Automating your Finances

by Joseph · 2 comments

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I’ve been thinking a bit about money lately (OK, I’m actually always thinking about money) and where I want to be in the future with my finances. Over the years I’ve really taken to automating my finances, whether it be bills, savings accounts or even investing in the future (retirement, long-term purchases and goals). The reason I’ve adopted automating the flow of money is because I’ve realized that I have certain weaknesses (i.e. keeping track of paying bills on a regular basis, consistently putting money away for a rainy day, etc) and the best way I’ve found to get around said weaknesses is to automate my finances.

I know automating isn’t for everyone, and that’s fine with me. Everyone does things a little differently and ultimately as long as we can all reach our goals of financial independence it doesn’t really matter how we get there. Whether you prefer to follow a budget to a T, be one of those extreme couponers or freelance outside of your normal employment, as long as you are making progress toward financial freedom the methods don’t really matter (well, any legal methods anyway :-) ).

All of that being said, my preferred tools in helping me build wealth are:

  1. Paying myself first
  2. Automating my savings & investments

Theoretically you could lump those two points together, but I wanted to highlight each of them individually today.

Pay yourself first

I know I’ve talked about this particular topic several times in the past, but if you’re anything like me you’re a creature of habit and repetition is sometimes the only way to really pick something up and make it a habit.

If you want to build long-term and lasting wealth you need to accept the fact that you must pay yourself first. This means that every single paycheck you receive, or any extra money you earn on the side, you must put aside a certain percentage into a savings account, or an IRA, or a mutual fund, or some sort of savings/investing vehicle.

If you can’t convince yourself that this principle is important you’ll have a difficult time building lasting wealth. Take it from me; I have first hand experience. When I was younger I would spend my money just as fast as I could get it, and therefore never saved any significant amounts of money.

So as a part of automating your finances it’s important to stick to the idea of paying yourself first. I promise you if you can really grasp this concept it’ll push you further along on your journey to financial freedom than anything else will (including extreme couponing).

Automate your savings & investments

Automating your money couldn’t be much easier than it is with all of the technology available in the banking industry these days. Most employers will let you set up direct deposit right into a checking or savings account, and more than likely will even allow for you to split your paycheck into multiple deposits. In other words put a certain portion of your paycheck into account #1 and the remainder in account #2. This can make setting up automatic savings as easy as filling out a direct deposit form with your employer.

Easy right?

Another way you might prefer to set up your automatic savings is to have your direct deposit going into one account and then set up automatic transfers from that account into others, such as your savings, emergency fund, retirement accounts, etc. Like I said earlier, it really couldn’t be much easier to set all of this up. Certain financial institutions make it easier than others, but any bank you use should certainly offer you the ability to set up automatic transfers in and out of your accounts.

Find what works for you

As I mentioned earlier everyone has a little bit of a different way of doing things. My advice is to find what works for you and stick with it. You’ll watch your money grow and realize that not only is retirement possible, but you might be able to do it earlier than planned!

{ 2 comments… read them below or add one }

1healthfacts October 6, 2011 at 6:59 pm

I do check each and every credit card statement that comes in and frequently log in to my checking account to make sure that I can account for each and every expense. I can see where some people don’t do that and can get surprised by fraudulent charges.

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Joseph October 6, 2011 at 7:14 pm

That’s a great habit to be in. There are definitely a lot of people out there who never take a close look at their balances and transactions. When I used to work in banking I’d have members come six months after a transaction started coming out of their account on a monthly basis and try to dispute it. At that point anything older than three months was out of my control and they had to eat it up.

Moral of the story? Definitely check your accounts, at the very least once a month.

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