5 Ways to Automate Your Finances
We often make things harder than they need to be, especially when it comes to our finances. I’m guilty of this myself! I used to have a million bank accounts with a handful of bills coming out of each and I had a big blob of savings that was used for a variety of things. Very little was automated outside of my 401(k), and that even had some room for improvement.
To make our lives easier and less stressful, we can use automation to our advantage. Here are five ways you can automate your finances to reach your financial goals more quickly and easily.
Pay yourself first.
This just means setting up an automatic transfer after your paycheck hits to your savings account. When we pay ourselves first, we treat saving like any other expense (and that makes it happen). If you don’t think there’s any way you can save right now, start with as little as five dollars per paycheck.
If you don’t miss the five dollars, you can slowly increase the amount. Ideally, you’ll send it to a separate savings account that’s not linked to your checking account. Out of sight and out of mind!
Set up auto payment for your bills.
Many of us don’t automate our bills because we’re afraid to overdraft. I personally like to keep less money in my checking account because I find that my spending actually increases when there’s more money available.
I set up a recurring calendar reminder to check that the money is available before the bill goes through, and at the same time I also check to make sure all the charges are legitimate. A lot of times we’ll get an email to alert us before the bill gets paid as well.
Contribute to your retirement accounts.
Most of us have money automatically going into a 401(k) or an IRA. If you are an entrepreneur or your company doesn’t offer a retirement plan, set up an automatic transfer to your retirement account to ensure it will happen.
Some companies offer automatic increases in contributions. For example, a 1% increase every six weeks (or whatever you decide). If your plan doesn’t offer this, you can create a calendar reminder to increase your contributions.
Smooth out larger expenses.
When we plan our spending weekly or monthly, we often forget to plan for less frequent, larger expenses and that can really mess up our cash flow.
Plan for these expenses using sinking funds - even if we don’t know exactly how much they will cost. Start with your best estimate. The sooner you start setting aside money for these expenses, the less painful it will be per paycheck. By estimating how much something will cost and dividing that by how many paychecks you have until you need the funds, you can calculate how much we want to transfer automatically to your savings buckets.
For example, travel is a big one for many of us! Let’s say I want to take a trip that will cost $3,000 and I plan to start spending on that trip in 7 paychecks. I’d want to set up an automatic transfer of $429 every paycheck ($3,000 divided by 7) to my travel fund (which can be a separate account in my online savings account). Then the money will be available and waiting when I need it!
Play the money game (digitally).
The money game is a really fun way to gamify saving money and minimize spending. Choose an amount per week that covers your variable spending. This might include groceries, dining out, drinks, taxis, or whatever that looks like for you.
Then each week, tally up how much you’ve spent in those areas and when the total comes in below what you’ve set aside, you win the money game and can put that money toward your top priority goal.
For example, let’s say I choose $300 per week as my variable spending number. I track my spending for the week and end up spending $250. That means I win $50 that can go towards my goals. In order to do this, we have to track our spending for the week.
If you are looking for a way to automate the money game, you can set up a separate checking account with its own debit card dedicated to variable spending. You can have your money game amount (in this case $300) transfer automatically to your account each week. You’ll know how much you’ve won by the amount leftover in your checking account at the end of the week! It’s also easier to track it in real time. Whatever is leftover each week can be transferred to your goals!
