Automation equals domination. That may sound lame, but sometimes the truth is a little lame.
If you want to dominate your finances, automation is your best friend and it’s an easy way to stay on track.
Sure, it’s not as exciting as watching every stock move and keeping track of each penny, for all of your finance nerds (yes, I’m talking to myself as well), but it is less stressful and more freeing.
7 Areas of Your Budget to Be Automating
Most areas of your budget can be fully automated and I’ll show you exactly how to do it.
The idea is to automate as much of your budget as possible so that you can track as few categories as possible. Not only will this make your life easier, but it will free up time to do more important things…like reading finance books.
So let’s get started. Here’s how to automate each area of your budget…
1. Automate Your Investing
Investing is easy to automate because automation is often a requirement. If you invest in index funds, you know there’s generally a minimum initial investment and/or a minimum monthly investment.
Either way you can set it up to automatically draft a fixed amount out of your checking account each month and you should.
If your company offers a retirement plan, such as a 401(k) or a TSP, you can set your deductions to automatic through your employer.
You should be investing at least enough to get the match, if they offer one. If they don’t offer a match, it’s up to you to decide whether you’ll have better options in your employer’s retirement plan or in your own IRA.
IRAs usually allow for more freedom in investment choices, but if your employer’s plan includes some nice low-cost index funds, you may as well keep it simple and stick with that.
2. Automate Your Utilities
When it comes to electric, gas, water, trash and recycling (and even your cable and internet), the company generally offers a way to set up an automatic draft from your checking account.
If not, you can generally send an automatic check for things that remain at a fixed price, but for the things that fluctuate, you may be forced to pay them manually. I know that’s disappointing, but some companies just haven’t got with the times…yet, but they will.
3. Automate Your Saving
Setting up an automatic draft from your checking to your savings is easy to do with most online banking. This is a great way to build your emergency fund. It also works great when you’re saving for a large item, like a vehicle or a down payment on a house.
Now there’s actually a free tool that will automatically save money for you. It’s called Digit and so far it has saved me over $300 that I didn’t even know I had.
It’s an intelligent service that tracks your spending and knows how much you can afford to put into savings, then it automatically deducts different amounts throughout the week.
If something crazy happens and it causes you to overdraft by taking too much, Digit will cover any fees, but it has never happened to me; it always knows when to quit.
4. Automate Your Mortgage/Rent
Your mortgage payment is easily automated through online banking. You can even do it without online banking. Just call your bank and set it up to be automatically drafted on a certain day each month.
If you want to pay extra on your mortgage, you can set an additional amount to go towards principle each month.
For rent, simply set up an automatic check to be sent to your landlord’s address each month.
Some landlords (especially property management companies) actually offer an automatic-draft service, but if not, online banking will do the trick by simply setting up the check to be sent through the mail.
5. Automate Your Giving
This is an often forgotten area of automation, but yes, your giving can easily be automated. First, check with your church, charity or organization to see if they offer a way to set up an automatic giving plan.
If not, simply get the mailing information and set a check to be automatically sent each month through online banking.
You’ll never forget about your giving again and you won’t have to worry about “not having enough” to give.
It’s funny, when we put giving last, we never seem to have enough, but if we automatically give no matter what, we always seem to find a way to pay the rest of our bills. Just a weird little law of the universe.
6. Automate-Away Your Debt
It’s easy to set up payments automatically through online banking, but you have more than one option – usually you have three:
- Pay the minimum payment each month
- Pay off the balance in full each month
- Pay the minimum plus extra each month
For your debt, you’re going to want the last option. This is where the debt snowball or the debt avalanche comes in. Choose your method and automate it.
You’ll have to adjust the payments once you pay off a debt, but that’s good, because it will be motivating to see your progress.
Before you know it, you’ll be debt free – automatically!
7. Automate Your Spending
Once you’ve automated the rest of your budget, your spending is all you need to keep track of.
If the payment doesn’t change, automate it and forget about it – though you should still be reviewing your monthly statements for errors.
For the rest of your expenses, such as groceries, entertainment, auto and clothing, just keep a small budget in a free program like Personal Capital or Goodbudget.
The easiest way to automate your spending is through the [responsible] use of credit cards. Simply set your credit cards to pay the full balance each month. This way you won’t accrue any revolving debt and you’ll never pay interest.
You’ll need to budget your spending and as long as you don’t go over budget, you won’t have to worry about anything. It’s a good idea to keep a buffer in your checking account for the times that you do go over a little – a few hundred dollars should do the trick.
The Main Thing
It doesn’t matter how you automate it, it just matters that you automate it. If you have to pay a fee to automate something, see if you can find a better way. There’s almost always a way to do it for free.
For example, your landlord may charge you a fee to set up an automatic plan, but your bank may be able to send a check each month for free.
Always look for a free option.
It may still be worth it to pay an extremely small fee, but you shouldn’t have to. Not in 2015. Automation is everywhere so you have choices and options, which is great because that means it’s more difficult for companies to charge fees for automation.
So get out there and automate as much as you can without paying extra. Free up your time and take a load off.
How much of your budget is automated? What’s something you’re going to start automating now?