How to Automate Your Money
As a society, we worry about money more than anything else. Should I be saving more? How do I spend less? What about paying off this debt? Am I sure I paid the bills on time? How do I get ahead by investing?
Having all these options may indeed sound like a good thing but they do exactly the opposite for us. They don’t enable us to take action, they immobilize us because there are too many choices to choose from. Most of us assume it’s about staying focused and on a tight budget that doesn’t allow you to have any fun. We think if we focus a little more on finances, learn about investing, pay off debt everything will all work itself out. It’s unlikely we even start because even reading those words triggers emotions of overwhelm. Ask your friends or coworkers if they’re taking advantage of their employers 401 (k) match. Most people aren’t even though it is free money – literally free money for money that’s already coming out of your paycheck. Their answer, Yea, I should really look into that.
Think of yourself as a small business, Let’s call it Me inc. Your business needs certain things to operate. It needs a place you can live, food to keep you going, transportation to get you from point a to b. Most importantly You inc. needs cash flow to make everything work.
To make sure you (and your business) is healthy and growing you’re responsible for making sure the money going in is more than the amount that goes out. Your cash flow depends on how frequently you get paid. Let’s just say like most people, you get paid biweekly.
To keep things simple we’ll exclude taxes. Before the direct deposit hits a certain percentage (between 0-15%) of your paycheck is automatically deducted for your 401 (k). Check your employer benefits to see if you’re missing out on free money, for example, my employer also matches up to 6% of whatever I save for myself. From there 88% of what I make hits my checking account. From there I take 30% of the total deposit and move it into a savings account. I haven’t found a way to automate this so I have to do this the hard way twice a month. From there rent, gym membership, electric bill, etc is automatically deducted once a month. It’s automatic so all I have to do is check my banking app to verify.
Food and gas get paid for by credit card where I’ve future dated the payment for two days before the due date to help build my credit. If you do have debt I recommend deducting only 20% or 15% for savings using the remaining amount to pay extra towards it.
Now that your responsibilities have taken care of themselves the rest of the money is yours to spend without guilt. Your money now works for you while you’re saving each month.
Best of all you don’t have to think twice when spending because all your money decisions have been handled automatically.