software (unless that’s the only way you can do it.)
  • Pro tip: as you go, save the logins & passwords from each company’s site to Google Chrome or LastPass to avoid having to remember them, saving you time & avoiding frustration.
  • Next, set your credit card to autopay (and paperless billing) on the due date for the full balance. (Bonus points if you also change your credit card due date to the 4th or 5th of the month so that you can pay it right after your rent/mortgage. See my easy no-budget budgeting system for why this is a good idea.) If you are carrying a credit card balance and can’t pay it off in full yet, set your autopay to the minimum balance instead, and make extra payments on an ad hoc basis to pay down your balance ASAP.
  • You’ll still receive your bills via email (or paper, if you prefer) so you have plenty of time to check them and make sure they’re correct before the payments get made in case this worries you. You can cancel the autopay at any time, so there’s no risk of paying something you shouldn’t so long as you’re still checking your statements. (I don’t think I’ve ever once found an incorrect charge on my credit card, except once when my account info was stolen, but it doesn’t hurt to be vigilant!)

Why autopay everything?

Automation frees up your time and more importantly, your mental energy. You never have to worry about missing a bill or getting a late fee again. It keeps your financial system humming along, even while you’re on vacation or off the grid.

Does this look like your finances?

Why doesn’t everyone do this?

Some people are resistant to embracing autopay, so there’s definitely some psychology to overcome if you’re one of them. The resistance I get is usually something like: “I want to be in control/I don’t trust the autopay!”

My answer? You are still in control, and even more so since you’ll never miss a payment or get charged a late fee again now! You’ll see every bill show up in your email well before it gets paid, so you can still go through everything line by line to make sure the charges are legit if you want to. (I still do with my credit card statements.)

In the same amount of time it would have taken to pay the bill, you can easily login and cancel the autopay one time or permanently if you ever needed to. Autopay isn’t set in stone: it just changes your default behavior to paying all your bills in full and on time, and that is very good default behavior to have!

The most impactful financial advice I give is about setting up systems to make good financial things happen by default. Take advantage of this powerful technique wherever you can, and make life easier on yourself in the process.

How to set up autopay on everything

I start by putting all of my recurring bills like internet, phone, utilities, digital subscriptions, gym membership, car payment, auto insurance etc on my credit card using the autopay on the billing company’s site.

I use the company sites instead of my bank’s bill pay because

1) I want to use my credit card and

2) I think it’s more direct to pay straight to the billing company (no middle man to screw things up) and

3) it forces me to make sure I have online access and a remembered password to all of my financial sites, which is very important.

Once I’m done with setting everything to autopay with my credit card, I only have one bill per month hitting my checking account, which simplifies things when I glance at my checking account statements to see what I’m spending on a monthly basis.

If there are any bills that don’t let me, or would charge me extra to, use a credit card (public utilities, for example), I set up automatic ACH checking account withdrawals instead.

Setting up autopay on my internet bill

I log in to Comcast/Xfinity, then navigate to the billing area, and click the autopay link at the bottom left of the screenshot. For your bills, try googling ‘[company name] set up autopay’.

Then I add my credit card info (this is all perfectly safe; don’t worry!), and just follow the prompts to turn it on:

All set up! Now all I do is double-check the bill notification emails (which I set to paperless) to make sure I’m only paying my $35 and no more.

I do the same thing for all my other bills. Then I set up autopay on my credit card to pay the full bill each month on the due date.

If you have a balance you can’t pay off in full yet, set up autopay for the minimum balance to avoid any late fees on missed payments, and then make manual payments to pay down the balance ASAP.

From this screen I click ‘I want to’ and then look for the word ‘autopay’ to set it up

Once you’re done, you’ll have autopay set up looking something like this:

If my landlord or mortgage company offers electronic autopay, I set that up too, which will usually come straight from your checking account instead of your credit card. Every one I’ve dealt with over the past 5 or 6 years has had an autopay option, so yours probably does too.

If you use Capital One 360, you can even schedule a physical check to be mailed to any landlords that force you to use paper checks. Just log into your bank’s bill pay service to see what your options are. Zelle is another popular option for electronic bill pay that many banks use, including Capital One.

Your turn!

