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Automate Your Savings!

The only thing worse than diarrhea is “first of the month” dread, also known as “bill week”. There is nothing worse than coughing up a chunk of your check and hanging on by a thread until your next payday. Using the model detailed below not only automates your savings, it also takes the hassle out of bill payments. This model deteriorates the idea of living “pay check to pay check” by ensuring each of your accounts consistently hold enough money to not only cover your bills, but allowing you to continue maintaining your daily living. Please note, the example below aligns with bi-weekly paychecks. Adjust it to meet your needs.

For this plan you will need four (4) bank accounts.

1. Start by calculating your monthly bills, except rent. Of course, insurance and utilities jump into mind, but do not forget to include monies used for groceries and gas. When calculating your bills, do not include nonessential items such as personal care (haircuts, eyelashes, and nails), entertainment, and clothing. Here is an example:

Utilities: $120

Car Insurance: $120

Phone Bill: $50

Groceries: $150

Gas: $100

Credit Cards/Loans: $120

Cushion (extra): $30

Running total: $690

Divide your running total by 2 (or whatever number of times you are paid in a typical month): $345

 

Check to see if your employer supports direct deposit in multiple accounts. If not, log into your overdraft free checking account and schedule automated payments of $345 to match your payroll schedule.

Main account ➡️ Billing account

Set up automatic withdrawals for each bill. No overdraft fees is an important feature to have in the instance the amount of your biller fluctuates. Being charged a $27 insufficient funds fee for being short $2 is unnecessary and costly. The goal is maintain enough money to cover any bill no matter the due date, and of course, to never withdraw from this account.

 

2. Log into your designated bank for rent and schedule an automated transfer of half (based on a bi-weekly pay) the amount due, matching your payroll schedule. Example, if your rent is $925, set up a biweekly transfer of $462.50.

Main Account ➡️ Rent Account

 

3. Establish automatic transfers within your savings account for a monetary amount of your choice. Again, align it with your pay schedule.

Main Account ➡️ Savings Account

 

The most important aspect of implementing an automated savings plan is honesty. Be honest and realistic, or this will fail you. Ask yourself the following:

  • Do I have the discipline?

  • How many life emergencies ACTUALLY occur? Am I just using this excuse as a crutch?

  • Can I live without instant gratification?

Nothing is set in stone. Allow this plan to work for you. We'd love to hear your feedback. How do you feel about automating your bill payments? What obstacles prevent you from saving money? Are there any subjects we've forgotten to cover? Let us know your thoughts below.

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