Putting anything on autopilot, especially something as important as your finances, may sound like an irresponsible idea at first. Yet experts say it’s one of the best things you can do to simplify your finances and stick to good habits that can help you build wealth.
“Automation creates a stress free, clear-minded environment for people to focus on more meaningful financial decisions, rather than day-to-day bills,” explains Certified Financial Planner Samuel Rad. “It helps you focus on the big picture, rather than the minutia, when it comes to running a good financial household.”
Plus, when you allow automation to do the work for you, you don’t have to exercise self-control—a resource we have in limited supply—when making smart (and sometimes difficult) financial decisions.
“If you do things manually, it takes multiple actions on your part—remembering 12 times to save, 12 times to invest, 12 times to pay your monthly bills,” says Certified Financial Planner Colin Drake. “Multiple actions require much more willpower and attention.”
Here’s how to make it work for you.
Automating your savings habits—by either having a portion of your paycheck direct-deposited into your saving account or scheduling monthly bank transfers from checking to savings—is a surefire way to make sure you pay yourself first, stay on track with your savings goals and set yourself up for financial success.
Brittney Knies, a Certified Public Account and blogger at Britt & the Benjamins, says it helped her save more than 40 percent of her net income last year. “It’s kept me from spending extra cash on things that don’t serve me and my goals.”
Aaron LaRue, 26, a product manager at Clara Lending, is automating his efforts to save for a home down payment. He calculated how much he’ll need for the future mortgage payment—which is more than his current rent—and automatically deducts the difference from his checking account and funnels it into a “house fund.”
“Using this hack, I’ve saved $9,500 over a year and a half—or just over $500 per month,” LaRue says. “When it comes time to buy, I won’t have any payment shock.”
If you’re funding a retirement account like a 401(k), or a traditional or Roth IRA every month, nice job—you’re already auto-investing. To get the most from these accounts, be sure to choose investments that suit your financial goals, and inch up your contributions over time.
You can also look into “robo advisors,” like Betterment.com, Motif and Wealthfront.com, which use algorithms to automatically construct and maintain low-cost portfolios, based on your age and risk profile. “You really don’t need to be an expert investor to have success with these affordable, done-for-you options,” Drake says.
Acorns, which publishes Grow, also offers these portfolio management services—plus the ability to automatically invest the spare change from every transaction you make throughout the day or to set up recurring and one-time deposits. (You’d be surprised how quickly that change adds up.)
These days, you can enable automatic bill-pay for just about every expense in your budget, from utilities and credit cards to health insurance.
Take it from Justin Malik, a 34-year-old entrepreneur in Irvine, Calif., who’s been doing exactly that since 2010. “My roommate has a huge pile of mail that he never seems to open. I’d be afraid that my bills would get lost in the mix, or I would forget to pay,” he says. “Automating my bills means that I never have to remember!”
By making consistent, on-time payments, you’re also keeping your credit in good shape and ensuring you’ll never get hit with late fees.
One word of caution: The set-it-and-forget-it method could prevent you from keeping a close eye your transactions—and therefore blowing your budget—or even detecting fraud. (Check out apps like Mint.com, YNAB.com and GoodBudget for help auto-tracking your expenses.)
Baltimore writer Jim Wang, 35, addressed this by setting up automatic text notifications on his credit cards, too: “If you don’t review every statement, a fraudulent charge could go months without detection. I set up notifications for any bill over $0.00—or $1 in the case of American Express—and they usually come within seconds of the transaction.” This way, if anything looks fishy, he knows right away.
Shopping for personal care and home products can be automated, too, thanks to programs like Amazon Subscribe and Save, which offers up to 15 percent off orders and sends notification emails before shipping, so you can skip or change your delivery dates. Target Subscriptions also offers a 5-percent discount and free shipping on everyday necessities.
Ali Betts, 27, a life coach in Louisville, Colo., even automates her food shopping via Door-to-Door Organics. “I no longer have to take time to go to the grocery store,” she says. “Everything is done for me, so I have time to focus on more important things.” (Other meal delivery services include Plated and Blue Apron.)
Often, signing up for automated deliveries of household necessities can save you money since you’re buying in bulk, and you won’t be tempted to make impulse purchases.
But be cautious of how many monthly services you sign up for. “While convenient, these subscriptions could result in over-ordering items you don’t need if you aren’t mindful, and you may be able to score bigger savings by shopping local sales,” says savings pro and media strategist Andrea Woroch. “But for basics you know you can’t live without, like baby diapers, dog food and such, it makes sense.”
Aside from purchasing, there are other shopping tools that can help you save. One notable platform is Paribus, which scans your email inbox for receipts for recent purchases. If it finds that a price has dropped, it contacts the retailer so you can be reimbursed the difference—all without you lifting a finger.
March 30, 2016