Episode 017: Automating Your Finances

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Automation is an extremely powerful tool and something that can be used to simplify our financial lives. Join me this episode as we discuss some of the ways we can utilize automation in our finances.

Full Show Transcript

Welcome!

This is Chris, I hope you’re all doing well, and welcome to Popcorn Finance where we discussed the finance issues that we all deal with in about the time it takes to make a bag of popcorn. And today I was listening to one of my favorite finance podcasts it’s called Stacking Benjamins, I don’t know if you guys have ever heard of it, but it’s a really fun take on personal finance. It’s hosted by a former financial adviser and currently practicing financial adviser. So they’re really knowledgeable they know their stuff and they kind of have a unique way of talking about things that a lot of really good guess.

But during the show they brought up the topic of automation and it made me think about what ways am I using automation in my financial life.  And so there is so much we all have going on and we’re all so busy. There are so many things that we deal with. And by using automation we can take the least reliable factor in our finances just completely out of the equation, and that’s us.

Because there’s just so many things that we have to keep track of in our financial lives. There’s bills, are we pay all of those on time. There’s our credit cards are we paying those on time, are we paying at least the minimum monthly payment on those. We’ve got to track our student loans, there’s groceries, there’s just all these little pieces to our financial lives that leave a lot of room for error.

So I try to implement some automation in my financial life to kind of take my humanness out of the equation and hopefully simplify my life. Because automation takes those so small, but really important repetitive tasks off of your plate. That way you don’t have to really think about that. You can do this to varying degrees it all depends on what you’re comfortable with. But I just want to talk about a few of the ways that I implement automation in my life and some of the other ones that are just out there that I’ve kind of seen over the years.

Direct Deposit / Automatic Transfers

First there’s direct deposit / automatic transfer and I think most people are familiar with direct deposit but that’s just a service that many employers offer that allow them to automatically deposit your paycheck into one or several checking accounts. And for me the way I implement this is that I have three main accounts that I have my check divided into and basically I have my primary account that I do all my banking out of.

I have an account that I use to pay an auto loan and then I have another account that I use to pay the rent. Instead of having to wait for my check to be deposited and manually transfer that out to multiple accounts I just let that happen right away on payday, I don’t even have to think about that part.

Then I also implement a series of automatic transfers because I also use a series of savings accounts just throughout the year for various things that they are going to happen that are relatively big purchases. Things like car registration, getting ready for Christmas, preparing for anniversary.

Everyone doesn’t have to do this. This is just how I like to do things just to keep track of things and not get overwhelmed.  I implemented a series of accounts that I can put specific dollar amounts into to be able to just follow along and know where I’m at towards my specific goals. But I automate all of this that way I don’t have to think about it and I’m not waking up on payday trying to hurry up and transfer money to correct accounts.

Retirement Savings

The next area, which is kind of in line with the automatic transfer, would be automating your participation in retirement savings.  So this would be things like 401k, 457, or 403b plans and even if your job doesn’t offer of a work sponsored retirement plan you can do an IRA which would be an Individual Retirement Account that anyone can participate in. I mean there are some restrictions but the majority of people can participate in them.

And this is a way to kind of just prepare for retirement but by automating it you take yourself out of the process. You don’t have the opportunity to back out of actually making a deposit into the account. Because what I’ve noticed is that when you automate these transfers you tend to kind of forget that they even exist and you just get used to your check looking how it does without that money being there and you don’t miss it. It becomes natural.

Bill Pay

The next item would be automatic bill pay. This is something that I’ve been using for a little while and I do it directly through my bank. There are certain bills that I just have automatically paid through my checking account like I have my rent. We have Netflix, those type of things automatically deducted from the account or sent out by the the bill pay system.

The really cool thing about it is that, I don’t know who really has checks anymore, and our rent can’t be paid electronically but through the bill pay service I can actually have a check written out to my landlord and then sent automatically through the mail and I don’t have to be involved at, all which is a really cool feature. So it just takes that that extra level of effort off of my plate and I don’t even have think about that I can just check the status online.

Mobile Apps / Robo Advisors

And the last area we’ll touch on is automation through mobile apps and this is a pretty new a service industry that is starting to pop up. I mean it started off with just a handful of apps and it feels like every month I hear about a new service that’s coming up. I have only used a couple of them personally myself, but it’s kind of interesting to see where this industry is going to go.

Because there’s more and more companies are kind of jumping in on this. The way that the majority of these services work is that they’ll take a small amount of money from your account. So it could be rounding up your transactions, they could be looking at patterns in your spending habits, and figuring out how much you can safely pool and it takes them money and either place it into a savings account or into an investment account. It kind of depends on what service you’re selecting what it does.

Digit

For me I’ve tried out Digit and that’s one that takes a small portion of money and it’s kind of randomized and it looks at your transactions and it finds where it can pull money safely and at what times of the month it can pull money and place it into a savings account.

It automates this process so you don’t have to think about it. I used it for a while and then I kind of got away from it once they said they would charge a service fee because it wasn’t really worth it for me and I already kind of had a automatic savings plan in mind. But it was a really interesting concept and very simple to use.

ACORN

Another one that’s pretty popular is ACORN and that one does a very similar process but I think that one’s rounding up your transactions and it takes that money and places it into an investment account. It can go into one of several small funds that they’ve created to invest your money in, but they do charge a small service fee.

Others

I’ve even heard of apps that will take a portion of your money and apply it towards your student loans. So they’re getting really creative with this and I’m really interested to see where it will go. I am definitely interested in different creative ways of automating processes and if I could do it all from my phone I’m all for it. So I’ll definitely keep an eye on this industry and see what comes up in the next few years.

End of the Show

That brings us to the end of today’s episode. But that doesn’t mean that the conversation on automating your finances has to end right now. I’ve been doing all the talking, so I’d like to hear from you. Please if you are using the anchor app send me a call in, which is just a recorded voice message, letting me know how you use automation in your finances.

And if you’re not using the Anchor app you can always visit Popcorn Finance on

Twitter @PopcornFinance

or

Instagram @PopFinance.

You can just leave me a message there and I’ll read it on the show.

Podcast Episodes

And also we have a growing catalog of back episodes. It’s not that huge, but it’s growing every week. We’ve done episodes on saving, on our credit system. We currently have an Investing 101 series going on which is basically just a basics course on all things investing to kind of give you a good foundation for understanding how all that works.

You can view those through the Anchor app or you can go to iTunes, Google Play Store, or many of podcast apps that are out there to check out those back episodes.

So as always, thanks for taking some time to check out the show. Hope you’ve enjoyed it and I hope you have an amazing day.

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