Take 30 minutes to do this yourself for all your bills, credit card, and then rent/mortgage. Afterward, you’ll have just a few monthly bills hitting your checking: 1) rent/mortgage, 2) credit card(s), maybe 3) a utility bill that you couldn’t use your credit card to pay, and 4) any cash or debit card transactions you have.

This makes it a lot easier to see your monthly spending.

*Boom!* You just saved yourself a ton of repetitive work logging into sites and making bill payments each month. You can check your emailed statements monthly to keep any eye on things, and then kick back and have a coffee or a whiskey (or a homebrewed cider!) while the machines do all the work!

Welcome to the 21st century! 🙂

60 minute financial makeover

Yes, you can change your financial life in 60 minutes. Set a timer on your phone if you don’t believe me, and let’s go.

The first two changes can be made by anyone and don’t even require any changes to your current spending habits. Definitely implement those ones before you leave this article!

Makeover tactic #1 – Retire earlier in 10 minutes: Minute 0 – 20

Log into your employer’s retirement plan, or open a Roth IRA, and boost your automatic contributions. (The article tells you how to boost these in the future instead if you can’t afford to do it today.)

Makeover tactic #2 – Manage spending in 15 minutes: Minute 20 – 40

Never worry about spending too much again when you do this simple trick using direct deposit + one monthly automatic banking transfer. (The trick still works even if you’re spending all of your take-home pay today, and requires no cuts to your spending if you aren’t ready to make any.)

Makeover tactic #3 – Increase savings in 15 minutes: Minute 40 – 60

Now that you’ve secured your 60+ retirement savings and fixed your spending, take your savings to the next level by cutting costs that you don’t care about so that you can spend or save more for what really matter.

Choose one of the below items and take 15 minutes to read the article and implement it. Extend the time limit another hour if you can and go through the rest of the list for some serious savings!

After cutting your budget back, take 5 minutes to revisit Step 2 and reduce your monthly spending transfer accordingly.

  1. Optimize your auto insurance. Log into your insurance policy to raise your deductibles and cut coverage you don’t need.
  2. Pick one of my 10 savings tips. Tips 1-5 let you choose from turning down the thermostat by 3 degrees, raising your insurance deductibles, cancel a subscription you don’t use much, lower your cable & internet bill, or optimize your cell phone bill. Tips 6 – 10 suggest deferring a large purchase, selling something online, get something from free or cheap used, switching to generic for something at the store, or DIY’ing a service you’d normally pay for (could be as simple as cooking dinner when you’d normally eat out.)
  3. If you’re a homeowner, downsize your trash can or look into refinancing your home.
  4. If you’re thinking about buying a car, save big on it with this guide.

Do this simple thing and never worry about money again

This is the second post in our series of steps you can take in 15 minutes or less to make a huge improvement in your finances. In step one, we talked about the importance of boosting your 401k contributions, even if only by 2-3%.

We’ll talk now about a simple trick I use to instantly stop worrying about over-spending, and start saving more income effortlessly.

TL;DR – Instead of sending all your take-home pay to a single checking account, send all of your income into a Savings account instead, and use a recurring monthly transfer from that Savings account into your bill-paying checking at the end of each month to cover your average expenses:

  1. In your direct deposit, or however you get paid, change the banking info from everything going into your checking to everything into your savings account.
  2. Next, log into your bank account and set up a monthly, recurring transfer from the Savings account that’s getting all your income now, into your checking account that pays all your bills.
    • Set the monthly transfer to your average monthly spending (see below for how to get this), plus a little bit extra to make sure you have enough.
    • If you can’t be bothered to estimate your spending, just set the monthly transfer equal to your monthly pay. If you get paid monthly, use your last month’s pay stub as your monthly transfer (make sure to use the take-home amount, not the gross!) Get paid every two weeks? Multiply your last stub by 26/12. Twice a month? Multiply your pay by two.
  3. Optional: for cars, vacations, weddings, college, and other big, irregular purchases that you need to save up for, either use some of the money that lands in your checking, or (much better) add more monthly transfer to additional savings accounts and send a fixed amount of money to them from your main Savings account. (Schedule these transfers a day after your checking transfer so that the spending money gets top priority in case there’s not enough in your main Savings.)

