How to automate your personal finances in minutes – the complete guide

How much time do you spend watching your finances every week? 1 hour? 2 hours?

Do you see budgeting as something boring, overwhelming or time-consuming?

Do you happen to feel guilty sometimes for spending on things you don’t need?

If you answered YES to these questions keep reading…

Let me get this straight, personal finance doesn’t have to be painful and it doesn’t have to be a waste your time.

If every week you spend 1 hour or 2 managing your finance and try to convince yourself that this is the only way to keep your finances on the right track, something is wrong (unless your hobby is going through your bills on a regular basis, which makes sense in that case ).

I don’t know you but I prefer reading a great book or watching a movie with my friends rather than spending my time budgeting.

The good news is that it’s definitely possible!

There is actually a simple system that you can set-up in minutes and that will allow you to automate your personal finances so that not only can you spend more time doing things you love but also buy the items you’ve always wanted, guilt-free.

Sounds great?

Let me show you what this system looks like and how to set it up.

Here’s what automating your personal finance looks like:

Automating your personal finances

Everything is automatic, which means that as soon as you get paid the system takes care of everything. The money that you earn is automatically allocated among the different accounts.

This system actually works a little bit like this:
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Let’s see in details how to set it up.

How to automate your personal finances step-by-step

Step 1: Set-up a direct deposit for your paychecks (no paper checks otherwise the system won’t be optimal). 6% automatically gets contributed to your 401(k), the rest gets deposited directly into your checking account.

Step 2: From your checking account, set-up two automatic transfers:

  • 5% to your saving account.  You can then use that money to invest (CD’s, Stock, P2P lending, online business…) or to buy things that require a large capital (Wedding, down payment on a house, vacation…).
  • 5% to your Roth IRA

Step 3: Set-up electronic bill pay for all your bills that you pay monthly and that can’t be paid by credit card (Mortgage, rent, gas, electric bills…)

Step 4: Pay all the others bills (Gym, Netflix, Starbucks subscription…) and your discretionary spending on a rewards credit card. That way you can maximize the rewards/cash back you can earn.

The beauty of this system is that you can spend all the money that’s left on your credit card guilt-free! You don’t have to think about saving, paying your rent, electricity… the system does it for you.

You can set-up this system in minutes (online or on the phone with your banker) and enjoy the benefits year after year.

Of course you will have to check your bills and statement every once in a while just to make sure there is no errors but it will only take you 1 hour maximum per month.

What about you? Do you have a system already in place? If not will you use the system I just explained? Let me know in the comments below, I read and answer each one of them.

Simon Cave

11 comments… add one
  • Victor October 9, 2014, 6:38 pm

    Simon,

    This is a great plan for automatic spending. One thing to note is that there are some limitations (at least in the US) as to how many electronic transactions you can perform per month out of your savings account. Banking law limits us in the USA to six transactions per month.

    Also, this does not address the budgeting part of the cycle, at least not explicitly. It assumes that you always have enough money in the bank to pay for all your bills (or that you go into debt with the credit card in order to make up the difference).

    A final point is that the use of a credit card can be a trap. Using such a vehicle to make regular purchases can lead to over-spending. I submit to you that a cash-based system is far more effective to cut expenses, helping us live within our means and assisting us in reducing debt.

    Reply
    • The Becomer October 9, 2014, 7:05 pm

      Thank you for your precisions Victor! You’re right, before setting up this system you want to make sure that you can actually divide your income among the various accounts, which requires you to review your whole financial situation beforehand.

      Reply
  • Rudiano October 11, 2014, 11:25 am

    Great post! It does mean that if your income fluctuates every month, you can’t really automate…It would be great if you could go to your bank and say “5% of everything that comes in should go here, 5% there etc…” I think I’ve asked that before but my bank didn’t have the facility. It’s got to be specific amounts. Shame. I’d pay for the service.
    Actually I’ll let them know!

    Reply
    • The Becomer October 12, 2014, 8:42 am

      Thanks Rudiano for your comment. Setting up the system is a little bit harder when your income fluctuate but it’s definitely doable if you evaluate your max and minimum income. For example you know your minimum earning is $2,300 on average and your maximum $5,000. And if you are afraid to go under $2,300 you can still set-up another account for emergency. As for the banks, you got to choose the good ones. In my case I did every procedure online.

      Reply
  • Chris @ CentsToMe October 17, 2014, 2:08 pm

    This is a great how-to. Automation is key for the average person!

    Reply
  • Erik November 25, 2014, 12:11 am

    What suggestions to you have for ensuring that electronic bill pay is accurate? Do you review afterward to ensure that the correct amount was charged? Suggestions on what if it was incorrect? Great article. Sounds like I Will Teach You To Be Rich.

    Reply
    • The Becomer November 26, 2014, 11:50 am

      Thanks for your comment Erik! Yes it’s necessary to check the amount, you never know.

      Reply
  • Michelle January 31, 2015, 10:31 pm

    We put all of our monthly bills on automatic bill pay.

    Reply
  • Anton Roder March 16, 2015, 11:32 pm

    I did this a while back and it works amazingly well. For those of you who asked about fluctuating incomes: With bills you may not know exactly how much you’re going to pay each month, calculate your annual average and then pay just a little bit more than you should. After doing this for about two years I had several of my bills paid well in advance. (This is useful during Christmas) There are some provisos: Some companies don’t like it when you do this. If you’re going to do it for your mortgage, make sure your bank applies the additional amount to pay off your principal and does not simply keep the money for your next mortgage payment.

    Reply
    • The Becomer March 19, 2015, 8:47 pm

      Awesome Anton! Thank you for your tips.

      Reply

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