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INTRODUCTION
Have you ever felt that budgeting feels complicated, frustrating and needs to be simplified? Automating your money is the secret ingredient you need to create a budget that truly works for you. Automation allows your finances to run smoothly in the background, making saving, investing, and paying bills easier. Automating your money lets your money work while planning your wedding, enjoying your honeymoon, and living your life. With automation, you can transform your budget and simplify your life. In this blog post, we’ll explore why automating your money is a game changer and how you can set it up to make budgeting simple and effective.
6 REASONS TO START AUTOMATING YOUR FINANCES
Automating your money is the #1 way to ensure it always works for you, even when not thinking about it. In “The 4-Hour Workweek“, Tim Ferriss emphasizes that automation simplifies life by minimizing repetitive tasks. In this way, automation allows you to focus on what truly matters and free up time to achieve your goals. If automation can do this for your life, imagine what it can do for your money! Here are 6 reasons why automating your finances is essential:
1. YOUR MONEY WORKS FOR YOU ON AUTOPILOT
When emergencies happen—like a hurricane or sudden car repair—your automated system ensures your money flows to the right places. When my area was affected by Hurricane Helene, having automatic payments set up in my bank account took care of my bills during that troubling time. I didn't have to find electricity, wifi, or a post office to pay my rent, bills, or debts. Automating my finances gave me one less thing to worry. My money knew what it needed to do, and automation took care of my financial life on autopilot.
You don’t have to scramble to determine what needs to be paid or where money should be saved. It’s like having a personal assistant for your finances, ensuring everything is in order while you focus on living your life.
2. TRACKING YOUR SPENDING BECOMES EASIER WITH AUTOMATION
Automated spending means you can quickly check your bank accounts to see where your money went. It’s easier to monitor your spending habits and adjust overspending if needed. If you want to use a tool like a budgeting app such as YNAB, automating your finances will fill out your spending categories quickly, so all you have to do is review your monthly spending instead of constantly logging in to check your finances.
3. AUTOMATING MAKES BUDGETING EASIER
With automation, you don’t have to remember to make manual transfers or pay bills. Tracking your spending and budget becomes much easier because an automated system works for you. You don’t have to check a spreadsheet or calculate anything constantly. Your rent is paid automatically, your debt payoff plan is working on its own, and your savings and investments keep growing without you having to make it happen constantly. Everything is set up to happen automatically, so managing your money becomes less stressful.
4. AUTOMATION WORKS HARD SO YOU DON’T HAVE TO
We all have days when we might feel like not dealing with our money. Automation removes behavior and emotions as a factor, ensuring that your financial goals stay on track. You can save for your emergency fund even when you don’t feel like doing anything. Automating these steps helps you steadily grow your savings and investments without thinking about it. With automation, you make your money work, so your emotions don’t hinder growing your financial plans.
5. AUTOMATING YOUR MONEY MAKES SURE YOUR BILLS GET PAID ON TIME NO MATTER WHAT
Do you forget those bill payments? Forgetting to pay bills can hurt your credit score and lead to late fees. Automation ensures that your bills are always paid on time, regardless of what happens. When Hurricane Helene hit my area, my rent and bills were paid on time without me needing to find electricity or a place to pay my bills, all because of automatic payments. Instead of worrying about where your money is going, automating it provides peace of mind, knowing that it’s all taken care of.
6. BUILD YOUR SAVINGS AND WEALTH ON AUTOPILOT
The beauty of automation is that you’re working towards your financial goals with minimal effort. As “The Automatic Millionaire”by David Bach suggests, automating your finances is the simplest, most effective way to build wealth over time. You can invest automatically even when the markets are crazy through dollar cost averaging, where you automatically put money in every month to invest. Consistently saving and investing are the cornerstones of building wealth, and automating helps you achieve this while living your life.
Now that you know why automating your finances is essential, let's look at how to automate your money.
HOW TO AUTOMATE YOUR MONEY: A STEP-BY-STEP GUIDE
STEP 1: HAVE ONE MAIN CHECKING ACCOUNT FOR EVERYTHING
This will be your central place where all your money goes. Your paychecks, extra hustle income, and bonuses should be deposited directly into this account. You’ll set up automatic transfers from here to handle everything else—savings, investments, bills, and day-to-day spending. You can even automate funds for “guilt-free spending” to give you and your partner more financial freedom within your budget.
You can still automate your accounts if you have irregular income or business. Have a separate bank account to put all your income, bonuses, and tips as your “business” account. Then, create a personal checking account to pay your bills, day-to-day expenses, savings, etc. Automate payments from your business account into a personal checking account as your “salary” that covers your costs.
