Automate Your Bank Accounts To Make Money – A Helpful Guide
What if I told you that you could automate your bank accounts and it would help you make and save more money? No this isn’t a late night infomercial, this is real life. You can and should set up your finances to allow everything to be automated.
How do you automate your bank accounts to make and save more money?
Direct deposit, automatic transfers, and bill pay allow you to automate 99% of all your finances yet people don’t take advantage of these opportunities. If you can find a setup that works for you, investing for the future will be put on autopilot and almost all the stress of money will be gone.
What do you think? Sounds like a good deal right? Speaking from my own experience, it makes life and money much more enjoyable.
It’s no secret that managing your money can be crippling and extremely stressful. It’s so much of a burden that most people avoid it at all costs. This is where the headlines come from that read “Most Americans Have Less Than $1,000 In Savings”. These just make me sick and one of the reasons why Young, Dumb, and NOT Broke?! even exists.
Are you ready to learn how automating your bank accounts can help you manage your money? Let’s get into it.
The Average Person
Let’s start this article off by talking about the everyday average person. Now, if this is you don’t worry and please don’t get offended. You are obviously reading this article to learn something and I applaud you for that. Nothing in this post is meant to demean, instead, I’m just trying to show you that there may be a better way.
The diagram below is of the average person. These are the people that are a part of the dreaded headline that I talked about above. Money comes in and then they spend it.
While this may give you some satisfaction now it definitely won’t in 30 years when you are trying to retire and you have nothing saved up or invested.
Most of these people use direct deposit which does automatically drop your paycheck into your checking account. Most of the time, the only reason they use this version of automation is because their employer requires it. That’s not a bad start, but there is so much more you can take advantage of.
After that, they are manually paying every bill each month. This often leads to some bills getting missed which can have some serious consequences like a credit card bill. Missing your payments leads to paying way more than you spent in interest or taking a major hit to your credit score.
Don’t get me wrong, I’m a big believer in the power of touch and writing checks for the bills may help some with being conscious about their spending. But for the majority, it is simply a task that they hate doing but that’s the only way they know how to do it.
Automation is here to make your life easier.
The *Slightly Above* Average Person
If you want to do the bare minimum then this is the section for you. First off, unlike the average person you are going to have everything automated.
Your direct deposit comes in and when your bills are due like the mortgage, utilities, or credit card they come out of your checking account automatically.
But you are going to go (slightly) above and add in an online savings account pictured below. I recently opened a Wealthfront account and so far, I’m loving it. This article isn’t about my favorite account though it’s about getting that money automatically moving from your checking to that savings. So back to business..
I don’t want you to fall into the bucket of people who have less than $1,000 in savings so let’s use automation to get you there. After you open a savings account, whether that is at the same bank as your checking account or an online one like I use, you can then link them.
Almost any bank will allow you to set up automatic monthly transfers from your checking to your savings. I’ll show you how easy this is to do later but for now you need to understand the benefits of doing it:
- You will build an emergency fund if you don’t already have one.
- You will earn more interest on that money in a savings account.
- It will force you to manage your money a little more closely with that automatic withdrawal happening every month.
Each piece here is a huge plus and honestly they are the foundation blocks of managing your finances.
If you can get this down then congratulations! You are ahead of most people!
One Setup To Automate Your Bank Accounts
I made sure to title this section in a very specific way. Starting the heading out by saying “One Setup” makes sure you know that this is NOT the only way to set up your accounts or maybe even the best way out there to automate your bank accounts.
This is just my way and it has worked incredibly well for me.
What you’ll notice in the diagram below is that there are a ton of bubbles and arrows going every which way. What if I told you that at each step I don’t have to do a single thing and that the whole flow happens automatically?
At the beginning of this article, I told you that most people give up on managing their money because it is simply too much work. To be honest, if I had to do each of these steps manually I would absolutely fail, without a doubt.
This is the true power of automating your bank accounts. You have a system that takes the human factor out of it. No longer do you need to make sure you pay the electric bill by the 5th of the month or get your mortgage check in the mail a little before the month. It’s already done.
Understand What Accounts To Automate
If you look at my bubbles you’ll see that I have a couple that are out of the norm. First off I have a travel savings account. Yes, I have a bank account just for traveling. I’ve tried to make it a priority in my life and I want to keep doing it more without worrying about the money.
