An Argument Against Automatic Payments

I’m famil­iar with the argu­ments for auto­mated bill pay­ments and I under­stand the appeal.  How­ever, I feel there are com­pelling rea­sons to NOT make auto­matic pay­ments.  Here we go:

It can, and has, been argued that auto­matic pay­ments help save time by elim­i­nat­ing the need to phys­i­cally pay bills and save money by elim­i­nat­ing the risk of late fees.  Clearly, sav­ing time and money are desired goals.  Still, the ques­tion that begs to be asked is do the advan­tages out­weigh the disadvantages?

I believe that spend­ing money should be a con­scious act. It’s much harder to spend reck­lessly if one has to pur­pose­fully and con­sciously hand over every sin­gle dol­lar, or penny, they spend.  This prin­ci­ple is clearly seen in the prac­tice of pay­ing cash for all pur­chases — the argu­ment being that peo­ple think harder about spend­ing cold hard cash than they do when they charge to a credit card.

The prob­lem with auto­matic pay­ments, whether it’s the mort­gage payment, the cable bill, or your gym mem­ber­ship, it’s just too easy to for­get about the money being spent auto­mat­i­cally. By tak­ing an active hand in how every sin­gle dol­lar is spent, we have the oppor­tu­nity to re-evaluate our finan­cial deci­sions every month.

For most peo­ple, their mortgage/rent is their sin­gle largest monthly expense and, there­fore, dif­fi­cult to for­get.  But the act of con­sciously writ­ing that check can be used as a sober­ing reminder of the per­cent­age of monthly income spent on hous­ing alone.  Or maybe it’s an affir­ma­tion of how far you’ve come or how grate­ful you are to have a home.

In the case of monthly mem­ber­ships fees for the gym or on-line com­mu­ni­ties, Cable TV or Net­flix, con­scious pay­ments are a great reminder to per­form monthly eval­u­a­tions of the value we receive from such memberships.

My Net­flix pay­ments are billed monthly to my credit card so I make a point of hand record­ing into my bud­get the fact that “only $13.99 per month” is actu­ally $14.98 every month.  Still, when buy­ing tick­ets for a play or con­cert or movie, it’s all too easy to for­get that I’ve already auto­mat­i­cally spent 15% of my entire monthly enter­tain­ment budget.

Tak­ing an active hand in spend­ing every sin­gle dol­lar you spend allows for greater flex­i­bil­ity and quick cor­rec­tions; it avoids com­pla­cency; it encour­ages con­tin­ual re-evaluation of decisions; it can reaf­firm good deci­sions; and can recon­nect us with for­got­ten bless­ings. Automa­tion can be good but there are obvi­ous advan­tages to con­scious and will­ful action as well.  Choose the method that best suits your cir­cum­stances and personality.

Related posts:

1. Novem­ber Bud­get Overview