How We Automate Our Finances to Make Saving Money Easier
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This is how we automate our finances so that saving and paying the bills is easier and eliminating the discipline needed to build savings.
Here is a modern money management tool that I’ve found to be just as powerful as creating a budget. What’s more, it can be used in conjunction with a budget OR on it’s own.
The tool I’m talking about is automation.
Thanks to internet banking, automating your finances is not only possible, but it’s easy and can take as little as 10 minutes to set up.
A few minutes doing this simple task can save you money, stress, and hours time over the course of the year.
According to studies, willpower isn’t very reliable (you can read an extensive summary of the research on willpower in this American Psychology Association article).
So if we can’t rely on willpower, how do we stay disciplined enough to reach our goals?
We can change our environment to make taking action easier.
In the case of dieting, that might mean ensuring there is only healthy food in the house.
In the case of saving, it can mean automating your savings goals so willpower no longer comes into play. You can get on with the other things in life while savings take care of themself.
A 2021 meta analysis of financial self-control strategies backs this up: automating your savings is one of the most effective ways to stay on track without relying on willpower. A meta-analysis found it significantly reduces spending temptations and helps people save more consistently—no extra effort required!
Automating our savings isn’t unique—the 50/30/20 rule, as explained here by Investopedia, also involves automating finances.
However, I like to be a little more precise with my automations. Below is an overview of how we automate our finances.
Disclaimer: This is general information only. In this blog, I share my personal savings and budget stories and what works for us. You should always consult a qualified financial expert when making money decisions (not a random stranger on the internet like me – or even your mate at the pub).
How We Automate Our Finances
1. Automating Our Savings on Payday
I rely on two strategies to automate our savings:
It’s simple in practice, but not always easy, especially when money is tight. As I’ve mentioned in other articles here on the blog, there have been times when all we could save each payday was $2.
I’ll talk more about having a savings plan below, but here I want to talk about willpower and paying myself first.
By automating our savings to go from our transaction account to our savings account each payday, it takes the thinking out of the process.
I’m not fighting temptation or me ‘out-reasoning’ myself with thoughts like ‘I will just save more next week,’ or ‘skipping one week won’t matter’ or ‘what the heck, I deserve a treat this week!’
Instead, the automatic payment happens while I’m still asleep, and I can live off the remaining while still saving.
Out of sight, out of mind.
2. Calculating How Much to Automate
You can totally use something like the 50/30/20 rule to make automating money easier.
But I’ve found when money is tight, you don’t have the luxury of saving 20% of your income.
When every penny counts, you have to count every penny.
(I don’t know if I just made that quote up or read it somewhere and forgot where I read it. I couldn’t find a source.)
Here’s how we automate our savings.
- We automate our debt repayments first. For us, it’s our mortgage. If I was still renting, I would automate that first.
- We automate our savings – even if it’s $2. I’ve always found having a savings habit is important, even if you only have a little.
- As a freelancer, I pay my own super (retirement savings) so I automate that to come out every payday.
- Then we calculate our bills and put aside a set amount each payday. This is called bills smoothing (similar to the old envelope system) and makes bill paying easier.
- As part of our bill smoothing, we also put aside money for things like Christmas or large expenses that we know are upcoming. For example, we started saving for the compulsory high school laptop one year before we needed to buy it to give us time to save up.
- Finally, we put money in an account for direct debits (yes, like Netflix).
Once we’ve automated our payments we can use the rest for groceries and, well, not much else really.
3. Schedule the Transfers
All those calculations seem like a lot of work, but I calculated it all in a spreadsheet over a decade ago, and still use the same spreadsheet every year, making small adjustments for inflation.
So the ROI on that time spent has been amazing.
The final step is I log into my online banking and schedule these amounts to be automatically transferred each payday.
Again, out of sight, out of mind.
And I adjust the transfers for inflation, changes in pay, changing savings goals etc.
Are There Pitfalls to Automating Your Savings?
While automating your finances can be a game-changer, it’s not without its pitfalls.
One downside is that it’s easy to set and forget—this can backfire if your income or expenses change, and you’re not adjusting your transfers to match.
Plus, automation doesn’t completely replace the need to keep an eye on your accounts. It’s super important to check your accounts regularly for unexpected transactions, scams, or banking errors.
A little manual oversight now and then can go a long way in keeping things on track.
You don’t need to pay a lot of money for fancy budgeting tools.
If you’re looking for a powerful money management tool, then your own banking system might be enough. Schedule savings and payments and make managing your finances this year that much easier.
Do you automate your finances? Share your experience and insights in the comments below.
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