The first thing to do is set up direct deposit from your employer to your bank. If you don't have a bank account, or if your bank charges you fees, I suggest changing to another bank. Thanks to their high yield interest rates and lack of fees, I recommend SoFi. Use my referral link to get a bonus deposit and unlock more rewards when you set up direct deposit. https://www.sofi.com/invite/money?gcp=0e9a20aa-6d7c-4399-8f6f-53e390a2948e&isAliasGcp=false
1. Auto Transfers to Savings: Building a Safety Net
Saving money consistently is a crucial step towards financial security and achieving long-term goals. However, it's not always easy to remember to set aside money each month. Automated banking comes to the rescue with auto transfers to savings accounts. Set up a regular automatic transfer from your checking account to your savings account on payday. By doing so, you ensure that a portion of your income is saved before you have a chance to spend it impulsively. Over time, these small contributions can grow into a substantial emergency fund or fund-specific financial objectives.
If you don't think you have anything available to transfer, start with a small amount and work your way up. You will learn to live off the amount left over once you set your auto transfer. Once you figure out your budget, you should find even more you can auto-transfer to your savings every month or every payday.
2. Sinking Funds: Financial Preparedness for Planned Expenses
Emergencies are not the only financial events we need to prepare for. Many planned expenses, such as vacations, home repairs, or holiday gifts, can disrupt our budget if not adequately managed. Sinking funds, separate accounts designated for specific purposes, can help. Automate contributions to these sinking funds just like you would with savings. Whenever the expenses come due, you'll have the money ready, and you won't have to dip into your emergency fund or rely on credit cards.
3. Automated Investments: Growing Wealth Passively
Investing is a crucial component of building wealth over time. With automated banking, you can set up automatic transfers to your investment accounts. Whether it's a retirement account, a brokerage account, or a robo-advisor platform, regular contributions can be scheduled. Automating investments not only helps you stay disciplined, but it also enables you to take advantage of dollar-cost averaging, buying more shares when prices are low and fewer when prices are high.
Once your savings account is built up enough where you can call it an emergency fund, I recommend regular automated monthly transfers from there to your investment accounts. SoFi has their own investing plans (Referral Link) or you can choose Fidelity, Vanguard, or any brokerage of your choice. Most financial advisors will not meet with you unless you have a large sum of money to invest. It's best when you are getting started to open your own account online. Your auto transfers from savings to investments should match your auto deposits into savings.
4. Automated Bill Payments: Timely and Stress-Free
Late bill payments can lead to late fees and negative impacts on your credit score. Manual bill payments might be easy to forget amidst busy schedules. With automated bill payments, you can ensure your bills are paid on time, every time. Set up automatic payments for regular bills, such as utilities, insurance premiums, and subscription services. Remember to review your accounts regularly to ensure no unexpected charges are processed, and always keep sufficient funds in your account to avoid overdrafts. My previous blog post was about automated bill payments.
5. Utilize Mobile Banking Apps: Stay Informed and in Control
Mobile banking apps have become incredibly powerful tools, offering real-time access to your accounts and financial information. Use your bank's mobile app to monitor your spending, track your savings goals, and stay informed about upcoming bills and transactions. Many apps even offer customizable alerts, notifying you of significant account changes or unusual activity.
Bringing up SoFi again, their mobile app gives you points for logging in every day which translates to real money.
6. Security and Monitoring: Protect Your Finances
While automated banking is convenient, it's essential to prioritize security. Use strong, unique passwords for your banking accounts and enable multi-factor authentication whenever possible. Regularly review your account statements to ensure all transactions are legitimate. In case of any suspicious activity, report it immediately to your bank.
Automated banking is a game-changer for managing finances effectively and achieving financial goals. By setting up auto transfers to savings, creating sinking funds, and automating investments, you can build wealth passively while staying prepared for planned and unexpected expenses. Additionally, automated bill payments help you stay organized and maintain a positive financial track record. With the power of technology and mobile banking apps, you have the tools to monitor your finances in real-time and enhance your financial well-being. Embrace the benefits of automated banking to pave the way for a more secure and prosperous financial future.
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Remember to use my referral link to set up your SoFi account!