Let’s face it, most of us don’t have a ton of free time on our hands these days. With the free time we DO have, very few of us want to spend it dealing with our finances. So with just a few weeks left in the year, it makes sense to take some easy steps to reduce the stress of managing your money. Thankfully this can be done very easily, by setting up an automated personal finance system! Once you put your finances on auto-pilot you’ll have plenty of time to kick your feet up and catch up on all those movies and shows that are piling up in your Netflix queue! Well, maybe not…but it will be one less thing in your life that you have to stress over.
Automating your finances is a simple and pain-free process. I’ve created this simple infographic to show how I’ve set up the flow of my finances, from the time I get my paycheck until the money gets spent or bills get paid. Feel free to copy my system, or improve upon it to meet your specific needs!
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How It Works
- First, I setup direct deposit for my paychecks (no paper checks!). 6% automatically gets contributed to my 401(k) so I don’t miss out on any matching funds. The rest gets deposited directly into my checking account.
- From my checking account I set up two automatic transfers. One sweeps a fixed amount over to my savings account each payday. The other is a monthly transfer to my Roth IRA. This makes sure I stick to my saving plan by paying myself first! (If your employer lets you direct deposit into multiple accounts you can make this even easier by automatically splitting your paycheck between checking and savings.)
- Next, I set up electronic bill pay for all my monthly bills that can’t be paid by credit card. In my case this is just my mortgage, gas and electric bills.
- All other bills, and ALL of my discretionary spending is done on a rewards credit card that, naturally, is (auto-paid!) in full each month. By doing all other spending on a credit card I maximize the possible rewards/cash back I can earn. Another benefit are all the added buyer protections that credit card company’s offer cardholders.
- Finally, (as long as you have 6-12mos saved in an emergency account.) I make occasional transfers from my savings account into other investment accounts. Such as CD’s, bonus contributions to my IRA’s, or soon – I’ll be adding more to my P2P lending account at Lending Club.
That’s it! Automating your finances is as simple as setting up automatic electronic bill pay for your bills and creating a few automatic transfers to your savings and retirement accounts.
Other than easing your mind, automating your bills and savings can save you money too. A lot of companies are starting to charge a fee to receive paper bills and statements through the mail. So by setting up electronic payments and receiving copies of your bills/statements by email you could save yourself up to $2-$5 per bill!
One last, but important note: While I do have all my payments and transfers automated as I’ve described, It’s still important to still give your bills & statements a once over each month. Companies still make errors and you want to be able to catch them ASAP should they appear on your bill or statement.
Stop worrying about making late, or missing payments. Automate your finances and put your mind at ease!
Do you already have an automated personal finance system in place? Share your system in the comments!
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