Set Your Personal Finance on Autopilot

Not everybody is interested in personal finance, that it becomes a hobby for them. Some people are annoyed by it and want to get it done, which is perfectly okay. The problem is that you might let chances go for improving your financial situation and build your wealth. Another issue arises that you might act impulsively when it comes to financial decisions, which will also endanger your long-term wealth building.

Set yourself up with a system of financial automation tasks that require very little maintenance once in place. This will reduce the necessary work to some adjustments every other month and leaves you to the more enjoyable parts of your life.

In the following, I will provide a three-part system of automated tasks and rules to help you reach your saving goals and maintain a healthy personal finance situation. Once set up, the system is mostly working on itself.

The paycheck part

You will likely have many obligations and bills to pay on a monthly or quarterly basis. I am talking of rent, utility bills, insurance fees, and other kinds of subscriptions. Set up automated money transfers that withdraw the amount from your account automatically and transfer it to your debtor on a specific date.

Setting up the transfer orders could be a bit of work if you do it all at once. Therefore, when you pay your next recurring bill, you set up the automatic transfer for this type of bill at the same time. Do this with every bill, and you will see a heavily decreasing amount of incoming bills over the next months. You can also permit your debtors to cash in every outstanding amount directly from your account.

Set a date for your automatic transfers a couple of days after your paycheck arrives. By this, you ensure that you have enough liquidity. Another advantage is to support your own budgeting. By paying all bills at the beginning of the month, you get an idea of how much you have left for the rest of the month.

This automated transfer system and permitted cash-in will save you a lot of time you formerly spent on paying bills. It also benefits you financially by saving the occasional reminder charge.

The savings part

If you want to save regularly and consistently, the best system is to treat your savings rate like a bill. Take some time and figure out how much money you need to save to reach certain goals like the down payment of a house. Translate it to a saving rate you can afford.

Set an automated money transfer order every month with this rate directly from your paycheck account to your savings account. Like in the chapter before, set a date for the withdrawal a couple of days after your paycheck arrives.

Just treat your saving rate as a regular bill to yourself. You will be surprised how little you miss the money that never sits in your paycheck account anyway.

The main advantage of a separate savings account lies not mainly in the higher interest rate. The benefit is that you seldom see that money, and it is harder to reach.

To make this more vivid, I will tell you about my savings account: I use a special account from which I cannot pay online or withdraw cash from it. The only possibility is to apply for a withdrawal to a specific reference account, which is my paycheck account. This process takes about three to four days to be completed.

To make it clear, nothing can stop me from withdrawing cash from my savings account to my reference account and buying that motorcycle I am craving. The forced delay will make me think twice and even a third time if it is really a good idea right now or just an impulse that will vanish over time.

The investing part

You can cover investing in a similar approach, like in the savings part. Define the amount of money you can afford to invest regularly. Take some time to compare banks and online providers to find one that will manage your investment account.

Most banks are providing specific saving plans where you can invest a small amount of money every month. They will take care of the buying and holding of the respective stocks or funds you chose.

Another critical part of assessing if the saving plan supports the automated reinvesting of any dividend payments. Consider choosing this to take full advantage of compound interests.

The main advantage is this automated system won’t only save you time, but it keeps you from several bad habits when it comes to investing:

The saving plan for a specific fund or index will keep you from stock-picking and timing the market. This is not only stressful and time-consuming. The chances are high that as a private investor, you won’t stand a chance to beat the market anyway.

On the other hand, the automated reinvesting of dividends will keep you from spending your earnings and let you benefit from the astonishing effect of compound interest.

The Takeaway

As you see, there are ways to build a personal finance system that will require little maintenance and leaves you to the more enjoyable parts of your life.

Not only will it save you time, but it will support the good money decisions and is mainly running on its own. You can leave yourself with watching your wealth grow.

The system is also designed to avoid some flaws and impulses that might make bad financial decisions. It takes into account some impulses and wishes everybody of us is facing from time to time.

It won’t prevent you from spending money on whatever you want. The system, I suppose, works by itself so that the good money decisions are taken out by themselves, and the bad decisions require effort and additional consideration.

Find out if this suits you if you want to spend less time on your personal finance and still let your wealth grow.

Best wishes.

This article is for informational purposes only and should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions