Financial Planning: Automation…a Friend with Boundaries
August 05, 2011I have a grocery store that I love. It costs a little more, but the service is excellent. One of the things I really like about this store is that when the weather is bad, and you’re dreading the hike to the car with open bags of groceries, there are staff who will come up to you at checkout and say, “Let me take care of that for you.” They will take it upon themselves to make life a little easier for you. This is a great idea and, for me sometimes, it is worth the small price differences in food. It also works because even though I have the option of using the service, I am not obligated to do so. And, if I want to use coupons to offset the higher prices, I can do that, too. In other words, I am not locked in.
Grocery stores aren’t the only ones to offer creature comforts that make life easier. A great place to see the latest and greatest is on the “infomercials,” those hysterical TV spots my kids love. (Do the marketing agents know this about kids? Because my kids not only remember the product, but ask me to buy them!) From the cat litter box that scoops itself (I don’t even have a cat, but the kids suggest I get one so we can use the litter box!), to the alarm clock that shines on the ceiling so you don’t have to turn your head to look at it on the nightstand, to the knives that keep you from running to the garage for a hack saw just in case you needed one for that tin can that needs cutting. Great ideas, no doubt, but do we really need everything done for us? Is it ever too much of a good thing?
Many financial institutions will offer an automated payment system in their online banking services. This can be great if you’re prone to forgetting to pay bills until the last minute, or even have the “late fee” plague associated with not paying on time. It also helps to track your spending by having bills consolidated into one system. But, the tradeoff might be that, in the event that you do too much online (I’ve been known to not ever carry a checkbook and sometimes go 2-3 years without writing a paper check because I do everything online), you can forget that real money is exchanging hands. Here is an example of that from my life.
I have a credit card that I use for a lot of purchases so that I can get rewards points to use for hotels, airfare, etc. I use the card, it’s set up to automatically pay for my transactions, and I never really pay attention to it until there’s a rainy weekend and I look at my financial life. (Hey, I look at other people’s finances all day long, I want a break when I get home.) So, one rainy Saturday I go to my mailbox and there are a number of notices from my bank about overdraft fees. Immediately, I thought “this can’t be right!” Unfortunately, the bank was right and my account was overdrawn, but I was correct in my assumption that something was amiss.
During the month, I bought a few gifts for my kids at a gift shop while I was traveling. They didn’t have bar codes and the cashier typed the prices into the cash register. The total was something like $109.44. When that total moved from the cash register to the credit card swiper machine (like my technical terminology?), it was $10944.00! Just a wee bit different. I didn’t notice it, she didn’t notice it. But my bank did! I was able to call the shop and the owner had recognized the error, but just try to track down Michael Smith in your local phonebook. Forget that I was from out of state; he had no shot of finding me. He was able to work with me to reverse out the transactions, they happened on the last day of my billing cycle, so by the time my plane landed at home, the bill had been processed and my bank account debited. In the end, it all worked out, but that’s an example of when having something done for you can be detrimental to your financial health.
What did I learn? Automation is good, but monitoring what’s automated is even better. What if the error had only been $100? That wouldn’t have created overdraft fees, and I may not have noticed it at all. Now, I make sure that every transaction on my cards can be matched to a receipt. Sounds simple, but in the speed of life, some things can be overlooked. And, rather than having my bill paid right at the end of the billing cycle, I moved the payment to the end of the billing cycle to give me time to review. Yes, automation is still my friend, but it’s now a friend with boundaries.