How to automate your finances

I’ve started putting my car keys in the same spot when I come home from work every day so I’ll know where to find them the next morning. I figure it saves me at least an hour of searching every year, and our dogs Beau and Belle appreciate that I’ve stopped blaming them when the keys get misplaced.

I’ve learned that if you want to do something – and keep doing it – make it a habit. And if you want to make your habits unbreakable, make them automatic.

It works really well with your finances, and the technology to help you do it has never been better. Here’s a step-by-step plan to get you started:

1. Fund your central bank account. You probably already have a primary checking account, which can serve as the nexus of your household cash management system. It wouldn’t be a bad idea to build up the balance to as much as one month’s expenses to protect yourself from overdrafts and other surprises. You can always fine-tune your cash levels once the system is up and running.

2. Use this account for payroll direct deposit. Have your paychecks automatically deposited, along with any other regular income sources you might have. For retirees, that would include monthly pension and Social Security payments.

3. Set up regular savings deposits. If you’re trying to build wealth, there’s no better way than to divert a portion of every dollar you earn into a savings program – before you ever see it. Start with automatic transfers into a savings account until you have about 30% of your gross annual income set aside for emergencies. Then fund your 401(k) or similar retirement savings plan through work, which can lower your taxes and qualify you for any matching payments your employer might make.

4. Set up automatic withdrawals, too. If you are retired and pulling money from your investment accounts, you can arrange to have withdrawals automatically deposited on a regular basis and have taxes withheld at the same time. Many of our clients who are subject to required minimum distributions (RMDs) set them up to be made systematically throughout the year, and the system automatically recalculates and adjusts them annually as well.

5. Set up automatic payments on all credit cards. If you carry a balance month-to-month, arrange to make the minimum payments automatically when they are due. It’s not a bad idea even if you pay your cards off in full each month, just so you don’t have to think about it.

6. Set up automatic payments on other monthly bills. Many companies offer automatic bill payment, or if you prefer, set up an online payment system through your bank or other financial institution.

7. Set up automatic alerts. See if your bank will send you a text or email alert whenever your account balance drops below a predetermined level. You can also set up auto-alerts when something you want to buy goes on sale or new coupons are available.

8. Consider a password protection service. We’re looking into this one ourselves right now as a way to beef up our online security and stop trying to remember all those passwords.

I’m still trying to figure out how a case of dog treats keeps showing up at our house on the same day every month, automatically. I would think you’d need someone’s credit card and online password to arrange something like that.

The clever beasts.

Any opinions are those of The Mike Brown Financial Group and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. RMDs are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation.