Episode 010: 8 Ways to Set Yourself Up For Automatic Financial Success

We are back after Cassie’s terrible eighteen days of the flu and more.  It’s been a rough start of our year but we’re hoping that just means the rest of year can only get better!  With that, it’s perfect timing to set yourself up to have an amazing year of automatic financial success.  To do just that, use the tips shared in this episode to implement what we like to call the automatic year!

Don’t worry though if you’re listening to this episode later in the year.  Sure, the new year is a great time to make changes and set goals for the upcoming year.  But no matter when you automate these different parts of your life, you will be set for financial success from that point forward.  In other words – do it today! 🙂

The inspiration for the automatic year comes from a great book we recently read called The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach.  In this book he focuses on how everyday people are becoming millionaires in retirement.  It’s all about the smart decisions and steps to take to become that automatic millionaire.  His focus is on retirement but we are going to take this as the inspiration for setting you up for success in many areas of your finances.

Many of the ideas and tips we share below are based on two fundamentals. 

1. Pay yourself first – How often do you find success when you set a goal to save or invest whatever is left over at the end of your pay period?  Rarely.  Rather, when you plan to pay yourself first you actually and really meet your financial goals. 
2. Set up a goal so it’s out of sight, out of mind – When you automate a process or step towards putting money towards a goal before you even see the money in your bank account, you don’t know what you’re missing.  Honestly, just setting that money aside so it’s not even a temptation will help you towards many of your financial goals.

As always, discuss each of these with your family and find out which ones work best for you and your situation.  The important thing, as always, is to be intentional and make a decision on what you want to implement for your family. 

1. Automate Your Bills

The average American pays up towards several hundred dollars in late fees each year.  In talking with many of our readers, often the reasons are varied for the tardiness.  You might think one of the primary reasons for the lateness is due to not having the money; there is truth in that.  However, often time and forgetfulness was cited as other significant reasons as well.  Thus, setting up your bills for automatic payment can help you overcome many of those reasons and keep you from building up those late fees.

Be cautious in implementing this tip

Now you do need to be aware of a few cautions to watch out for in using this automatic tip. 

First, you don’t want to be mindless paying for bills that you might not be using the service for.  That in and of itself results in wasted money, often at a much higher amount than the potential late fee.  So although it’s wise to set up the automatic bill pay, you need to be continuously monitoring your bills to watch for useless charges.

Additionally, be careful of mindlessly paying for bills that you might be able to optimize.  For example, in Episode 008, we shared a tip about reviewing your water bill and finding actionable steps to take to reduce the amount you pay each month.  Setting this bill up for an automated payment can prevent you from brainstorming on ideas to cut that bill (and others) down.  Again, make sure to take the time with your family to review your bills and find ways to decrease them.

With this, at minimum we would recommend you reviewing your bills over the last year.  Check whether you had any late fees, either one, two or three or more time.  Those bills may be the first ones you consider setting up on an automatic payment to prevent that from happening moving forward.

2. Automate Savings With Your Taxes

From the outset we admit this is a controversial tip.  Many financial experts recommend that you actually do not follow this tip.  But before we get into that, let’s share what we are talking about.

This tip assumes someone in your family works for a company as a W-2 employee where the company withholds taxes from each paycheck.  When you set up your W-4 (not a W-2 as stated on the episode), you can change your number of itemized deductions to adjust whether you take more, or less, out of your paycheck.  Simply put, the less deductions, the more withheld from your paycheck.  Additionally, we mention the ability to use another field on the W-4 to withhold more per paycheck as well.  Read below to find out why the term per paycheck is so important.

In sum, when you withhold more from your taxes than you actually owe, you can get a large refund.  You can probably see then that having a bigger refund means your forced savings account can help you meet a financial goal.

The experts say…but what do they know?

