Automate Your Finances

Why automate your finances? To find out, let’s think about exercise.

When you go for a run, lift weights, or spend some time in your favorite exercise class, it’s easy to accept that you’re tired and need some rest. After all, you just worked out! But after you’ve gone shopping or paid your bills, you don’t tend to put your feet up. But as it turns out, mental work is work, too.

Here’s a fascinating article from the New York Times Magazine exploring this concept through the lens of decision fatigue. It comes down to this: the more decisions you make, the less reliable your decisions are. You have less self-control and less willpower. The entire article is worth a read, but for now, consider this sentence in particular: “Once you’re mentally depleted, you become reluctant to make trade-offs, which involve a particularly advanced and taxing form of decision making.”

You know, trade-offs. A vital part of budgeting!

So let’s take a look at some of the ways you can automate your finances. The idea is, you make a careful, considered decision one time. You put a structure in place for it to take care of itself, and you set a way to check in on it. (Nothing worse than forgetting you subscribed to a convenient monthly charge!) Then you forget about it and use your mental energy on other things.

How to Auto-mate Savings

For us, the easiest way to save is to never see the money. If $100 is automatically deducted from your paycheck, you will quickly adjust to living on the rest. If, instead, you decide to transfer $100 to a savings account every month, well, that’s harder. Sure, it’s the work of a few seconds, but there are many more places it could go wrong: you could make a mistake, you could forget, or you could decide—just this time, of course—not to make the transfer. Something’s come up, and this month you really need that money.

• If you get a salary from a company with a retirement fund like a 401k, set it up. If money is tight, start with 1%. If your company will match your contributions up to a certain percentage, that percentage would be a great place to start. (Free money!) Sometimes you can even set it to automatically increase a percentage point every year. Decide on when you will check in on your retirement fund—when you will take a look at the investments you’ve chosen and make sure the contributions look accurate—and schedule it in your calendar. Now you’ve reduced your thinking about this to a couple times a year at most, but you can rest assured that it’s happening.

• What about your emergency fund or other cash savings? This is the classic “pay yourself first” that personal finance people talk about! You can keep this from ever seeing your checking account too. First, set up a savings account separate from your checking account. Some people use a whole other bank for this; we find it effective to go into the settings on our bank’s user interface and set it to the last account in the list, which appears below a “click to expand” link. Next, talk to the person at your job who does payroll, or log into the payroll portal if you have one; it may be run by a third-party company like Paychex or ADP. You can set your paycheck to be divided into multiple accounts by dollar amount or by percentage. Separate out your savings and commence with ignoring it.

• Finally, once your money does hit your checking account, it’s not too late. You can set up a recurring transfer to your savings or investment account. We like to do it the day after our paycheck is direct-deposited. Don’t forget you can do this with accounts like 529 plans (college savings plans) too.

How to Auto-mate Spending

• It’s time to schedule as many of your recurring bills to autopay as you can. We like to use a credit card for this—to keep our checking account balance simple, because it offers a little more consumer protection, and because we get credit card points. This is where automating your finances can get dangerous, though, because it’s easier to overlook overcharges. So, keep in mind that you still have to track your spending! But it can be quick; just write down the charge when it hits your account. You’ll notice if it’s too high or if unexpected charges show up. Never worry about running out of stamps or paying late fees again.

• Now that you’ve addressed your regularly scheduled bills, go back to your budget again and look for patterns. What category do you spend roughly the same amount in every month (or maybe, what category do you want to spend the same amount in)? Is there a way to take it off your plate?
  For example, a few months ago we realized that our spending on alcohol was all over the place. (We live in a state where you have to go to a wine or liquor store to buy wine—it’s not for sale in the grocery store, so this was easier to track than it might have been if it was included in the grocery bill.) Some months we would skip the wine store; others we would go multiple times. And when we did go, the amount we spent varied widely depending on what we got. So we signed up for a wine subscription service that charges the same amount for the same number of bottles every month. It’s not a large number, so if we don’t drink them, we can save them for the next month or give them as gifts. No more trips to the wine store; no more unpredictable budget.
  We’ve done the same thing with pet food via Chewy (some local pet stores have their own programs!), lower-waste cleaning and body care supplies via Grove Collaborative, pantry staples, and even home and car supplies. See what is available near you that takes something off your plate—maybe you have a milkman (seriously!) or a local tea supplier who is willing to drop off refills. As long as it’s a budget category that you already have and it’s making less, not more, work for you, automating your finances is something to consider.

• And finally, though it’s seasonal, consider joining a CSA.

If you’re anything like us, you have plenty to think about when it comes to money. Automate your finances so you can reduce the mental burden of the regular charges. Then you can concentrate on making your overall financial situation even better!