This simple direct deposit + monthly transfer setup ‘fixes’ your spending so that you aren’t tempted to spend your whole income. This drastically amps up your savings, especially as you get raises and bonuses. It also accounts for irregular income like that of self-employed folks, or those who rely on commissions, bonuses, or RSUs/stock options. It even works for retirees: just set all your pensions, dividend payments, social security, and any other income to go to Savings, and use the monthly checking transfer as described.

Ready to do this yourself in 15 minutes? Follow along below!

Use direct deposit to master your spending and amp up your savings automatically

My employer uses ‘Workday’ to manage employee pay. I clicked ‘Payment Elections’ to get to my direct deposit. Search your employer pay site for ‘payment elections’ or ‘direct deposit’, or ask your HR person how to change your direct deposit if you can’t figure it out.

Here’s what your set up might look like today, with the ‘balance’ of your paycheck all going to checking:

The Sucker’s direct deposit: everything going into checking in one lump sum.

Adjust your direct deposit to send everything to Savings instead

This is super easy. Just swap out your checking account number for your savings number in your direct deposit. Get the routing and account number for your Savings account by logging into your bank online.

The Pro’s direct deposit: everything going to Savings, with a monthly transfer to checking (we’ll show that next), and the rest that’s left in Savings to pay off debt, invest for the long-run, or buy a home, and NOT for spending!

Estimate your average monthly spending: the easy method

If you’re feeling lazy, or spend roughly everything and can’t be bothered to cut back yet, just find your last pay stub, convert it to a monthly amount of take-home pay, and set your monthly checking transfer equal to that. If you get paid monthly, use that amount. If biweekly– every two weeks– multiply your last pay stub by 26/12 and use that as your monthly transfer number. For semi-monthly– twice a month–, just double your pay stub. Make sure you’re using the take-home pay amount to compute your monthly transfer, and not the gross!

Think of this as the ‘save tomorrow’ method. Yes, that means everything today will go to checking and nothing will stay in savings. But, when you get a raise or bonus, it’ll get banked in your Savings without you having to lift a finger. You can always spend some of that extra money later by adjusting your monthly transfer upwards, or taking some money out for a one-time treat, but the default will be that you save more, and good financial defaults make all the difference.

Estimate your average monthly spending: the better method

To start saving some portion of your income today, roughly estimate what you spend each month, erring on the high side. First, add up any large, constant bills like rent or your mortgage that come straight out of your checking account.

Next, average together your last year’s worth of credit card bill and any other bills that come straight out of your checking account (or wherever else you pay bills from.) Include any cash that you took out of an ATM.

For credit cards, you and then log into your credit card(s) online, download the past year’s worth of transactions as a CSV file, and add them up in Google Sheets or Excel and divide by 12. Or, just look at your payments IF you pay your bill in full each month, and add up the last 12 of those and then divide by 12. Many credit card providers also give you annual summaries in January (look under ‘Statements’), so you can just grab your most recent one of those, get the total, and divide that by 12.

Here’s mine from my Chase credit card, which shows $16,035 in 2020 spending (bottom right), which is $16 K / 12 = $1,333 per month. They also give you a useful breakout to understand your biggest spending categories, but we’re not worried about that here.

For bills paid from your checking account, log into your account and do the same thing you did with your credit card transactions. Look for something like ‘Download Transactions’. Make sure to filter out stuff that’s not actually an expense, like transfers between accounts.

I downloaded my Capital One 360 checking for the past year into Excel and scanned it quickly for bills. I just had my mortgage, a utility bill, and a handful of checks since I put as much as I can on my credit cards. I added up the bills and checks and divide by 12.

So, let’s say my mortgage is $2,500, my credit card spending was $1,333, and the remaining misc bills that came out of my checking averages $167. That’s a total of $4,000 per month. I also use $200 / month for cash spending, so that’s $4,200. Round up to be safe, so call it $4,500.

Set up the monthly transfer to checking to pay your bills

Now that you have your estimated spending as a monthly number, log into your bank account and set up the automatic monthly transfer at the end of each month to go to your checking. Schedule a few business days earlier if you’re transferring from Savings at one bank to checking at a different bank since it could take 2-3 business days.

