Living Paycheck to Paycheck? You May Need to Avoid This Common Financial Tool

Sometimes good tools go bad.

As someone who is somewhat, let's call it "memory challenged," one of my absolute favorite personal finance tools is autopay. Pretty much anything with a due date is set to automatically pay itself each month so I don't have to worry about late fees when something slips my mind.

And yes, autopay works for most bills. Utility companies, cellphone providers, credit card issuers -- everyone is more than happy to let you set-and-forget your monthly bills.

No matter how much I love autopay now, however, there was a long time in my life when I didn't dare use it. Not because it wouldn't have been useful -- it definitely would have been -- but because I couldn't guarantee the money would actually be there when they went to take it.

The autopay dilemma

The major downside to autopay is the same thing that makes it useful: Payments are made automatically each month without any interference from you.

If you're in a position where you can always keep a buffer of $1,000 or more in your checking account, this is great. You never have to worry about which bill might autopay this week, because you always have the money to cover any automatic withdrawals.

On the other hand, if you're living paycheck to paycheck (like nearly two-thirds of U.S. consumers) autopay can be a nightmare. That's because autopay is going to try to withdraw that money every month -- whether it's there to be withdrawn or not. Or, perhaps worse, autopay may end up withdrawing your last few dollars, right when you need them most.

This can be especially painful if you've forgotten about the autopay (which isn't uncommon; after all, I set up autopay because I was afraid of forgetting my due dates in the first place!). In this case, you may make a purchase (or three) around the same time the autopay hits your account, causing you to overdraft.

The only thing worse than an overdraft fee? Multiple overdraft fees.

Lesson learned: Never set up autopay unless you're certain you can keep enough money in your account to cover the charges, plus whatever other purchases you may need to make.

Other ways to remember due dates

Autopay is undeniably a great tool. But it's hardly the only way you can work to prevent missed due dates. Here are a few suggestions:

• Text or email reminders from your issuer or provider: Many companies will let you opt-in to text message and email bill reminders. If the company has an app, you may also be able to set up push notifications on your phone.
• Digital calendar reminders: Modern smartphones are chock full of great productivity tools. Your calendar app should let you set up tasks and reminders. You can even have them automatically recur every month on the same day, or at a regular interval. The same thing can be done in your Microsoft or Google calendars.
• Physical calendar: Some folks simply do better when things are physically in front of them. An old-school paper calendar with your due dates circled in red marker, placed somewhere handy where you'll see it every day, could help you stay on track.
• Sticky notes: My go-to method for analog reminders is the tried-and-true sticky note. Even while using autopay these days, I still keep important dates tacked to my computer monitor so they're never out of sight or out of mind.

You can use any of these methods -- or something else entirely. It doesn't matter if it's a common trick or entirely unconventional, as long as it works for you.