2 Things That You Should Do With the Money in Your Checking Account on Payday

When you get paid, you'll want to do something smart with the money deposited into your checking account. After all, you worked hard for those dollars and you want to make the most of them.

Fortunately, there are just two things you need to do to make sure you're using your checking account funds wisely. Here's what they are.

1. Make automatic bill payments

The first thing you should make sure to do on payday is set up automatic payments for your credit cards and other bills like your mortgage or rent and utilities. You can set this up through your bank's mobile app, or with your creditors by asking them to automatically withdraw payments on the day you get paid.

Making automatic bill payments is important for two reasons. First, it can help to protect you against the damage a late payment can do. If you previously had great credit and made one card payment 30 or more days past due, this could drop your credit score by 110 points. Even those without perfect credit could see around a 60 to 80 point drop after being a month late. Card issuers could also charge late fees, which could be as high as $30 the first time you're late and $41 if you fall behind two or more times.

There's no reason to risk being late and making your future financial life more difficult, so setting up automatic bill payments just makes good sense.

Aside from not accidentally being late, automating your bill payments ensures that you'll take care of the essentials first before spending extra money. It also takes the stress of remembering to manually make these payments off your plate.

2. Transfer some of your money into savings

The next step you should take is to transfer some of your money into savings on payday. You can arrange to have money moved automatically into a savings account, into a brokerage account, or both.

Ideally, you should be saving around 20% of your income, with some of that going toward retirement savings and some going toward saving for emergencies or large purchases. You can figure out the specifics of exactly how much you should be saving for retirement and other goals by using online calculators like the one at Investor.gov that tells you exactly how much you'll need to put aside monthly to accomplish your savings goals.

If you set up an automatic transfer of money to your brokerage account and to savings accounts for each goal you have, you'll make sure that this money is prioritized before doing anything else with your paycheck.

Once you've paid the bills and set aside money for savings, you can spend the rest of the money in your checking account without worrying about whether you're doing the right things with it. Brokerage accounts and savings accounts make setting up automatic transfers easy, so get started with that today. Even if you're not able to carve out as much to save as you want, you can still put something into these accounts for your future and then slowly work up to your goals.

If your money goes directly where it needs to after hitting your bank on paydays, you are much more likely to find financial success. This is because saving for the future and paying your bills on time will become your new status quo. Give this approach a try for a few months and see if it makes a positive impact in your ability to accomplish your important money goals.