6 Ways to Automate Your Finances
Are you eager to take the stress out of paying for that family vacation?
Would you like to be on the same page with your family about money?
The answer is AUTOMATION.
We are one week away from our due date with baby #2, and I could not think of a better time to talk about how to automate your finances. Setting up automation in your home is a key component to having efficient systems. When you automate something, you tell it to do a specific action at a specific time. For example, automating your credit card to pay off in full on the 15th of every month. You set it and forget it. Another example would be putting a load of laundry in every morning. Specific action, specific time, no decisions. It’s an automated process that makes your life SO much easier.
In this blog post, let’s look at 6 ways you can incorporate automation into the financial components of your life:
#1 - Automate your Finances for Short Term Savings
First, decide what you want to save for. Do you want to go on a cruise next year? Research some preliminary cost information. If you know that the cruise is going to cost roughly $3,000 in 12 months, then you should be setting aside $250/mo from now until you book accommodations. The best way to make sure this money actually gets set aside is to set up an automatic transfer from your checking account into a separate savings account. Or, if you don’t have a separate savings account, but you operate a net-zero budget, you can allocate $250 to a “Cruise Vacation” line item in your budget. Money will accrue in that line item over the next 12 months, resulting in $3,000 and a fun trip in the books!
#2 - Retirement Savings
It is SO important to “set it and forget it” when it comes to retirement savings, especially when you have a retirement plan through your employer. Select how much of your paycheck you want to contribute, and let that money accumulate. It’s amazing how much you end up contributing over 1, 3, 5 years! It adds up fast. The reason why automation is so important here is because we would either a) forget to contribute or b) spend the money elsewhere. Automating forces you to keep steady after your goals, and not succumb to whims and emotions. Turn the faucet on, and leave it.
#3 - Bills, Bills, Bills
I am a huge believer in setting bills to autopay. This is especially easy if you use budgeting software that automatically downloads your bank transactions. We use YNAB, and love it! All of our bills are paid automatically, and I don’t worry about amount errors because I have to approve the transaction in YNAB. Plus, I know what my bills should be (or be close to) on a monthly basis. Setting up bills on autopay greatly reduces the amount of time it takes to pay them. It’s one less thing you have to do in your busy life!
#4 - Automate your Finances for E-delivery
This goes hand in hand with bill autopay. I will preach about e-delivery until I am blue in the face. It has saved so much time (not to mention paper!) Think about it: if you have to get the mail, open it, read it, put it somewhere, take action on it, file it, then review and purge those files later - wow! That’s a lot of work! But if you just get an e-mail that says your electric bill has been paid - voila! Done and done. Move to a “utility folder” in your email, or archive. Very fast and simple. Speaking of e-mails, check out my blog on how to organize your email in this blog post.
#5 - Sinking Funds
For anything that doesn’t occur on a monthly basis, but that you need money for in the future, I recommend setting up a sinking fund. I talk about this in my Budgeting - Don’t Fear The Word blog post. Think about things like car insurance, holidays, yearly memberships and fees (we have 17 items in this category!), and clothing. Grab a paper and pen and tally up the yearly amounts in these categories, and then divide by 12. I call this "monthalizing"! Now you have a monthly amount that you can budget towards that line item so that when it comes time to buy presents, pay car insurance, or renew your Costco membership, you aren’t stressed out and worried about whether or not you have the money. It’s automatically saved for each month so the money is there when you need it.
#6 - Money Discussions
Don’t wait to talk about money, put it on your calendar, and know that reviewing your financial life is an important and automatic part of your routine. My husband and I meet once a week to review our budget. There are always conversations to be had, issues to work through, goals to re-align. I highly encourage you to start talking about money on a regular basis; make it an automatic action in your life. It’s important to talk about cash flow, budgeting, and short-term goals during your weekly meetings, but you should also plan for bigger picture meetings as well (at least 2x/year, if not quarterly). Check-in with your partner (or yourself, if you live alone), and make sure you are aligned with your money goals.
What do you want to achieve over the next year? In 5 years? What’s important to you? How do you feel about money right now? These are a few talking points that can guide you in your discussions.
And that’s it! 6 ways you can automate your finances to bring less stress and more joy to your life. That is my mission in this business - to teach you how to control the controllable so that you can spend less time doing things that annoy you, and more time doing things that you LOVE.