This system will work even if you don't have a business. If you don't own a business or have irregular income, your main account and your personal account can be the same if you want to pay your bills, savings, and day-to-day expenses from one account.
Regarding where to put your money, choose a bank you trust. Several online banks like Amex can offer higher APY on your bank accounts. Other great banking options include Ally Bank or Capital One. Some investment companies like Fidelity or Charles Schwab offer banking options as well. Some people will use a money market account at a brokerage for the higher interest. Choose a bank that has a trustworthy reputation, offers FDIC insurance for your money, and has minimum or no fees to keep the account.
STEP 2: SET UP AUTOMATIC TRANSFERS TO SAVINGS, IRA, AND BROKERAGE ACCOUNTS
Decide how much you want to save or invest monthly, and set up automatic transfers to these accounts. For example, you can have money automatically transferred from your checking account to your high-yield savings accounts, IRA, or brokerage regularly. You can build your emergency savings, sinking funds for goals like a house, wedding expenses, your honeymoon, and plan for retirement. This way, you’re saving and investing without even thinking about it.
If your employer offers a 401K or retirement program, ensure that you get this withdrawn from your paycheck, even if it is as little as 1%. Some 401K providers or brokerage companies like Fidelity require an extra step to start investing in a fund, so please check you are genuinely investing. Otherwise, you will invest in something that won't grow over time. If you don't know, call the company and have them walk you through the process to ensure you automatically invest in the funds you want.
STEP 3: AUTOMATE YOUR BILL PAYMENTS
Set up automatic payments for all your recurring bills, like utilities, rent or mortgage, phone, and internet. This ensures that all your bills are paid on time, and you can avoid late fees and interest charges. If you find setting up automatic payments or transfers online challenging, don’t hesitate to call your bank or the company. They can walk you through the process to set up automatic bill pay.
If the company has no automatic payment process, you can call your bank and send them a check as part of “bill pay.” Aim to set up these payments to go out a week before they’re due to ensure everything is paid on time. This is usually free, so ensure the check arrives before the bill is due.
STEP 4: PAY OFF CREDIT CARDS AUTOMATICALLY
Make sure to set up automatic payments for your credit cards. Ideally, you’ll want to pay the entire balance each month, but if you’re paying down debt, set up an automatic payment for at least the minimum amount due. This ensures you avoid late fees and, if you can, automate extra payments to help pay off debt faster.
STEP 5: KEEP A BUFFER IN YOUR ACCOUNTS
When automating your payments, keep a buffer in your checking accounts, usually around $500 or up to one month’s expenses. This extra cushion ensures that unexpected charges, like a surprise bill or a forgotten subscription, won’t cause overdrafts or disrupt automatic payments. A buffer provides peace of mind, knowing that your essential bills and transfers will go through smoothly, even if something unexpected comes up. Plus, it prevents the stress of constantly monitoring your account balance, so you don't have to worry about running out of money.
BONUS STEP: CONSIDER SEPARATE ACCOUNT BUCKETS FOR DAY-TO-DAY SPENDING
Opening a separate checking account “bucket” for day-to-day spending. Separate bucket accounts are perfect for anyone struggling with sticking to a budget, overspending on impulse purchases, or wanting better control over their spending. They’re beneficial for people who want a clear separation between essential bills and fun money, as they allow them to enjoy their daily activities without worrying about cutting into funds meant for rent, savings, or other financial goals.
To set up a day-to-day expenses account bucket, determine how much you can afford each month on everyday expenses like groceries, dining out, and entertainment. Then, open a new checking account and set up an automatic transfer from your main account to this one, ideally on the same day you receive your paycheck. Using this account exclusively for discretionary spending helps you stick to your budget because once the money runs out, you know you've hit your monthly limit. This method simplifies tracking your spending and prevents accidental overspending while allowing you to enjoy your day-to-day activities without guilt.
Using a bucket system, you have a central account, a bills account to pay all your bills, day-to-day expenses, and “guilt-free personal spending” accounts. This “bucket” method is an excellent fit for those who prefer structure and want to make budgeting more effortless and manageable.
CONCLUSION
Automating your money is the simplest way to make your budget work for you. Setting up an automated system eliminates the need for constant decision-making about saving, spending, and paying bills. Automation removes the frustration of budgeting, reduces stress, and makes achieving your financial goals easy. Whether you aim to build an emergency fund, save for a home, or pay off debt, automation will help you get there faster.
Are you ready to simplify your life and automate your finances?
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