How to Automate Your Savings and Retirement Easily
I’ve talked a bit before about starting your retirement planning while you’re young. While that’s an important part of your finances, that’s not the only thing you should work on. Automating your savings, bills, and retirement can ease your stress and help you build your net worth more quickly.
Automated System for Our Own Finances
Here are some things we’ve done with our finances to help us reach our money goals:
We have a portion of our paycheck transferred to a high interest savings account.
We have some money transferred over from checking to savings regularly, like a bill. Start small and automate your money to put into savings. You’ll become use to the slightly small paycheck as you start savings. The first thing you need to save for is an emergency fund. This step can help you build financial cushion, especially in turbulent economic times like these.
Find an FDIC bank or CUNA credit union that offer high interest rates for savings and watch it grow faster. For us Capital 360 provides us an easy to grow our savings. You can open a checking account with Capital 360, simply click here to get started.
We’ve set up free online bill pay with our bank.
This has been a great system for us. Most banks and credit unions offer this money and time saving feature. Spend an hour setting this up with your bills, account numbers, due dates, and amounts, and you’ll only need a few minutes a month to keep it up. Online bill pay can help you manage your bills without having to worry about paper bills and checks.
With auto debit, the company automatically takes the amount out of your checking account at the due date. If you set up either correctly, you’ll avoid late fees. I like have more control over my account and online bill pay can help me if something happens with our direct deposits.
I had a friend who got burned due to a Human Resource error with her deposits. Even though she called her bills and explained the situation some still withdrew the regular amount (they already had her banking information) and it caused a cascade of fees.
Automate contributions to your company’s 401k program.
My husband’s job offers a 401(k) with a match and we try to take advantage of it. Try to at least set aside enough money to receive the company match as it’s basically free money in your pocket. Look for low cost index funds to put your money in. Pay off your high interest debt first, before investing for retirement.
Some personal finance experts suggest put 5- 10% of your paycheck into a retirement account. You can always increase the amount as you receive raises and promotions.
If your company an Employee Stock Purchase Program, you may want to consider participating. ESSP allows you to have some of your paycheck deducted to buy your company’s shares at a discount from its market price. Just remember to be diversified with your retirement fund and not too heavily invested in your company.
Have a small portion of your paycheck transferred into an IRA account.
I have an IRA set up for me to transfer money. Once your build up your emergency fund (like 3-6 months of expenses) and eliminated your high interest credit card debt, funnel some of your income into an IRA. Banks, brokerages, and credit unions offer IRAs.
Some charge a flat fee for the year, some take a fee for each transaction made, others can take a percentage, and some do all of this. Compare your options to see if you’re getting a good deal.
We have an account with Betterment that has been really easy to maintain. If you’re interested, you can sign up for a new account at Betterment here. If you want a system that is easy to manage and has a track record of long term growth, you want to look for low cost index funds to put your money in.
These are mutual funds that track a market index such as the S&P 500. They have low expense fees because they not usually actively managed.
Thoughts on Automating Your Finances
How about you? How much of your finances is automated? How has automating your finances improved (or worsen) since switching?