While you always need to pay attention to your money, you don’t necessarily have to touch it to make it work harder for you. Simply automate your finances.
It’s often said, “you should make your money work for you, not the other way around.” But how do you do that, exactly?
Perhaps you have stocks that automatically reinvest dividends or a 401(k) that grows through automatic deductions from your paycheck. Your salary is probably directly deposited into your checking account. Automation already plays an important role in how you manage your money.
But are you maximizing its potential for helping you manage the complete spectrum of your personal finances? While you always need to pay attention to your money, you don’t necessarily have to touch it to make it work harder for you.
Here are four simple steps to automating your finances.
1. Enroll in online bill pay and set up automatic payments.
Most people think you can only automate payments for credit cards, but did you know you can also set this up for any regularly occurring bill, such as rent, your mobile phone, utilities, or even your auto insurance? Remember, though, automatic payments don’t give you a pass from monitoring bills and account statements. Be sure to review all those things before the money comes out of your checking account in order to avoid overdrafts or fraudulent payments.
2. Automatically invest in the future.
Paying yourself is an important step toward breaking free of the rat race. You should be putting a portion of every paycheck towards retirement. For some people, this might happen before you even get your paycheck via a company-sponsored 401k. If your employer doesn't offer a 401k, you should consider looking at IRA options and setting up automatic transfers to it every month.
3. Set up a recurring automatic transfer to your savings account.
Your first saving goal should always be the creation of an emergency fund. Ideally, you will have between three and six months of living expenses saved up. Once you have that, do not touch it except for... well... emergencies. And of course, don't forget to automate this process. You'll build savings effortlessly, without having to think about it.
4. Use budgeting software to help control your spending.
Tracking where your money is going and making budgets is important, but it can be tedious. Free budgeting software can help you understand just how much money you have to spend each month, as well as how much you need to save to achieve certain goals.
Automating your personal finances can help ensure you never miss paying a bill (which btw, is good for your credit score). You'll spend less time making your money work harder for you, so you have more time (and cash) to do the things you love.