This week, Money360 is running a short series on some of the key moments in my financial turnaround and how you can experience those moments as well. For a full description of this, see the first article in the series.
As I began to get my financial situation under control, I began to find a few new problems.
First and foremost, even though I knew it made sense to start saving money regularly, actually making myself do it every week was a trick. I would often forget about it, or I’d talk myself out of it when the time came, convincing myself to throw it toward a debt or some other goal.
Second, I was simply not very organized when it came to bills. I’d get a bill in the mail and put it in a place where I’d hopefully remember it when it came time to pay bills, but even then, bills would sometimes slip through my fingers due to simple forgetfulness.
Thankfully, I found a very simple solution to both problems at once.
Bank on Autopilot
To put it simply, I began to trust my bank to handle both of these things for me.
Of course, in order to actually do this, you must have a bank with a robust online banking system. You need the ability to pay bills directly online as well as establish account-to-account transfers online. I use ING Direct, which allows both quite easily.
The first step I took was to simply set up an automatic weekly transfer from the primary checking account to a savings account. At first, it was a small amount, but over time it grew and grew. Eventually, I added transfers to other savings accounts for other goals, transfers for my children’s 529 accounts, and so on.
The key is to start off with small amounts that aren’t disruptive to your regular finances. You don’t want to start off with an amount that will force you to stop the transfers because of inadequate funds. Start with a small amount, then build from there.
Many people are hesitant to even start because they’re afraid of overdrafting. If that’s your concern, then the problem isn’t with the automatic transfer. The problem is with other money management choices in your life – bad spending decisions and so on. If you’re not willing to save for the future, your life will always be like the present.
The second step was to automate regular bill payments. Right now, I automate almost every bill we have save our energy bill and our cellular bill. Every other bill is a regular amount, so I have our bank set to automatically pay these amounts on a schedule. I don’t have to lift a finger for our mortgage payment, our insurance payments, our trash removal, our water and sewer payments, or anything like that. It’s all automatic.
Both of these moves contributed greatly to my personal finance success. The first one pushed me to start building a strong emergency fund and, eventually, to save for other goals. The second one helped me to get more efficient with my bill paying tactics, leaving late bills in the dust.
Simple moves, big improvements. That’s the kind of personal finance that can change a life.