Here’s how my transfer looks using Capital One 360:

At Capital One 360, you click your checking account then ‘Transfer’ to set up a recurring monthly transfer like this.

Pro tip: If your rent/mortgage is paid on the 1st, change all of your credit card due dates to be on the 3rd or 4th so that these essential bills get paid soon after you transfer your spending money to checking. Do the same with your utility accounts that come out of your checking if any and if possible. This way, all your important bills are paid soon after you get your spending money, and what’s left over you can spend via a debit card or with cash withdrawals guilt-free since you know you’ve already taken care of your monthly must-pays.

Important: Make sure you have a cash cushion in your Savings account to start the full monthly checking transfer. You could also pad your checking a little bit in the beginning in case you underestimated your expenses. (But, going forward, only adjust your monthly transfer to checking! You want to get in the habit of knowing and sticking to exactly one fixed average monthly spending transfer.)

Splitting your income automatically to spending & saving is the key to getting rich

That’s it, you did it! If you didn’t follow along, take 15 minutes now to log into your company’s direct deposit to dump everything to savings, and then to your online banking to set up the monthly checking transfer. You can always choose your paycheck amount (the ‘save tomorrow’) method to transfer for now, and go back later to update the amount after you’ve crunched the spending averages. The key is to take action and do some form of this right now!

Once you do this, you’ll never have to worry again about budgeting under normal circumstances.

Later, invest your excess Savings

The last step, which you can do a few months later after you’re system has been running, is to periodically transfer the excess money left in your Savings account to invest it. You could set yourself a quarterly calendar reminder to make this transfer, or set up some automatic transfer.

Let me know in the comments if you implement this system, or if you have any other suggestions for making this system, or a different one, work!

Optimize your auto insurance and save hundreds a year

The Author’s 2002 Toyota Corolla aka ‘The Babe Magnet’, purchased used in 2006, and still going strong with over 200,000 miles! (Optional carrying capacity shown on roof racks.)
Checklist to optimize your auto insurance
  1. Increase your Collision + Comprehensive deductibles to at least $1,000, and preferably $2,000 or as high as you can comfortably pay for.
  2. If you car is worth less than ~$5,000 – $10,000 AND you can replace it with cash today, drop Collision & Comprehensive altogether.
  3. Decline Underinsured Motorist Property damage since your Comprehensive/Collision already takes care of that.
  4. Protect yourself with high liability limits: Carry at least $50,000 / $100,000 for Bodily Injury Liability and $50,000 for Property Liability. If you have more than $100,000 in assets, increase your limits at least as high as your net worth, or to the max allowed by your insurer.
  5. If you and your family already have health insurance, you don’t need and should drop Personal Injury Protection and Underinsured Motorist coverages.
  6. Drop rental car coverage. Drop roadside assistance if you already have your own service, or decide you don’t need it. If there are any other small dollar coverages, you probably want to drop them too. Self-insure small financial risks yourself!
Step-by-step instructions to pare down your auto insurance to save hundreds per year

Most people carry coverages they do not need on their auto insurance, or simply pay too much for insurance because they haven’t shopped around in years. Let me show you how I optimize auto insurance coverage to save money while protecting myself from financial risks.

First, shop around for the best coverage by at least getting a quote at GEICO (they often offer the best prices) and Allstate/esurance. These guys offer insurance directly to consumers without brokers as middlemen, and thus often offer the best prices. Compare their rates to your current insurer and see if it makes sense to switch.

Next, let’s take a look at your current policy online, either after switching carriers or before. As an example, I’ll use my GEICO auto insurance to show you before and after cost savings.

Companies with good online interfaces like GEICO let you play around with coverage limits and types to see cost differences in real-time. If you carrier doesn’t let you do that, you’ll need to call them up and talk through the differences over the phone. (Another reason I like GEICO.)

Navigate to where you can see the coverage broken out something like this:

My post-optimization coverage. Note that I carry very high bodily injury + property damage limits to protect myself to the maximum extent possible, but I’ve pared down all other unnecessary (for me) coverage.

Now, find a button that says something like ‘Edit coverage’. So long as you don’t save the changes, you can hopefully play around with the limits and see the dollar differences. Let’s do this at GEICO, and explain how to determine what you do and don’t need.

