Do you spend enough time managing your finances? Paying the bills, putting away money into your savings account, putting away money into your retirement account, transferring money from account to account and managing your budget? What about investments, cutting down on expenses and paying off old debts? When faced with so many choices and decisions we often just give up, put it aside or do nothing.
Personal finance, saving and your over all financial well being is about more than just will power. It takes knowledge and a plan to make it happen. It is also about automating everything you can, especially the psychology of automation. Getting yourself trained in good habits. If you automate as much as possible you are far more likely to succeed financially as it takes away the stress and time needed to pump into managing everything. What can you automate? For one thing your bill payments can be automated using your banks bill pay service. You can also automate dividing your pay check to your checking and savings accounts. You can set up automated contributions to your retirement plan through work. You can set it up with your bank to pull a certain percent of your check to your Roth IRA retirement account as well.
If you have certain savings goals you can set up separate savings accounts for each of these goals. What is great about this is that it is easy to see where you are for that specific goal as well as the fact that once the money hits your savings account it will be harder to touch, IE save it and forget it. If you have for an example a goal to save for both a house and a wedding you would open two separate savings accounts and set up auto deductions from your paychecks into both of these accounts. It takes out the work and stress of saving for these two things and makes it very easy to track your progress.
Lets take an example of an automated finance program in action. Freddy Fingers Jr makes $3678 per month take home from his job. Freddy want to save 3% to his Roth IRA retirement account or $110.34. Freddy already has a 401(k) through his work place and these deductions already come out of his check. Freddy Rents so he has to cut a check for $1390 to his landlord every month on the 1st. He owes $110 per month to his car insurance but he sets this up as an automated bill payment. Freddy has an auto loan for $390 per month which he sets up on auto pay. Freddy has health insurance through work and this gets auto deducted pretax from his paycheck. He also pays roughly $200 per month to The city of Austin power company and roughly $45 per month for gas both of which he sets up automated payments for. His time Warner cable, phone and internet payment of $175 per month is also set to bill pay. Finally he has his cell phone bill for $75 which he sets up as an auto payment. After all expenses are paid he has paid out $2495.34 per month leaving him only 1182.66 per month. Freddy luckily is married and his wife Mona earns $3954 per month which goes to the joint checking account. This leaves Freddy and Mona a sum of 5136.66 per month with only needing to write one check. Freddy and Mona want to own a house so they are setting up a 2nd savings account and auto deducting $1550 per month to this account. They also want to go to Bora Bora so they have set up another saving account and are putting away $450 per month towards Bora Bora. They also want a general savings account so they divert $450 a month towards this
Roth IRA: $110.34 (Automated)
Rent: $1390 (Manual Check)
Car Insurance $110 (Automated)
Car Loan: $390 (Automated)
Electric: $200 (Automated)
Gas: $45 (Automated)
Cable, phone and internet: $175 (Automated)
Cell Phone: $75
= $2495.34 expenses
Left over combined for Fred and Mona: 5136.66
Diverted to savings:
House savings: $1550 per month (Automated)
Vacation Savings: $450 per month (Automated)
General Savings $900 per month (Automated)
Under this plan they have roughly $2236.66 per month left over for good, gas and life style choices all with only needing to ever cut one check per month. The worry and stress has been taken away making it more easy for them to achieve their goals.
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