We’re big believers that money is a tool to help you reach your personal goals. To help us manage our money without being obsessed (and stressed) with it, we’ve created a financial system that helps us stay on track.
Why You Should Automate Your Finances
If you want to know why automating your finances is a practical move, consider my personal example.
I have busy the last couple of weeks with family issues (helping a relative get back on their feet) and juggling my temporary assignment with my freelance work. I’ve decided I’m doing too much and I have been cutting back on my hours across the board.
The good news is our cash flow hasn’t suffered (it’s actually improved) and one reason is that our bill pay and finances are pretty much on automatic.
Without automation we would probably be late on some payments since things come up and we can forget. We developed this system so we can check our balances once a week for 5 minutes to make sure everything is running smoothly.
Automate Your Savings
Start small and automate your money to put into joint and/or individual savings. You’ll hardly notice the slightly smaller paychecks as you start build up your 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 in your neighborhood that offer high interest rates for savings and watch it grow faster.
Automate Paying Bills
Most banks and credit unions offer this money and time saving feature. It took less than an hour to set up most of our bills with our joint checking account.
We only need around 20 minutes a month to pay bills. Once you set your online bill pay system up, it’s very easy to maintain.
We took copies of our bills and set them in a pile. I entered the bill names, addresses, due dates, account numbers, and bill amounts with our bank.
You can set the bills up to be recurring, where it will pay it automatically for you. If a bill changes from month to month, I just login and change the amount. The bank takes care of the rest.
If you have a small business, don’t forget to automate money to go to a high interest rate account for your taxes.
Automate Your 401(k) and IRA Contributions
Check with your Human Resource department at work and see if your company offers a match on employee contributions and how much is it. Another benefit to contributing to your 401k is that the contribution money is taken pre-tax, which can reduce your taxable income.
Once your build up your emergency fund, eliminated your credit card debt, and have increased your income; funnel some money into an IRA. You want to still look for low cost index funds to put your money in.
The two most important factors for obtaining the benefit of compound interest are the interest rate and the length of time your money earns interest. The latter is the most important; your investment will grow slowly at first, but over the long term you will see dramatic improvements.
Automate Extra Mortgage Payments
(Updated) I decided to run the numbers and see what we could come up with. We wanted a mortgage acceleration plan that was sustainable and had some impact with the mortgage.
We decided to look at our much of our mortgage payments this year were actually going towards paying down the principle. Seeing how it was only around $150, we decided to use that as a guide for our acceleration payments.
If we continue to pay $150/month extra towards principle, our 30 year mortgage will become a 20 year mortgage. That means we’ll save $42,408.57 in interest payments!
If we continue to pay $150/month extra towards principle and put down our $8,000 tax credit, our 30 year mortgage becomes a 18 year mortgage. That means we’ll save $55,113.56 in interest payments!
Your Take on Automating Finances
How much of your financial system is automated? We review our system time to time to see how we can improve.