Managing your finances can become a chore. Though paying your bills and transferring money to savings are monotonous, they are really things to automate in your finances instead!
Why automate your finances?
Automating your finances essentially takes the human factor out of money management.
Though that may sound harsh and a bit robotic, its sometimes necessary when your financial actions are often driven by impulse or emotions.
Automating doesn’t mean that you aren’t aware of what’s happening with your money. Instead, it just means that you’ve removed yourself from the process by creating a system that works apart from you.
No more relying on memory to get things done.
4 Things to Automate in your Finances
1. Your Retirement Contributions
The best advice that I ever received (and heeded to) when it comes to money is to automate my retirement savings. It’s essentially having your retirement contribution taken out of your paycheck before you even get paid.
Though there are several options to choose from when it comes to your 401K, the single most important thing is making sure whatever amount you choose comes out automatically.
Because 401Ks have become widespread throughout the years, companies have made it easy to contribute. Just take a trip to your HR or payroll person and let them know that you’d like to have your 401K contribution automatically drafted from your paycheck.
If they’re unable to do so, contact the investment firm and they’d be more than happy to set something up!
2. Your Savings
Many times saving up for emergencies or for general savings becomes that last item on your list after all the bills and other unplanned expenses are paid for. Don’t fall into that trap.
Have your savings either directly deposited when you get paid or set up an automatic transfer from your checking to your savings account to occur the day after you get paid.
Most companies allow you to split your direct deposit up between accounts. So make things easier on yourself and get your savings automated every time you get paid!
3. Your recurring expenses
Automation makes it practically impossible to be late on your bills. Since you’ll already be paying these bills each month, automate your payments so that you don’t forget.
In my 4 Ways to Save Money on Your Student Loans blog post, I shared how some lenders actually incentivize automated payments with reduced rates. This may not be the case with all bills, but be sure to implement this where it does. Either way, the incentive is your bills being paid on time.
Trying to improve your credit score?
On-time payments is one of the contributors to your score. So, automate those payments to show a history of paying your bills on time!
If you’re finding that too many bills have to be paid around the same time and you just don’t have enough to cover it during that pay period, you can always request to change your billing cycle. Doing so allows you to regulate what is taken out during each pay period so that you have enough to cover it all.
4. Your Taxes
Last, but definitely not least, you need to automate your taxes.
If you earn any income in the United States, then you are required to pay taxes. In fact, the government ensures this by withholding taxes from your check everytime you get paid.
Though the automation is already done for you, the kicker is making sure that the right amount is automatically taken out of your income. This requires that you select the correct withholding for your specific circumstances.
Click here to calculate your tax withholding
If you’re an entrepreneur, this is much different. Instead of an employer making sure that the government gets paid for you, you’re solely responsible for making sure you pay your taxes.
Here’s a tip: Take out a percentage of your revenue every time that you get paid from customers. Place this money in an account dedicated to taxes. Use this account to only pay your taxes!
The old adage, “Out of sight of mind,” is definitely at play here. If you never see it on your check or account, you won’t miss it or spend it.
Save yourself the headache of trying to manage your money manually. Automate your finances to set yourself up for success!