Automation: The Secret to Reaching Your Financial Goals
Have you ever been motivated to start a new routine, only to lose motivation a few weeks in?
When you're trying to establish a new habit, routine, or resolution, the first few times are easy, but in the long run can be hard to stick to. This is especially true for something you know is good for you, but isn’t something you want to do (like going to the gym, eating healthy, or saving money). Over time we lose motivation and it's much easier to stay at home, have dessert, or promise yourself that you’ll save next month instead!
The secret to sticking to any new routine is to make it as easy as possible to do the activity. When it comes to financial routines, the best way to do this is with automation.
How to Automate Your Finances
Automating your finances requires more work in the beginning, but then very little work in the long run. This way, you take advantage of that burst of motivation in the beginning and make it easy for yourself to continue your new routine for good.
Here are the 5 most important, and easiest, parts of your financial life to automate:
1. Savings
If you are saving up for an emergency fund, vacation, or anything in between, automating your savings is a great way to stay on track.
Go to your savings account and set up a recurring deposit for the amount of your choosing. 5-10% of your take home pay is a good amount for most cases. You should time it so that the money gets taken out a few days after you get paid (this way you don't get tempted to spend it!). If things change, you can always adjust or pause your automatic deposit.
2. Investment Contributions
You can also set up automatic contributions to your 401(k) and IRA (individual retirement account). 401(k) contributions are done through your employer, and IRA contributions through your investment account.
One tip here: Does your employer offer a 401(k) match? Many employers will match your contributions to your 401(k) up to a certain amount. Make sure you set up an automatic contribution that takes full advantage of this great perk!
3. Automated Investing
When you contribute to a 401(k) that money is automatically invested based on the plan you choose when you initially signed up. The same is not true for an IRA (individual retirement account). When you contribute to an IRA, that money sits in cash until you actually purchase investments with it.
However, there are services that will automatically invest your money whenever you contribute. If this is something you are interested in, check out Ascend Invest. Ascend is our automatic investment platform which has all the benefits of other automatic platforms, but also provides you access to expert financial advice from a Registered Investment Advisor.
4. Credit Monitoring
The days where your credit score was a mystery to you are over. Now sites like Credit Karma allow you to check your credit score as often as you would like, and even provide free automatic credit monitoring to notify you whenever there are important changes to your credit report. Some banks will also provide this service free of charge.
5. Bill Pay
Missing a credit card payment can wreck your credit score. There’s no reason to forget a credit card payment when it can be paid automatically and online. Log in to your credit card provider and set up a monthly automatic payment.
Some banks (like Bank of America) make setting up an automatic payment hard and confusing. They do this because setting up an automatic payment actually lowers the fees they would collect on higher balances. But don’t give up. Check your bank’s FAQ section or call customer service if you can’t figure it out.
Many other bills also offer automatic and online payments as well, you just have to take the time to set them up. Some even reward you with an account credit when you sign up for automatic payments! Unlike banks, your utility companies or other bill providers want you to pay your bill on time, so many of them make it easy and rewarding to set up automatic payments.
Conclusion
Automating these 5 easy steps will have a long-lasting impact on your financial future. So the next time you have a burst of motivation to take control of your finances, don’t waste it on one-time tasks. Instead, set up automatic actions that will benefit you long after the motivation runs out.
If you have questions about things like...
How much should we be saving?
Should we invest or pay off my debt?
What 401(k) plan should we choose?
We can help. Send an email to contact@hardycap.com or set up a call on our calendar.
Hardy Capital Investments is a registered investment advisor. Information provided on these sites is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product. Advice may only be provided by Hardy Capital Investments's advisory persons after entering into an advisory agreement and providing Hardy Capital Investments with all requested background and account information.
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