Figuring out how properly allocate your finances to where it needs to go is complicated. Not even to mention how time consuming and tedious it is to actually move your money around. You are wasting so much time doing this and losing out on new opportunities to live your life.
It’s time to set up automating your finances so you don’t have to worry about a thing. Once money sets foot in our account, it should already be doing what you’ve programmed it to do. Hands free! Wouldn’t that be nice?
Waking up and seeing your bills are already paid and adding yet another thing to not worry about in your life.
Below is a path for you to automate your finances for an easier life. A financial path that will get you moving towards a life of freedom without lifting a finger.
Retirement Accounts
If you have a work 401k or one you opened up yourself, you can set up automate deposits into your retirement account before taxes are taken out.
In fact, before your money even goes anywhere else, you can set it up to have a certain percentage hit your account first. It’s an investment that will grow without you even realizing it.
Remember to understand how much your bills are each month so you can properly allocate a realistic percentage to invest into your 401k.
Home base Checking Account
The next place for your money to fall after getting paid is a designated home base. This would be your main checking out. Choose a bank account where all your activity will be happening. This will be a fully automated account.
Be careful about overdrafts, so it may be a good idea to open an account with overdraft protection to save yourself a few dollars from mistakes you may make in the beginning.
No one is perfect, and you can’t predict unknown factors in your life, so keep an eye on bills that may be higher than anticipated so you can react accordingly. Overdrafting your account is a terrible experience and something I’d recommend trying to prevent.
Automate Bills
Did you know you can autopay your bills every month? Your annoying electric bill or gas bill can be automatically paid each and every month.
I don’t know about you, but their websites are typically the worst. Poorly designed and I get confused navigating it every time, even though I’ve been using it to pay my bills for years.
Once you set up autopay you never have to lift a finger. But be careful of spikes in your monthly bills. You may have increased usage of electricity in your home with the AC blasting or something related.
Staying aware of these changes will help you avoid over drafting your account and possibly missing an auto payment for another bill.
Autopay Credit Cards
Next is to autopay your credit cards. Come up with a predetermined amount you want to pay each month, whether it’s the full amount or the required minimum due. No judgement just work with what you can afford. I’m sure you’re working on ways to pay down that debt.
Auto Deposit Savings
After auto paying all of your bills and credit cards, it’s time to auto deposit money into your savings and investment accounts. Paying off your bills is much more important than saving in this instance. That’s why they’re called living expenses. Prioritize paying your bills and working down that debt before worrying about how much money you can save.
If you’re able to pay all your bills, it’s time to designate how much to go into your savings account and how much into your brokerage. This number will be different for everyone. Some may like to keep more cash on hand than others. Some may be saving to buy a home or building an emergency fund.
Figure out how much to save that works best for you. With your credit cards and utility bills being set every month, it becomes easier to determine how much you’ll need to save and invest to hit your goals.
Left Overs
It’s important to keep some extra money in your account to handle those unexpected spikes in bills. Consider it as an emergency fund, but for less extreme circumstances. This will help you upkeep your automated life without worrying about having enough each month. It’s more like an extra cushion or extra grease to keep those gears moving each month.
My Two Cents
I think automating your payments like that is a smart idea, helping to save time that could be used elsewhere. I am always nervous about if I’m putting too much into savings and investment accounts and not enough to account for my bills each month. I’m self-employed, so my income is never the same each month.
That’s why I tend to opt out of auto depositing my savings and investments and do both of those manually. I’m confident my bills will be covered each month but what I save each month may be more or may be less. It’s better to do myself to tackle that.
Also, this method can add one several other categories, like a fun account, for guilt-free spending or any other monthly expense you’ll need.
The point isn’t what you can use it for per se, it’s more to show you ways to make your life and your finances easier for you and help you find the time to do something else that’s more productive. It’s custom made to adapt to your life and your spending habits.