Auto insurance has four basic components to it:

  • Injury Liability: this protects YOU financially by paying for physical injury to another person in an accident. I.e.: you hit them and they end up in the hospital.
  • Property damage liability: this protects you financially by paying for damage you cause to someone else with you car (e.g.: you hit their car, or, god forbid, their house.)
  • Injury protection: this pays you/your passengers some (usually small-ish) amount for medical bills that you incur as a result of the accident. Most people don’t need this IF they already have health insurance and can pay their insurance deductible.
  • Property damage protection: this pays you if your car is damaged. If you can afford to fix, or replace your car if it’s totaled, you’re better off ‘self-insuring’ by keeping cash on hand and declining this coverage. My car is worth less than $5,000, which is an amount I’m totally comfortable self-insuring.

Let’s say I had a fairly typical set of coverages that looks like the below, including collision + comprehensive with deductibles of $500.

The first and most important thing to look at is your liability limits. You generally want these as high as you can afford to protect you from large financial losses.

As a rule of thumb, get as much as will be equal to or greater than your total net worth if possible, but get at least $50,000 / $100,000 for Bodily Injury Liability and at least $50,000 for property damage liability. (I.e.: if you wreck someone’s $50 K car, you’re safe. If you total their $200 K Ferrari, you’ll still be on the hook for more money…)

Next we have coverage for your losses. This is where you can save some dough. I always decline Medical Payments (above), Personal Injury Protection, and Underinsured motorist (below) because these cover my or my passenger’s medical bills, which I don’t need because I already have health insurance that would cover those. If you also have health insurance, and so do the people who ride with you (your family, say), then you almost definitely to not need any of these coverages, which will save you big bucks!

Eliminating these three things will save me $58.90 + $123.30 + $43.40 = $225.60 every 6 months, so $451.20 per year ( = $37.60 per month.)

Next are Underinsured Motorist Property Damage (above; this covers my car) and Comprehensive + Collision. Collision pays for damage to your car resulting from a car crash if you’re at fault, or in a no-fault state, or if it’s the other guy’s fault and he doesn’t have insurance or is never caught. Comprehensive is for non-crash damage to your car like from theft, vandalism, or natural disasters.

I drive a cheap, reliable car, and keep plenty of cash on hand, so I decline all of these coverages completely and pocket the savings (to save & invest if I ever need to pay for any such damage, or to replace my car.) If you can afford to pay cash to replace or fix your car, waive all of these. A general rule of thumb might be to waive them if your car costs $10,000 or less, and certainly waive if it’s only a few thousand or less.

Check Kelly Blue Book to estimate your car’s replacement value, since that’s all an insurance company will give you (they won’t pay you more than the car’s worth! That’s why even a minor-but-expensive-to-fix ding will ‘total’ your car from the insurance company’s perspective.)

For those of you with more expensive/newer cars, even if you need this coverage, you should definitely increase the deductible to the highest level you can afford to pay without losing sleep over it. For more people, that’s probably in the area of $1,000 – $2,000. If you haven’t saved at least that much in an emergency fund, get busy!

If I dropped these property coverages completely, I’d save $11.30 + $12 + $49.20 = $72.50 per 6 months = $145 per year.

If I upped my deductible from $500 to $2,000 and dropped the Uninsured Motorist one (I don’t need it since I’d have my own Comprehensive + Collision coverage to use in that event), I’d still save about $61 per year. (Your savings might be much greater if you have a more expensive car.)

Dropping rental car coverage saves me $30/year. Ask yourself: if your car is in the shop, are you really going to need to rent a car, or could you just borrow one, get a ride with a friend, work from home, ride the bus/public transit/bike/walk, or take Uber/Lyft? And even if you DID need a rental car, it’s not expensive to rent one yourself; you don’t need to insure against the risk.

If you already pay for AAA or another roadside service, you definitely don’t need to pay for duplicative roadside assistance from your insurer. However, if you don’t have it, it’s only $20.60 per year from GEICO, and is probably worth it, so you decide there. Here’s what GEICO’s covers:

Okay, now you’ve eliminated coverage you don’t need, raised your deductibles, and upped your liability limits to protect yourself. Way to go!

Tell me in the comments how much you saved, and whether you also increased your protection by raising your limits.