Today is the last in the Pay Off Your Debt Faster series. Over the last month, I shared step by step how the two of you can speed up your debt free plan. The last step – automating your payments – has been touched on briefly, but it has such a huge impact on your success, I want to take a few minutes to focus on how you can do it today.
Why You Should Automate Your Debt Payments
It’s no secret that I love automating finances, whether it’s for debt, savings, or investing. It’s a solution that has helped us tremendously with reaching our money goals.
One of the biggest reasons why automating your finances makes sense is that most couples I know live full (and sometimes hectic) lives and their payments already scheduled lets them focus on more important things. We have had times where work or family have kept us busy, but because our payments were already schedule, our cash flow didn’t suffer and we avoided getting it with late fees.
How to Set Up Your Debt Payments
Most banks and credit unions offer this money and time saving feature for free. If yours doesn’t or they are slow with their bill pay system, it’s time to switch for your joint accounts. Your bank should be helping you build your finances, not make it harder. We made the switch years ago to Capital One 360 and we’ve been happy with their service and the nice little bonus of earning some interest with checking. Always a plus in my book!
Getting your debt payments started is as simply as getting the minimums and debt snow ball payments up with them schedule early enough so you don’t ever have to pay late fees again.
We only needed around 20 minutes to set things up and we spend like 15 minutes each month just to review things.The goals is to make it easy for us to maintain and monitor so we can focus on more important things. You can also use services like Personal Capital, Finovera, or Mint to keep you up to date of your progress.
So how do you do it?
Log into your checking account and go to your bill pay section
Schedule your minimum and snowball/avalanche payments
When scheduling payments give your bank enough time to process so you don’t ever get hit with late fees. (If they have really slow service, go ahead and switch banks. You shouldn’t have to stress over bills getting paid on time.)
And just like that, you’re done!
The only time you’d probably need to mess with things is when you have to increasing payments (huzzah!) or when you’ve paid off your debts (score!).
Thoughts on Paying Debt Off Faster
I’d love to get your take on how you manage to stay the course for your finances. How much of your financial system is automated? How many of you have scheduled your debt payments? Which bank or credit union do you recommend? Which ones do you avoid?
We’re big believers that money is a tool to help you reach your personal goals. To help us manage our money without being obsessed (and stressed) with it, we’ve created a financial system that helps us stay on track.
I have busy the last couple of weeks with family issues (helping a relative get back on their feet) and juggling my temporary assignment with my freelance work. I’ve decided I’m doing too much and I have been cutting back on my hours across the board.
The good news is our cash flow hasn’t suffered (it’s actually improved) and one reason is that our bill pay and finances are pretty much on automatic.
Without automation we would probably be late on some payments since things come up and we can forget. We developed this system so we can check our balances once a week for 5 minutes to make sure everything is running smoothly.
Automate Your Savings
Start small and automate your money to put into joint and/or individual savings. You’ll hardly notice the slightly smaller paychecks as you start build up your emergency fund.
This step can help you build financial cushion, especially in turbulent economic times like these. Find an FDIC bank or CUNA credit union in your neighborhood that offer high interest rates for savings and watch it grow faster.
Check with your Human Resource department at work and see if your company offers a match on employee contributions and how much is it. Another benefit to contributing to your 401k is that the contribution money is taken pre-tax, which can reduce your taxable income.
The two most important factors for obtaining the benefit of compound interest are the interest rate and the length of time your money earns interest. The latter is the most important; your investment will grow slowly at first, but over the long term you will see dramatic improvements.
Automate Extra Mortgage Payments
(Updated) I decided to run the numbers and see what we could come up with. We wanted a mortgage acceleration plan that was sustainable and had some impact with the mortgage.
We decided to look at our much of our mortgage payments this year were actually going towards paying down the principle. Seeing how it was only around $150, we decided to use that as a guide for our acceleration payments.