Those automatic payments sure make our life easier, don’t they? You set up the payments and from then on, bills automatically get paid regardless of other things happening in our life. A little bit of awareness and caution is called for to keep these conveniences from harming our fiscal fitness.
Do you know how many automatic payments you have set up on your accounts? I inventoried mine and found that all except one of my monthly recurring bills are set up on an automatic payment, a total of eight payments. That means eight fewer times I have to remember to pay a bill. No doubt, autopay is convenient. However, losing track of all those payments can cause some real challenges.
Your bank balance is the first hurdle. Losing track of what you are spending can cause overdrafts and uncovered spending when those automatic payments hit your account. I always reserve the amount of my automatic payments at the first of the month. There can be surprises, however. My husband’s cellphone bill came in at three times the normal amount this month due to a trip where he was always paying roaming charges.
Because of these variable payments, I always estimate an amount higher for safety. Losing sight of how much is spoken for could also lead to the danger of overspending since we think we have all this leftover money.
A greater danger for most of us is forgetting that we have agreed to make payments. There’s the payment for the gym that you no longer exercise at or the movie subscription that you haven’t used this month. Since they are automatic, it’s easy to lose track of what is actually coming out of your account.
Make note of the automatic payments you have agreed to and make sure you are still using that service. If it is something that you haven’t used, cancel it.
Remember that some of the subscription payments may occur on a monthly basis, but others are on a quarterly or annual basis. So it may take some long-term monitoring to catch all the recurring automatic payments.
A survey by the website CreditCards.com found that 35 percent of those Americans surveyed had made automatic payments that they had forgotten about. In more than half of these cases, the unexpected charges occurred when the person had signed up for a trial subscription or trial period and forgot to cancel.
This isn’t surprising, since most of us are creatures of habit. When a process is set up, it continues because it is easier to continue than untangling the methods to stop the charge. We are great at setting defaults to control our finances, but not at changing those defaults.
So why not make the default settings in the form of automatic payments benefit your fiscal life? Automatic savings is another type of default setting on our accounts that can benefit you. Go through your account and see if there are stray automatic payments that you have forgotten about and no longer need.
Change that default from paying the money out and instead put the money in your savings account. Even if you have no automatic payments to repurpose, set up an automatic payment to your savings account. You’ll be improving your finances, one automatic payment at a time.
Roxie Rodgers Dinstel is associate director of the Cooperative Extension Service, a part of the University of Alaska Fairbanks, working in cooperation with the U.S. Department of Agriculture. Questions or column requests can be e-mailed to her at firstname.lastname@example.org or by calling (907)474-7201.