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Let’s say you log into your bank account, and zap: You see that your home insurance or tuition has just taken a big chunk off your balance. It’s a legitimate bill, but you’ve been distracted by 10,000 other things and forgot that you’d put it on autopay. Now you’ll have to scramble to make sure you’ve got enough money to cover your other expenses.

Some bills — property taxes, college tuition, car or home insurance, HOA dues, club fees, or vehicle registrations — are more likely to wreak havoc on your finances because you may only pay them once or twice a year (or at least on a less-than-monthly basis.) For gig and freelance workers, it’s often a big income tax bill that catches you off guard.

But what if you took the automatic concept from auto-pay and used it to auto-save as well? Just as you might already be putting 10% or 20% of every paycheck straight into your 401(k) or IRA, you can plan in advance, funnelling set amounts of your income into accounts designated for other specific expenses. Smaller chunks can make big bills feel a lot more manageable.

Chris Colson, a payments expert at the Federal Reserve Bank of Atlanta, calls it good old-fashioned earmarking, just with a digital twist.

“As programmable payments become more common, an old-school budgeting idea is making a comeback: earmarking,” Colson wrote in a recent blog post. “It’s a simple concept, but when combined with automation, it could be the budgeting upgrade many people and businesses have been waiting for.”

(Pro tip: Even though monthly payments can be an option for things like car insurance or propane, consider the tradeoffs if you give up pay-in-full discounts.)

So what would you need to do? The key is to make technology do as much of the work as possible — and keep you disciplined.

•   Make your list: It’s easy to forget all the bills you have, especially if it’s been 11 months. Comb back through your credit card and bank transactions to make a list of the less-frequent but significant bills you want to save up for.

•   Do the math: For each bill on your list, divide the amount by the number of months before it’s due again. That’s how much you’ll need to set aside each month. For example, to pay your boat’s annual $1,200 marina slip fee, you’d need to set aside $100 per month. (You can also divide your bill by 52 to get a weekly amount.) And if you know your bill is likely to go up, maybe add in an extra month’s worth.

•   Set up the rules: Use your bank or budgeting app to separate your paycheck and other income into buckets allocated for each bill. Set up recurring transfers so the fixed dollar amounts you determined in the previous step are automatically deducted each week or month. (With SoFi Savings Vaults, you can set up as many as 20 different customized buckets – and earn a competitive interest rate.)

•   Consider this method for more than bills: You can use this savings approach for any large, infrequent expenses. Holiday gifts, back-to-school shopping, or anniversary trips. (Think of it as the envelope or cash-stuffing method, but in automated, digital form.)

Related Reading

•  Automatic Savings Plan: What it Means, How it Works, Example (Investopedia)

•  5 Ways To Grow Your Savings With Automatic Transfers (Bankrate)

•  AI Budgeting Tools: Personal Finance Management (SoFi)

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