If you asked people what they wish they had more of in life, almost everyone would say “time.” With the hectic pace of our modern lives, finding time to do the things that really bring joy can be difficult. And for many people, spending time dealing with saving, retirement planning, and other personal finance issues ranks right up there with a root canal.
But what if you could buy back that time without sacrificing the benefits of a solid financial plan? Through the power of automation, you can have the best of both worlds—a solid financial future AND getting extra time back to spend with family, friends, or working on your favorite hobby free from the worry of money.
By automating your finances, you can buy time in two ways:
- Saving time every month by not having to transfer money between accounts or remember to make contributions to your retirement funds.
- Setting up a system to automate your savings goals and get to retirement faster
While saving time today is important, I think even more important is the time you are buying later by setting up an automated system to fund your retirement. If by automating your savings you’re able to save and invest more consistently, your money will have more time to grow and you can even retire years earlier than you otherwise would!
With that in mind, here are 3 easy things you can do today to automate your savings and retirement plan, so you can spend less time worrying about your finances and more time enjoying life.
1. Pay Yourself First by Automating Savings
Saving money is hard enough as it is. I don’t know about you, but if I’m the one in charge of having to set up a transfer from my checking account to savings account every month, more often than not it just doesn’t happen.
Why You Aren’t Saving Money and What to Do About It
There are tons of financial statistics about the sad state of American finances that show most people have a difficult time saving money. Regardless of age or income level, many live paycheck to paycheck.
When left to our own devices, we tend to take the path of least resistance. If our bank account is flush with cash, we spend more freely until it starts to dwindle. Then at the end of the month we look back and wonder where all the money went.
This mindset of saving whatever is leftover after the bills are paid leads to frustration and hopelessness when it comes to saving money. Like a dieter who starts off with good intentions and a solid plan, the temptation to consume proves too great, and eventually he abandons the diet (or savings plan) thinking he is a failure.
But with a simple mindset shift, you can go from spender to saver and hardly even notice the difference. In my own life, I’ve noticed that when I try to do things by sheer willpower, it never goes well. But if I remove the temptation, reaching my goal becomes much easier.
In the dieting example, it is very difficult to stick to a healthy eating plan if you have to reach past the ice cream and frozen pizza to get to the vegetables behind them. Instead, if you remove the temptation (the foods you shouldn’t eat) from the house, it becomes much easier to choose the healthy option.
In the same way, if you set a savings goal and automate the bank transfer, you are removing the temptation of having money to spend in your bank account. So not only are you increasing your chances of success to save money, you are saving time as well!
Tips for Automating Your Savings
Once you spend a little bit of time up front defining your savings goal and the plan for your money, automating that plan is easy and will save you time month after month. Here are a few options to automating your savings so you don’t ever have to touch the money or think about it.
- Set a clear savings goal – Whether you’re saving for an emergency fund or vacation, make sure you have a clear goal and timeline that you can control.
- Make recurring transfers from your checking account – If you know you get paid every other Thursday, you can set up a transfer to occur right after the money hits your account. This will save you time and brain space so you don’t have to remember to do it – it just happens.
- Use direct deposit to divert money from your paycheck before it ever hits your bank account – If you get paid by direct deposit, you can often set up multiple transfers to go to different places. For example, if you want to save 10% of every paycheck, you can set up the direct deposit to put 90% in your checking account and 10% in your savings account automatically.
- Set up an online-only savings account at a separate bank than your checking account – One easy way to resist the temptation to spend your savings it to make the money just a little bit harder to access. If you set up your savings account with a separate bank, you won’t see the balance every time you log in to your checking account. In addition, transferring money out of savings usually takes 2-3 days – quick enough if you need it for an emergency, but long enough that you won’t be tempted to spend on an impulse buy.
2. Automate your 401(k) Contributions
Another way to buy time through automation is to set up your 401(k) contributions going into your employer-sponsored plan.
It’s no secret that the average American family is not saving enough for retirement. There is a lot of confusion as to how much you should have saved, but the standard advice is to put 10-15% of your income into retirement accounts. Even if you are saving the recommended amount for retirement for your age, making sure you have a system set up so you can set it and forget it is important.
Most employers will match up to a certain percentage of your salary, so if you’re not contributing at least that much you are throwing away free money! In addition to setting the percentage of your paycheck that goes into your 401(k), you can also choose your asset allocation for each deposit. If you’re not sure what your asset allocation should be, run this check-up with blooom.
For example, in my own 401(k) I split each deposit into 5 different low-fee funds offered by my plan to automatically diversify my investments. If you’re already contributing to your 401(k), it’s important to check what exactly you are invested in. Often if you don’t specifically set up which funds you want to buy, your money will be going into cash or a money market fund which may return only 1-2%. Make sure you are putting your money to work and not letting it sit collecting dust!
One more thing that many 401(k) plans allow you to do is to automatically step up your contributions each year. This is another great way to buy more time in retirement by slowly increasing the amount you set aside every year. If you’re currently contributing 10% but you want to eventually get up to 15%, you can set it to automatically increase 1% a year for 5 years. If you time it when you receive your raise, you won’t even notice the “missing” money.
3. Automate Your Spending
Once you’ve automated your savings and retirement investing, the last thing I’d automate to save time and stress is your bills. Between the mortgage payment, credit card, Netflix, phone, internet, and a dozen other recurring bills, setting up auto-pay is a must to save time (and your sanity.)
It will also save you money if you can avoid late payment penalties for those times you forget a bill is due (it happens to all of us.)
While I am firmly entrenched in the “auto-pay all the things” camp, I understand that some people are a little more wary of allowing creditors to automatically take money out of your account each month. If that is you, I would recommend setting up bill pay through your bank. While this is a semi-automated solution, you get alerts when a bill is due, and the only thing you have to do is click a few buttons to pay. The benefit of this method is you are still in control of when and how much money is taken out of your account.
And if you’re like me and really want to squeeze some extra money out of the bill pay process (to add to your retirement savings of course), I highly recommend getting a good cash-back credit card to earn 1-2% on every transaction.
In addition to that, I use a few of the best cash back apps like Ebates or Drop to stack even more savings on top of my normal shopping. Between these two things, I can generally add an extra $1-2,000 to my savings accounts each year.
While it’s not a ton of money, I look at it as slowly but surely buying back time as I get closer to financial freedom!
About the Author
Andrew Herrig is the founder of WealthyNickel.com where he writes about his family’s pursuit of financial independence. He is passionate about helping others build wealth through side hustles, saving money, and wise investing.
Published on September 30, 2019