8 Ways to Automate Your Finances

There is a psychological aspect to personal finance management. Many consumers have trouble saving money simply because it is on hand and they tend to spend it. Personal finance experts have long been proponents of automated finances because what you do see, you are less likely to miss.

Automating your finances means you set up electronic transactions for a variety of reasons through your financial institution and payroll department. By setting up automatic deposits and transfers, you do not physically see or touch the money so you are more likely to allow accounts to grow your savings for a variety of short-term and long-term purposes.

There are several ways to automate your finances with many more options for you to explore based on your financial needs. Here are   ways to get started automating your finances:

1.Review Your Stash of Bank Accounts

If you have previously established a bunch of bank accounts for a variety of savings goals and your financial needs, it is time to sit down and review where you stand. Ideally, you should consider consolidating your banking life by maintaining the minimum of accounts. Aim for having one checking account, one savings account, one retirement account just to make your life simple. If you have not explored your options for bank accounts in years, now is the time to compare what’s out there and get the account that is right for you.

2. Establish Protection for Overdrafts

Automating your finances can start out a bit rocky as you transition your monies and get used to budgeting correctly. For this reason, you should make sure you protect yourself from overdrafts by setting up overdraft protection through your bank. This will cover you in the event of a mistake. Most banks these days charge a high fee for overdrafts which can hurt your budgeting efforts.

3. Speak to Payroll

Most employers offer the convenience of direct deposit for payroll checks. If you have not set up direct deposits for your paycheck, do it immediately. By putting your check directly into your account you can prevent overspending, which makes sticking to your budget easier. Additionally, direct deposits generally give you faster access to your money.

4. Establish Your Savings Priority

Personal finance experts recommend the strategy of paying yourself first. At least 10% of your check should be going directly into savings for yourself as an emergency fund that remains untouched. Establish a direct deposit allocation with your payroll to distribute a percentage of your pay into savings. Even if this is the only account you are able to fund because money is tight, be sure to commit to at least the 10% with each paycheck.

5. Automate Your Monthly Bill Payments

Before you can set up additional savings goals, you need to ensure you have met your financial obligations first. For your monthly bills that are fixed, you can set up automated payments through your bank. This will get your bills paid on time, at the same time, in the same amount each month. This automation is only recommended for your bills that do not change in amount. Accounts that change from month to month should be paid manually.

6. Prepare for Retirement

If you have not started planning for retirement, now is the time to get serious. The longer you wait, the more you have to save. Many working people have established a retirement account through their employer’s 401k program. If that is not an option, investigate IRA accounts and automatically deposit a set amount from each paycheck towards your future.

7. Establish Savings Goals

Consider how many times you say ‘I want one of those’. Ideally, any big ticket purchase outside of your budget should only be done after you have saved the right amount of cash. For this reason, it makes sense to include these savings goals into your automation plan. Write down the various things you want to save for in both the short and long term including new furniture, annual vacations, holiday spending, taxes, a wedding, college, or the new boat you’ve had your eye on.

Banking institutions like ING Direct allow you to establish sub-savings accounts from your main account to make money distribution much easier than establishing 9 different savings accounts. Allocate funds into these savings goals based on what you can afford within your budget or how long you have to save the total amount.

8. Increase Your Income

One reason people fail to set up automated money systems is due to their lack of money. Many families have budgets that do not stretch far enough. It is wise to establish your budget, figure out expenses, and divide your remaining funds into savings allocations. If there is not enough money left for savings or you don’t have enough income to cover your monthly expenses, you need to consider asking for a raise, getting a part time job, or adding other means of supplemental income.

Your overall goals should include meeting your financial obligations each month and building a sufficient financial cushion for all of your ‘wants’ as well as protection should anything happen to you, your job, or your financial stability.