Tricks in Automating Your Personal Finances

[Chris@TTL]

My favorite insight that came from working through automating our finances:

It lets you pay your future self first. It's kind of like sticking the cookies in the back of the pantry so you're not tempted every time you take a look inside. 🍪💰

Does anybody have any sneaky tips for setting up account transfers and managing the flow of money?

For example, we use Capital One 360 savings accounts (it's easy to create a bunch of "sub" accounts - the old ING Direct) to distribute funds focussed on specific goals.
Think:

• House downpayment account
• Replacement vehicle account
• Major vacation account
• Large upcoming medical expense account

[secondcor521]

Here's a good one that I've never seen anywhere else:

Have your paycheck direct deposited to your savings account, then set up an automatic transfer from savings to checking in the amount of your budget.

A few benefits of this trick:

1.  You're earning interest right away - not currently a big deal, but if we ever have real interest rates again it's an extra several dozen dollars automatically.

2.  If you get a raise or bonus, you're less likely to increase your budget, because your paycheck and your budget are decoupled.

3.  When you FIRE, you can just switch to selling assets to replenish savings, and you're already used to spending from savings so it's not as much of an adjustment.

[DadJokes]

Here's a good one that I've never seen anywhere else:

Have your paycheck direct deposited to your savings account, then set up an automatic transfer from savings to checking in the amount of your budget.

A few benefits of this trick:

1.  You're earning interest right away - not currently a big deal, but if we ever have real interest rates again it's an extra several dozen dollars automatically.

2.  If you get a raise or bonus, you're less likely to increase your budget, because your paycheck and your budget are decoupled.

3.  When you FIRE, you can just switch to selling assets to replenish savings, and you're already used to spending from savings so it's not as much of an adjustment.

I really like that idea.

[Greystache]

Set up auto pay for as many bills as possible.  If you can, pay them with a credit card that earns points.  Also have a separate card that is used exclusively for auto pay and never leaves the house. This is because it is a huge hassle to update your auto pay if a credit card is lost or stolen.

[Car Jack]

A card never has to leave the house for it to get fraudulently used.  I've had cards that I got for the bonus and nothing else, 3 years later, with no use besides that one insurance bill payment for the bonus get hacked and used in London.

But I do separate tradeline cards from cards I actually use.  If a tradeline card is burned, I don't care.

[Chris@TTL]

@Car Jack - I've had the same problem where a card that's never left the house wound up with fraudulent charges years later after sitting in a drawer unused (obtained at all to get the signup bonus). It's mindboggling to wonder how this even happens.

[Chris@TTL]

@DadJokes @secondcor521 - I also think this is a really solid idea. I especially appreciate:

If you get a raise or bonus, you're less likely to increase your budget, because your paycheck and your budget are decoupled.

It's another one of those nifty mental tricks to help prevent lifestyle creep.
Jenni wrote up a big post on how to automate your finances and I think those sorts of ideas around removing the human temptation to spend from the systems are really helpful.
Sometimes we need to trick our monkey brains into being good savers.

And to your point about "earning extra several dozen dollars automatically", it's surprising how easy it is to discount the value of merely being efficient with where your cash is sitting and for how long.
Having $10k sitting in a zero-interest checking account that could earn 1.2%/year (sad times how low it is), is equal to $10/month in free money.

I mean, how much time have I spent fighting Comcast from bumping our bills up annually by $10/month?

Anyway, thanks for the feedback and keep them coming all!

[talltexan]

I was really impressed by an article on Learnvest a few years ago that sorted expenses into four categories:

Fixed monthly (ex. Mortgage)
Fixed periodic (ex. Car insurance or property taxes)
Variable monthly (ex. power bill)
Variable in person (ex. groceries)
Discretionary (ex. Tickets to Hamilton)

[Annie101]

We automate everything that we can.  Have been saving monthly for a sabbatical for many years (into a dedicated account).  We automatically save into 529 college funds. 

[ChickenStash]

My employers have all allowed setting up multiple direct deposits so I use that to get the money right where it needs to go on payday. Main checking, IRA, savings, brokerage, 401k (kinda). The only time I manually move money to savings or brokerage is when I sweep "left-over" money from the main checking account a few times a year.

My previous employer had a really nice PeopleSoft form setup so I could very simply adjust the amounts or add new accounts  (like when trying to get a bank sign-on bonus) any time I wanted. My current employer requires all kinds of forms, cancelled checks, etc. that have to wind through heaven only knows how many hands before the changes take place - took about a week last time which meant it was 2 pay checks before the changes worked. Not the end of the world but annoying.