The financial experts recommend that you don’t do this.  This is because any money withheld does not earn any interest whereas you could otherwise take that extra money per paycheck and put it into an account that does earn interest.  However, we know very few people that actually take that extra per paycheck (whether $15, $30, or more) and open up a fund to specifically do just that.  On the flip side however, we do know many families that have saved that money, interest free, and pay off a bill after getting their refund.

If you have difficulty saving then try this trick.  Just make sure to be intentional that you actually use that refund for your financial goal.  Whether saving for a vacation, paying off debt, or anything else make sure you use that money for that goal.

As mentioned above, remember if you decide to set aside extra money using the per paycheck that you remember that amount will be taken from each and every paycheck.  A previous coworker put the amount she wanted withheld for the full year and realized it in February.  Yes, I did wish I had her salary as that was a lot taken out each paycheck.  I have no idea how she didn’t realize that in the first check.

Finally, don’t forget as well that you can change the amount withheld on your W-4 at any time.  This can help you put more away earlier in the year even if you are uncertain whether you can keep withholding at that rate for the full year.  Simply provide the updated W-4 to your payroll department and it should be adjusted in the next check or the one after.

3. Automate Your Retirement

This is actually the focus of the book we mentioned above by David Bach.  He talks about automating your retirement so you can retire a millionaire, even on a $40,000 income.  He shows the math in the book and it’s brilliant.  The summary is that a little bit over time grows to a lot!

One of his top tips is what we mentioned above: pay yourself first.  David Bach recommends paying yourself first and saving even 10% of your salary.  Again, invest early and you will see that grow!

The amount we recommend is really going to depend on where you are at in paying off your debt.

First, make sure you are investing at least up to your company match.  We have mentioned this in a slightly different order in the past, but we believe this is a great step even before you pay off your debt.  Investing that small amount early will mean you get “free money” from your company.  Talk to your HR or payroll department to find out how to get started.

After paying off your debt then really build up the amount you put into your retirement.  We share in our book some different strategies and ideas on the recommended percentages and other considerations as well.

What is great about this tip is that automating the amount you put into your retirement will keep you from missing that money in the future.  What we mean is that you won’t even see the money as it will go straight into your retirement account.  The amount on your check therefore “hides” that saved amount and you automatically learn to live on less.

4. Automate Your Mortgage

Who doesn’t want to pay their mortgage off early?  We believe we know the answer.  Everyone does!

Most if not all mortgage companies will allow you to automate your mortgage payment.  And the majority will let you set up bi-weekly payments.  This is amazing as you will set yourself up to pay off your mortgage early by at least 4-6 years.  Plus, the average home owner will save about $50,000 of interest.  How does this happen?

The bi-weekly payments mean you pay half your “monthly mortgage payment” every two weeks – for a total of 26 payments.  What this does is allows you to pay 13 “monthly mortgage payments” with one of them going directly to principal!  That additional payment to your principal really impacts and moves up your payoff date!

Even better, we love this system as it equalizes your paychecks.  Instead of the paycheck right before the first of the month going mostly towards the mortgage, you can now divide that up evenly over all paychecks.  The sense of freedom you find by not being mortgage bankrupt for one paycheck each month can be amazing!

Don’t forget, this is automated and you don’t have to do anything other than set it up with your bank.  If you are still on a manual payment plan, we would encourage you at minimum to automate that even if you don’t use bi-weekly payments.  One late payment on a mortgage can greatly affect your credit score.  So setting up that automation could really help you prevent that from happening.

5. Automate Your Refunds

You likely know that if you purchase an item and the price drops within a certain amount of time, you can usually request a refund.  We both know however that this is a tedious and almost impossible task to keep track of.  Often, we will actively track those prices for big ticket items but rarely for anything else. 

However we occasionally catch them as we did for a Christmas gift we bought just a couple of months ago.  We were able to get over half the money back just by showing them our receipt!

