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A harsh reality: your finances must always be a high priority. You hear that about 60% of six-figure earners still live paycheck to paycheck, and why is that? Because people assume that as you earn more money, the less intention you have to place on your money to be able to get ahead.
And unfortunately, that just is not true. Regardless of how much money you make, you will always need to place some amount of intention and priority around your financial life to make sure your bills are getting paid, you're spending less than you earn, and you're stashing away a % of your money to save for your future.
However, everyone can agree that the less time you spend with your money, the better, right? I don't think this is true about every aspect of your finances (I still track every dollar I spend manually using this budget template spreadsheet - and I'll ride or die for a spreadsheet over a budgeting app any day), BUT I also think that there are a ton of areas in your financial life that you CAN automate to make 1) your life easier and 2) it almost impossible to not hit your financial goals every single month.
This article will discuss the benefits of automating your finances and how it can help you achieve your financial goals. Automation is powerful when it comes to your money! I learned about this topic in one of my all-time favorite money books, I Will Teach You To Be Rich, but here are some ways that automating my money has improved my financial life in my twenties.
The Benefits Of Automating Your Finances To Hit Your Financial Goals
Automating your finances offers several key benefits. First, it provides a safety net and peace of mind. Automating your bill and credit card payments ensures you never miss a payment, even if you're on vacation or forgetful. This reliability helps you avoid late fees and maintain a good credit score.
Secondly, automating your savings and investments increases your consistency. By setting up automatic deposits into your savings and investment accounts, you are more likely to save and invest consistently over time. This consistency can help you build wealth and reach your financial goals faster.
Another benefit of automating your finances is that it saves you time and effort. Instead of manually paying bills and transferring money between accounts, automation takes care of these tasks for you. This frees up your time to focus on other essential aspects of your life.
Additionally, automating your finances can help you avoid impulsive spending. When you have a clear plan, and your money is automatically allocated towards your financial goals, you are less likely to spend money on unnecessary purchases. This can help you stay on track and progress towards your financial goals.
Establishing A Cash Buffer
Before you start automating your finances, it's essential to establish what is called a cash buffer. A cash buffer is a buffer for one month's expenses beyond what you will spend this month. This ensures that your current expenses, bills, investments, savings, and debt payments will never draw your bank account down to a negative balance.
Having a cash buffer is crucial, especially when automating your investments. You don't want automated transactions to drop your bank account below zero. With a cash buffer in place, you can be confident that your finances are stable and that you won't encounter any unexpected overdraft fees or financial setbacks.
Automating Bill Payments
One of the first areas you can automate in your financial life is bill payments. Set up automatic payments for regular monthly bills, such as your mortgage, rent, utilities, and credit cards. This ensures that your bills are always paid on time, even if you forget or cannot make the payments manually.
When it comes to credit cards, using them responsibly is essential. Treat your credit card as a pass-through vehicle for money you already have and will spend. Pay your credit card balance in full monthly to avoid paying any interest. By enabling autopay for at least the minimum payment, you can ensure that missed payments do not negatively impact your credit score.
Automating Savings And Investments
In addition to bill payments, you can also automate your savings and investments. Set up automatic monthly transfers from your checking account to your savings account. This helps you consistently save money and build up your emergency fund or other savings goals.
Take advantage of this benefit if your employer offers a 401(k) plan with matching contributions. Set up automatic 401(k) contributions before you even receive your paycheck. This ensures that you save for retirement and take advantage of employer-matching contributions.
You can also automate your investments in non-retirement accounts. Set up automatic deposits into investment accounts, such as a brokerage account, to consistently invest in the stock market or other investment vehicles. This helps you grow your wealth over time and reach your financial goals.
Good Habits To Practice Alongside Automation
While automation can significantly simplify your financial life, it's essential to practice good habits alongside it. Here are a few habits to consider:
Put bill due dates on your calendar: Even if your bills are automatically paid, staying on top of your finances is essential. Add bill due dates to your calendar so you know when payments will be charged to your account.
Conduct a monthly review of your finances: While automation takes care of the actions, staying informed about your financial health is still important. Conduct a monthly review of your accounts, balances, and financial goals. This helps you stay on track and prevent any surprises or issues.
Use a financial planning tool: Consider using a custom-built spreadsheet or a budgeting app to track your income, expenses, savings, and investments. This can help you plan for taxes, calculate your take-home pay, and monitor your spending and saving habits.
Takeaway
Automating your finances can be a game-changer in achieving your financial goals. It provides a safety net, increases consistency, saves time and effort, and helps avoid impulsive spending. By automating bill payments, savings, and investments, you can ensure that your financial obligations are met and you consistently work towards your goals.
While automation simplifies your financial life, it's essential to practice good habits alongside it. Put bill due dates on your calendar to stay on top of your finances, conduct a monthly review of your accounts and financial goals, and consider using a financial planning tool to track your income, expenses, and savings.
In conclusion, automating your finances can provide numerous benefits and help you achieve your financial goals. By setting up automatic bill payments, savings, and investments, you can ensure that your financial obligations are met consistently and efficiently. Remember to establish a cash buffer and practice good financial habits alongside automation to stay on track and prevent surprises or issues.
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