Using Automation & Technology To Force Successful Financial Habits
- Mr. Organic
- Jul 11, 2019
- 5 min read
What Tools Should You Be Using?
Automatic payments are a necessity, but what else should you be using to maximize your financial success?
First, Goal Setting:
Making the internalization of your goals an automatic process is a bit difficult. What is necessary for growth in your goals is that you continually review them. You must learn to train your mindset to review your goals daily.
The reason goal setting is first and so important is because it provides the "why" behind all your actions.
Without a why it is nearly impossible to stay committed for the long term. Also, keep in mind your goals are dynamic! So don't be afraid to change them as this in natural for growth progression.
Personally, I utilize my desktop background to display my goals. Because I use my computer daily, this is the first thing I review when I boot up the computer. Which provides me that time to review my goals.
Tools To Internalize Your Goals Regularly:
For this I would also recommend a good meditation application like Headspace. You can also just meditate without an application. This will help to clear your mind and provide you the space needed to review your goals daily.
Too many people go through life without stopping to think about what they are thinking about.
Mindfulness meditation is a practice I have found extremely helpful in dialing down on my goals and the success path to achieve them.
There are tons of applications for goal setting. Try these 5 Best Goal Tracker Apps for 2019
Then, Budgeting:
In order to understand how much you can save, we need to understand your cash flow.
See, How The Wealthy Budget and Why You Should Too | The Millionaire Mindset to understand how to build a good budgeting mindset.
As well as maintaining a good mindset around spending money you need technology to keep track of the numbers.
Tools For Budgeting:
Try applications like Mint, or Chase also has spending summaries within their application.
These snapshots are a good way to gauge your spending per category. To the left is an example of my Chase Freedom card snapshot report.
Try 8 Best Budgeting Apps of 2019 to find the right one for you.
Finally, Start Automatic Money Lines:
Set up these 5 automatic savings/payments/investments before you spend it!
1) Automatic payment into Emergency Fund If Not Complete Yet
Having an emergency fund is key to confident wealth building, and if you have not yet built your 3-6 months of expenses then do this is first. You can open an auto draft into your savings account, or even use an online money market (some offering %2+)
2) Automatic Payment for Any Debt Or Bill
Late fees and interest are easily avoidable and in most cases you can receive discounts if you use automatic payments. Personally I use the Chase Freedom Unlimited card to get %1.5 back on all of my bills, and I pay it off monthly.
See my article, How To Win The Credit Card Game! Stop Paying Interest And Get Paid, if you're unfamiliar with credit cards.
3) Automatic Investment Into Non-Retirement Vehicles
This is not an emergency fund, but rather a investment that will grow and be accessible pre-retirement. Once you're emergency fund is funded this is a great area to transition that monthly savings for more growth potential.
If you're 30 now, but you can't access your 401(k) until 59.5. What if you want to make a large purchase within the next 29.5 years?
Do you want to help with your kids education (look into: 529 Plan)? What about a car purchase? The purchase of real estate as an investment? Help your kids buy a home? I think you can see my point.
Too many times I hear that an individual pulled out of retirement accounts to pay for their kids college and paid a boat load in taxes doing so! The reason this comes before retirement is because the cost is too high to pull from retirement assets pre-retirement age, and it does not outweigh the tax benefits.
In other words, if you save the money in a non-retirement bucket and use it pre-retirement, Great! You avoid penalties and taxes as planned.
Otherwise, if you don't use the money, Great! You'll have more money then you expected to have for retirement, and I have never heard anyone complain about too much money!
4) Automatic Retirement Contributions: 401(k), 403(b), IRA, Roth Options
Automatic Deductions from your paycheck into a 401(k) or Roth 401(k) if company will still match! See my article on How To Pay 0% Taxes In Retirement to understand why the Roth may be your best option at this current time!
Most 401(k)s use a percentage of your pay, but if they are asking for a dollar amount, I would advise still looking at it as a percentage.
Finally, Target Date funds may be the best choice for passive attitude. These funds will be more aggressive the farther from the date chosen. For example, Target Date 2050 will be aggressive vs. Target Date 2025 will be more conservative because the individual may start using the money as soon as 2025. They will also become more conservative automatically as the year chosen gets closer. Be aware though, these are normally not managed funds, thus no one is paying special attention in the case of a large draw back or recession.
In my article, reviewing the seven steps to financial success, it's recommend that at least %15 of your income go into retirement. This may need to be more depending if you're starting late or would like to retire earlier then the general age (65).
Keep in mind if you do not have a 401(k) or wish to invest in more options then provided you can always look into Traditional or Roth IRAs. Work with a trusted financial adviser to help determine what investment vehicle and options are best for your situation.
5) Automatic Additional Principal Payments To Payoff Loans Early
Planning to retire in 15 years, but your mortgage still has 20 years left?
First, use this calculator to determine how much extra you need to pay each month, and schedule the payment to automatically pay the extra principle each month.
You can also do this for any type of loan to accelerate the pay off date (student, auto, personal, etc.)
Now you've got automatic payments for all your bills, automatic investments for emergencies, non-retirement purchases, retirement, and finally extra principle automatically going toward loans to pay them off quicker.
Take advantage of every tool that will make your life more efficient, automated, and happier!
Thank you for your time!
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