You might look forward to payday every other week, but how do you feel about sitting down and managing that money? Only 3% of Americans take the time to manage their money every day. Even then, the average American spends less than two minutes daily managing their finances. Nobody wants to spend the time to move their money around different accounts and bills–and you probably don’t either. That’s why you need to learn how to automate your finances so your money goes where you want it to go without you doing all the manual work.
Automating your finances means setting up your accounts to transfer money automatically between them. This is incredibly useful for recurring expenses, such as bills, or moving money to separate accounts. These separate accounts are often used for a number of things, such as long-term savings, emergency funds, and more. Since some people use different accounts for varying expenses, automation makes it easy to manage all of them. These include:
The most immediate use for automating expenses is paying household utilities. This includes your internet, gas, and electricity. It’s also a great way to avoid late fees.
Debt is one of the biggest hurdles to financial freedom, but paying it off is much easier with automation. When you automate your debt payments, you automatically pay your lender. This is particularly useful for debts with high-interest rates, as it ensures that the payments will be on time.
Insurance is a recurring expense you don’t think you need until you do. You should try to insure anything you need to make money, like your car, house, and yourself. Insuring so many things can get hectic, so you should automate this expense when possible. Some insurance companies even let you combine your different insurance packages for singular payments and better rates. Talk to your insurance provider for more info!
If you’re a business owner, business expenses are another expense you should automate. On average, small businesses spend about $40,000 every year. Since most small businesses don’t have an accountant, you’re likely managing these expenses yourself. Saving yourself the trouble and automating recurring business expenses, like ordering inventory and office supplies, will help you manage your business’ finances.
In this day and age, it feels like everything is a subscription service. This includes everything from streaming services like Netflix and Disney+ to meal kits and food boxes. Having a separate bank account to wire money automatically for these subscriptions is a good idea. Having an account for all your wants ensures you’re not going over budget and spending too much on yourself.
Don’t skip out on these subscriptions if they bring you joy! We all need something to spend money on, something to look forward to. You should be okay if your subscriptions aren’t eating up your entire “self-care” budget.
Paying your rent on time every month is incredibly important, especially if it’s your biggest expense. An automatic payment system will ensure that your rent gets paid whenever necessary. As with anything involving rent, talk to your landlord first. They might prefer to get paid with a check or cash for whatever reason. If they want to be paid in cash, make sure you get a receipt for your payment.
The same goes if you’re paying your house’s mortgage. Automating your mortgage payments means you no longer have to manually pay every month. Just be sure to track your mortgage’s interest rate, as you’ll likely be paying more money per month every year.
It would help if you thought about saving for retirement as soon as possible. With compound interest, you’ll receive more money over time just because you started investing early.
One account that you should automate is your 401(k) if your employer offers one. This is because they deposit the money into the account for you. If you want to learn more about investing accounts, check out my article.
Your emergency fund is there when times get tough. That’s why I sometimes call it the rainy day fund. This money, preferably in an untouchable separate bank account, ensures you stay afloat in an emergency. This includes a loss of your primary income stream, like your day job. An emergency fund is one of the most essential steps to financial wellness.
Saving up for a vacation? Consider having a dedicated vacation account. You can consolidate your entire vacation budget and earn interest! By automating transfers, you won’t be under budget at the beach.
Everyone should have a long-term savings account. This is where you’ll store the money you need to reach your financial goals, like owning a house. You should regularly add money to your long-term savings account, even if it’s just a little.
Now that you’ve put your finances on autopilot, here are a few tips that you should know:
Utilities aren’t a set-in-stone expense like subscriptions. Some months, your electricity and water bills may go up or down for various reasons. Find the average monthly cost of your utilities, and deposit a bit more than that in your utility account every month.
Automation won’t work correctly if you don’t have a budget and stick to it. You can automate your recurring expenses, but you need to revisit your budget if you’re spending more than you earn.
Nobody wants to pay transfer fees! These seemingly small fees can add up over time and eventually become hundreds or even thousands of dollars. Paying them feels like paying to use your own hard-earned money. I guarantee you lost thousands of dollars due to transfer fees. When dealing with multiple accounts, make sure you’re paying as few fees as possible.
Even in a world where CashApp, Venmo, and cards are widely used, having a bit of cash on hand never hurts. There will be situations where you will be glad you have cash. Like if you’re eating out, but your phone dies, and you forgot to bring your charger. Cash may no longer be king, but it’s always nice to have around when your card gets denied.
You might still get paid in checks, which can sometimes be inconvenient. I mean, who wants to wait in line at the bank to deposit their hard-earned money? If you haven’t already, talk to your employer about paying you via direct deposit via paycheck.
Having your money be moved around automatically is incredibly convenient–and so is receiving regular financial advice. By joining my money squad, you’ll receive exclusive and potentially life-changing financial tips every week. Signing up is free and takes only a few seconds!
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Dollars Makes Cents by Shaquana, Financial Coach and Wealth Expert, resources helps professional millennial women of color with the tools and skills they need to eliminate their debt, amplify their savings, and build generational wealth — without having to compromise their lifestyle.
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