What if we shared however that “there is an app for that.”  LOL!  Seriously though, we recently mentioned the Paribus app that does exactly that for your online purchases.    If you’re shopping online for most stores, they will track the price after your purchase.  If the price drops, they will submit the claim on your behalf and give you the full refund.  Yes, the full refund.  You can read the post where we explain why they do exactly that.

Amazon is unfortunately one of the stores they do not offer the price difference.  However, they can still save you money even on your Amazon purchases.  Essentially they track your orders and will request a shipping refund for orders that are delivered late.  They do that for other stores as well!

If you take just a few minutes to download and setup the Paribus app you could get back $60-70 per year.  It may not sound like a lot, but that’s just another automated way to save.  Plus, combine this one tip with others and you can see how the savings and your money saved just build month over month!

6. Automate Your Child’s Education

If you have a child that you are getting ready for college, then you know the importance of saving to help avoid those student loans.  Set up a 529 plan today to automatically withdraw from your paycheck.  Yet again, you will be paying yourself first.  And additionally, withdrawing from your paycheck will keep you from missing that money since it never enters your bank account.

7. Automate Investing

As we share in our book, you might want to wait on setting this up until you’ve paid off your debt.  The reason for this is because any interest earned will likely be less than the interest built up with your debt.  But once you get that debt paid off, using a fun tool like the one we mention below can help you invest painlessly.

How often when we think of investing money do we think we need thousands of dollars?  We think of these huge stocks, some of them thousands of dollars per share.  Often there is a common thought that investing is only for “the rich.”  But the tool we share today will let you take pennies on the dollar and invest them as you wish.  It really is simple.

We’ve spoke about Stockpile in a prior episode and mentioned how much we love it elsewhere on our site as well!  But when it comes to automating your investing you’ll want to check out Acorns.

First, you can feel comfortable investing with Acorns.  Acorns provides SEC registered broker-dealer services (not FDIC insured as mentioned in the episode as that is related to bank accounts – something totally different.  Cassie just used the wrong acronym on the episode).  Plus, they are members of Securities Investor Protection Corporation (SIPC) which protects securities customers of its members up to $500,000.  Finally, they use industry-grade encryption to protect your card number and it’s never stored on your phone, tablet or computer.

Here’s how it works!

When you sign up, enter your card number that you make your purchases on.  Once done, Acorn will round up your future purchases to the next dollar and invest that amount for you.  Seriously, it is just that simple and it only takes mere pennies to get started.

When you set it up, you can choose how aggressive you want your portfolio to be.  You are not investing in specific stocks, but instead in index funds they have setup for you to select from.  What’s great is you can change this at any time.

Get a free $5 just for signing up

We were also able to get you a free $5 if you sign up through our link for Acorns.  As we mention in this episode, Acorns is not the last investing platform you’ll ever use, but we love how simple it is and easy to automate!  For our family, we are investing about $20-$25 per month.  It’s great to see this amount grow and know that we are investing for our future all through this simple tool!

8. Automate Your Savings Accounts

You’ve probably heard us talk about all our savings accounts that we have – 12 total savings accounts if you are asking.  This allows us to setup goals and work towards those each and every paycheck.  Honestly, however, in the past it’s been a time-consuming task requiring me to take the time to transfer the funds.  This tip has automated that process and made my life a lot easier!  We hope it makes your life easier as well!

We found a new, high-yield savings account with an interest rate that is 15 times greater than the average savings account interest of 0.06%.  Seriously, at a rate of 1.16% that is a huge difference.  Plus, they allow me to automate all that work I did in the past and they transfer that money for me!

Get a free $5 when you invest $5

It is so simple to setup – and get a free $5 as well!  Make sure to signup through this link as they will give you an additional $5 when you invest your own $5.  First, submit your name, email address, and set up some very basic personal information.   Next, instead of giving routing numbers and account numbers, they provide you a secure platform to log into your bank and select the account you want to withdraw from.  Then, choose the goal amount you want to save, how long you want to save it for, and choose when you want the amounts withdrawn from your account whether monthly, weekly, or otherwise.

