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Do you ask yourself, “what does it mean to automate my finances?” Or, “should I automate my bills?” You’re in the right place if you want to learn to automate your money. I go into more depth on all of this in my award-winning book, Budgeting Doesn’t Have to Suck. I hope you find this summary and infographic really useful in the meantime.
How To Automate Your Money
When you create your budget and have money left over…that’s your cash to save and invest. As you will see in the infographic below, the goal is to automate your savings transfers, your bill payments and your investing so that those critical activities occur without friction. The problem is that you may see extra cash in your account and feel inclined to spend it. What can you do to avoid this, you ask? Automate your personal finances!
Just like how you might schedule a bill payment on your credit card or bank’s website, you should setup an automated transfer of money from your checking account into your savings account. Make this transfer happen on the days when your income comes in, such as every payday. This way, your extra money is automatically moved to your savings account, where it can be put to work before you have a chance to touch it.
Do the same with your investment portfolio. If you don’t have one yet, keep reading. Investing is the surest way to increase wealth. You may think of retirement when you think of investing, but investing can also be for the short term. Your short-term goal could be to save for a vacation or a down payment on a home or a vacation home.
Maybe you have a 401k already. Get the maximum match that your company gives and no more. Then, contact a company like Fidelity, open an account, choose a low-expense index fund, and automate your contributions to this account just as you now do for your savings account. Keep your investment money invested for the long-term, in sickness and in health. I am not giving financial advice and you need to do your own research, but this is what works for me. If history can be trusted, your money will grow in the long-term.
Infographic: Automating Your Finances
This infographic is the system that you should create to automate your finances. It’s easy and also important to your financial success. The more income you earn, the more important automation becomes.
There is a lot of science behind the power of automation and how it helps develop our habits. If you leave it up to yourself to manually make those transfers, they are much less likely to happen, especially over an extended period of time.
If you receive a paycheck, schedule the transfers to occur on the day your paycheck lands in your account. That way, you don’t have the risk of the Wealth Effect kicking in when you see your checking account balance. Get those savings, investment and bill pay transfers automated right now.
This article originally appeared on IAmJimMiller.com and was published with permission.
Jim Miller is an entrepreneur, accountant, personal finance expert, author, dad and former-rock star focused on creating things that make the world better.
Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.