Setting all your finances up for automated handling can be wonderful. Directly deposited paychecks, automatic contributions to 401(k)s and set-it-and-forget-it bill pay allow you to free up time to actually enjoy life. But automation can be dangerous for your finances too. If you are a little off your game, you could seriously jeopardize reaching your savings goals. Here are some things people who automate their finances need to watch out for:
Automation may create money leaks over time. It might sound crazy for people to find out they've been repeatedly billed for services they don't use months after the fact. But how would they find out when bills only come through e-mail and they never check credit card statements?
Gym memberships, credit monitoring services and annual credit card fees may have made sense when you signed up long ago, but the recurring charges will continue to eat into your cash flow unless you stay on top of your spending and stop expenses you no longer need. If you don't make time to monitor your bills you'll pay a big price.
You'll be less sensitive to price increases. Many services are amazingly good at slowly raising prices over time. Whether it's through new customer discounts for the first year or simply tacking on a bump every few months, many people routinely pay more without even realizing that costs keep increasing because they never bother to check.
You probably won't be motivated enough to try cheaper options unless you pay attention to how much those services cost. I was honestly happy with my cable TV services, but it took some frustration with the relentless price increases to finally get me to try a Netflix free trial offer. I realize now that the benefits of going this route extends far beyond just the cost savings, but I would have never known unless the price concern pushed me to make that first step.
It's easy to be complacent with how much you are saving. Automatic contributions to save for retirement are a great tool, because you save something before you get a chance to spend it. But putting retirement thoughts aside because you never have to think about it can backfire. Many people stick with the same saving percentages and amounts when it would be more appropriate to increase what they put away as their salary and cash flow situation improves.
You're not closely monitoring your investments. It's a good idea to check investment options regularly and see if the investments still fit your overall goals and situation. Perhaps you need to rebalance your investments to recalibrate the risks you are taking. Maybe you've moved into a more secure job and can increase your stock allocation because the increased stability boosted your ability to take on more risk. Or you may want to decrease your equity allocation because you are closer to retirement and want a more dependable outcome. Whatever the case may be, too much of a hands off approach can mean a severely out of whack portfolio that isn't fully helping you.
Automating your finances can help you to save for retirement, but you also need to regularly monitor the situation. If you don't spend some time trying to improve your finances, you might find out it's too late to save enough for a comfortable retirement. Your retirement deserves and demands your attention. The only thing you should forget is "set it and forget it".
Visit MoneyNing.com for more personal finance discussions. This site also helps readers decide whether a 0 percent balance transfer card is worth signing up for and keeps a good list of helpful promotion codes.
More From US News & World Report