Seriously, it’s fast to setup, easy, extremely flexible, and something that once setup you will be automatically saving from that point forward!

Plus, we also love that if you have a goal for an account of three years or more, you can also opt to invest that money instead of just earn at 1.16%.  You’ll want to check their different options to get started on that as well!

Don’t forget that all of these tips are to set you up for the automatic year and set you up for automatic financial success!

Our 2% Tip of the Week:

The 2% Tip is where we share an idea to either shrink your budget or increase your income by 2%.  This week we tackle a fun and low cost way you can help increase your income!

This is something that we just started going ourselves – and we love it!  A friend of ours started doing this just a few months ago.  She didn’t have experience with graphic design.  She didn’t have any experience marketing her own product.  But from a passion to make this work, she is earning a decent income and has tiered up to higher levels in the program to sell more shirts.

Before I get to far, let me mention how this program works.  Amazon Merch is an awesome way that you can create your own t-shirt designs and sell them for a profit!  Have you ever seen a t-shirt and stated that you could have done that yourself?!  Well now you can!

Low cost means low risk!

This program is amazing because you don’t have to make thousands of shirts in various sizes and colors, send them to Amazon, and hope that someone buys them.  Instead, you submit your design, once approved by Amazon (no copyright issues or offensive messages), it goes on their site to be sold.  When someone buys a shirt with your design, Amazon makes the shirt on-demand, sends it to the customer and you make a profit!

We shared an article just a few months ago about how easy it is to get started.  It does require you to apply to the program and can take a few months to be approved, so get in the queue now!

Don’t forget to market your own product.  It’s honestly so much easier than it used to be as social media can be an amazing resource.  Display your design in related groups, share with others with a common interest, and get the word out!

Resources mentioned in this podcast:

Check out these books

• We really do love David Bach’s book, The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich.  He really does break down how simple it can be to start investing and overcomes many of the barriers to get you started.  Use his latte factor  approach and see what you can do!
• Check out our book, The 2% Rule to Get Debt Free Fast: An Innovative Method To Pay Your Loans Off For Good.  In the book we share context around many of the ideas above, including our Percentage Based Finances (PBF) approach to help you save towards your savings goals.  Additionally, we share tips on maximizing your approach to retirement.
• We created a 64-page workbook to give you the tools and the resources to help you pay off your debt.  You can see the digital version or the printed version.

Don’t miss some of our favorite apps (plus make $10 total)

• In a prior post, we share all about the Paribus app and how we use it to get money back from online purchases.  If you’re looking for a direct link just click here to sign up for the Paribus app.
• Although not related to automating your savings, we encourage you to check out one of our favorite investing tools, Stockpile, where you can invest in fractional shares of your favorite stocks.  Plus hear our prior podcast episode where we shared about it in our 2% Tip.
• CLAIM YOUR $5: Don’t miss out on signing up to get your free $5 when you signup using this link for Acorns.  It really is so simple to setup and easy to get started.  We honestly love these ways to introduce yourself to investing and start small.  What’s important is that you start and start as early as possible!
• CLAIM YOUR $5: We really do love how easy it was to setup our automated savings with Rize (use this link to get you $5).  Seriously, going from manually managing 12 savings accounts to now having them all automated has made our lives simpler – not to mention the awesome 1.16% interest rate.

2% Tip Resources

• Finally, don’t miss our prior article on Amazon Merch to learn more and get started expressing your own creativity while making money doing it.  If you’re looking for the direct link, just click here to check out Merch by Amazon program.

Don’t Miss an Episode:

If you want to make sure that you never miss an episode we encourage you to sign up for our Take Back Your Finances Podcast list.  As mentioned above, we will send you the free Spouse Questionnaire sometime during that first week just for signing up.  Additionally, we will also send you other resources from the latest podcast episode like checklists or related worksheets.  You just might receive resources on some of our favorite money-making or money-savings tool as well!

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