To automate this, all I did was ask my employer to take a percentage of my check and send it to that account each week (I’m paid weekly). If you have direct deposit then chances are good your employer will allow you to add at least 3 separate accounts to split your check up into. This turns out to be about $80 a week or $320 a month. Again, without this account, there is no way I would set aside that money for travel.
If you are going to automate your bank accounts to help you save more money, then you first need to understand what accounts you have and what you need to be saving for. You can use my accounts from above as an example but here are some others that you may have in your financial story:
- Health Savings Account
- 529 Plan (Education Savings Plan)
- 457 Plan (Government Employees)
- IRA (Roth, Traditional, Self Directed)
- Brokerage Account
All you have to do now is prioritize your needs and automate payments into those specific accounts.
Retirement and Savings Accounts
When you look at the diagram above, one of the things you will notice is the bubbles that have the arrows back into themselves. These are accounts that are accruing interest and compounding it. If you want to learn more about compounding interest then read my article: Start Saving Now to Become A Millionaire – Part 2.
I have two IRA’s, one traditional and the other a ROTH, which I deposit into on a monthly basis. They are automatically invested into the index funds that I chose years ago. Then I have my online Wealth Front savings account. This acts as my emergency fund and earns 2.57% interest annually (this is the best I could find).
The last account that re-invests back into itself is my swing trading account. This is the account that I’m in almost daily because I enjoy trading stocks. Again, this is my choice and I could buy a diversified portfolio and let it sit but I enjoy trading. Trading stocks is extremely dangerous so before you even think about opening up an account please read: 4 Reasons You Shouldn’t Trade Stocks.
If you do have an interest in swing trading, then I have a great article that takes you through my exact process and I even post my trades. You can find the link to my trading diary in the article: Making Money Swing Trading: A Helpful Illustrated Guide.
Setting Up Your Automation
This all sounds great in theory but we’ve come to the point where you actually have to set it all up. Once you have all your accounts lined out and a plan on how you want to attach them to one another, it’s time to put that in motion.
This is where the work comes in and where excuses seem to appear. “I’m too busy” and “that’s too complicated” seem to be the most common. But here is what you need to ask yourself.
Is it worth a couple hours of my time today to get myself on the right track for years to come? If I get this done can I be more relaxed and comfortable with my financial situation?
These questions seem like no-brainer’s to me. YES! Take the time to do this right and you’ll save yourself down the road.
In-Person or Online
When setting up your automation, you really only have two options; you either do it in person or online through the bank’s website.
If your bank is a small local bank then your only option may be to go in and talk to someone face to face (scary I know). They just don’t have the resources to have a great online portal like Chase or Bank Of America do.
Chances are high that anything you are trying to do, they have done hundreds of times already. Just tell them what you are needing and it shouldn’t take more than 10 minutes to get you set up. It’s their job to take care of you so trust me, they’ll find a way to make anything you may need happen.
If you are going to go the online route then look for something like what you see in the image below.
This is directly from my Chase portal and it allows me to set up internal transfers like a monthly one from a checking account to a savings account. It also allows me to link accounts like my swing trading which is through Interactive Brokers where I make periodic transfers.
And just to prove how easy this easy here is a screenshot from another one of my accounts at a small local credit union:
This isn’t rocket science. Rather, a little bit of work now to save yourself time and thousands of dollars down the road.
The Bottom Line
Feeling a little overwhelmed? Don’t be. Like in everything else, we are always a work in progress and trying to improve. Automating your bank accounts is going to take time. It may also take trying multiple different things before you find something that works for you. Even today, as I’m writing this, I’m thinking of better ways to automate my bank accounts.
Five years ago I was the average person and spending money as fast as I made it. Setting up automatic transfers allowed me to still live my life how I want to and made the boring stuff automatic.
On top of that, when you automate your bank account things that are out-of-sight are out-of-mind. I don’t even realize that I’m investing in each of my retirement accounts until I do my monthly financial roundup. Moral of the story is that you’ll adjust quickly to spending a little less each month and soon, you won’t even remember that you used to do things differently.
The most important thing I people need to remember is that banks work for you. You are the customer and it is their job to make your financial life easier. Yes, they are good places to store money but their services go well beyond that. Automating your bank accounts will make your life easier and save you money but it’s just one of the many things a bank offers. Take some time to meet your banker and see what they can do for you
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