Thursday, January 24, 2019

6 Ways to Set Your Finances on Auto-Pilot


When I’m on top of finances, I’m all up in my money management apps, checking my balances and the swift progress I’ve been making on my savings goals.

But when things aren’t going so hot? I’m like an ostrich with my head buried in the sand, and I avoid thinking the “M word” at all costs. As you might suspect, this sort of behavior is quite common, and is called information aversion, explains Kristen Berman, principal and co-founder of the Common Cents Lab at Duke University.  

“Money is something we don’t like to think about, especially when we have less than we want to have,” says Berman. “We don’t want to step on the scale when we’re heavier than we’d like to be, and we don’t want to manage our money when the balance is lower than we want.”    

Enter one of my favorite tactics: automation. By setting your finances on cruise control, you get to think less about your money. Plus, you can rest assured that your savings goals are being taken care of.

Here are 6 ways to set your finances on auto-pilot:  

Pay Bills Online 

I am a huge fan of the “set it and forget it” approach, from what I eat and wear and how my money is spent. By auto paying your bills, you won’t have to manually pay each bill each month. Plus, you won’t need to fret about forgetting a payment and incur late fees.

Worried about not having enough in the bank when it comes time to pay your bills? One way you can avoid this is by assigning different bills to different paychecks. For instance, let’s say you get paid twice a month. Your rent and money for an emergency fund can come from one of your paychecks, and you can pay the remainder of your bills from the second one.  

You can also do the math to figure out how much your fixed expenses are, set that amount aside. Then spend the rest. There are a few checking accounts that allow you to safely sock away money for all your bills, and will “release” these amounts near the due dates.  

To simplify things a tad, you can also pay your bills with a credit card. This only works if you designate a single credit card to paying your bills, and that you pay the balance in full each month. Instead of a bunch of transfers out of your bank account throughout the money, you only need to pay a single bill.  

Auto Save When You Get Paid 

There’s nothing like a chunk of money dropping into your account during payday. The danger lies in having a lump sum of cash in a single account. Because if you have, say $3,000 in your checking, chances are you’ll spend all of it.  

Instead, pay yourself first. Divvy up some of your paycheck toward your savings goals. Your paydays are when you have the most money to work with. Use that power to allocate your earnings as you like. When I had a 9 to 5, I would set up an auto transfer to pay off my student debt, and for different savings goals: An emergency fund, vacation fund, and for retirement.  

Figure Out Your Daily Spend Number  

For someone who thinks far more about money than, the average bear, I actually loathe making money decisions on a daily basis. What I do instead is figure out how much I can roughly spend each day on discretionary stuff. How much I have for variable spending is determined after all my bills and saving goals are accounted for.  

I don’t need to quibble over whether I can afford that lunch out or that fancy cheese at the market. That daily number keeps me on track. I just check in on my balance once a day or so to make sure I’m not overspending.  



Set Up a Transfer When You Slash Expenses  

If you’ve been working on lowering your living expenses, put the money you saved toward auto savings. Say you’ve committed to carpooling a few times a week with coworkers. You’ve estimated that it saves you $20 a week, or $80 a month. While it’s tempting to blow that money on a few extra lunches out, auto save that $20.  

Last month I switched providers and saved $50 a month on my cell phone bill (score.) It’s far too easy for those 50 buckaroos to quickly disappear. Because I’ve freed up some cash, I bumped up the auto save amount for my emergency fund to $50.  

Save Money from a Side Hustle  

If you’re a side hustler, consider auto-saving part of your earnings from one of your gigs. It’s easier to set up an auto transfer from a gig where you get paid the same time each week or month, and you know roughly how much you’ll make.  

Let’s say you earn about $200 a week from ride sharing, and you get paid every Friday. If you can swing it, set up an auto-transfer of a portion of that every week. If you save $25 weekly, $1,300 a year.

Of course, only do this if you have money to spare. If you have a day job and are picking up side hustles to “get ahead,” then by all means sock a bit away toward your savings goals. But if your side hustles are going toward your bills, you’ll need to be a bit more judicious as to how much you can reasonably save.

Make Automatic Contributions for Retirement 

If your workplace has an employee-sponsored retirement option, such as a 401(k) plan, save as much as you can. Because the money will come directly out of your paycheck, chances are you’ll hardly even notice it. If your employer offers a matching contribution, aim to contribute at least enough to get the full match.

A 401(k) isn’t the only type of plan you can make automatic contributions for. The same goes for other retirement plans, such as an IRA, or if you’re self-employed a SEP IRA, Simple 401(k) or Individual 401(k). I auto transfer a set amount into my IRA each month.  

The beauty of setting your finances on autopilot: If you can’t see it, you won’t spend it. Auto saving means fewer decisions you have to make about your money. Plus, it means the rules and systems you’ve set in place for your finances overrides any bad habits or behavior you have with your money.

Source: https://blog.mint.com



Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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