Doctors are busy. Luckily, you don't have to spend much time on financial chores compared to what was needed in the past. Nearly every step can be automated. David Bach even wrote a series of books about how to become a millionaire “automatically.” Here are some steps you can take to automate your financial life and help you reach your goals of financial freedom:
# 1 Automatic Paycheck Deposit
Put your paychecks on automatic deposit. Most people have been doing this for years. If you haven't, get with the program.
# 2 Automatic Bill Payments
Put all your bills on automatic payment — mortgage, utilities, insurance payments, credit card payments (for the full amount each month I hope), student loan payments, child support, alimony, and car payments (if you must buy a depreciating asset on credit.)
# 3 Automatic Investing
Put your investments on autopilot. You can have your 401K/profit-sharing plan contributions automatically deducted from your paycheck before you ever see it. IRA contributions can also be taken out of your checking account each month automatically. In fact, so can any investment even in a taxable account or a 529 for your children. This helps you to pay yourself first, and this habit will lead you to financial independence. Remember, you'll need to save 15-25% of your income toward retirement. Start today, and make it automatic.
# 4 Deposit Checks at Home
Get a checking account that allows you to deposit at home. Any physical checks I receive are scanned at home and deposited directly into my checking account on my bank's website. In fact, now I can make deposits from anywhere using my smartphone.
# 5 Use Credit Cards Instead of Cash
Use credit cards instead of cash. Now, I only advocate this if you have the discipline to pay off your credit card every month, and you should also be aware that there are several studies out there that show you actually spend more when using plastic instead of cash. But this can really simplify your finances. Instead of having dozens of transactions coming in and out of your checking account each month, you only have one. You can even get rewards from the credit card company that can add up to several hundred dollars or even thousands over the course of the year. The best part for me is that I never need much cash. Neither my wife nor I have visited an ATM in the last 3 months, and it has been years since I set foot inside a bank.
# 6 Automatic Transfers/Bill Pay
Pay your kid's allowance with automatic transfers. Again, saves a trip to the ATM each month. Your bank's bill pay function can be used for this if needed.
# 7 Automatic Tax Payments
Pay your taxes automatically. W-2 employees have taxes withheld, but even independent contractors can set up quarterly estimated payments to come out automatically. The amount owed at the end of the year can be paid over the internet as well-just watch out for fees that are sometimes charged.
# 8 Automatic Gifts and Payments to Friends/Family
Gifts and payments to friends can be paid with your Paypal account or a free digital wallet like Venmo. There is no additional fee and it comes directly out of your checking account (or can be transferred directly into your checking account) without the hassle of using checks.
Which of these do you use? In what other ways have you automated your financial life? Comment below!
Really good advice here. Don’t forget automatic finance tracking and notifications. I tell my readers to automate their tracking of all of their accounts in one place, because otherwise you’ll end up only tracking your checking account and miss a lot of stuff.
I’ve been leaning toward using credits cards instead of cash (and presumably debit cards)) per #5 above because it’s one payment versus multiple throughout the month (and can more easily accumulate travel rewards). We currently use mostly our debit cards and then physically enter each receipt into Banktivity (formerly iBank for Mac) along with the category for each purchase for budget-tracking purposes. I’m wondering how folks who do a sole monthly credit card payment are able to track their budget categories, given they only make one payment per month (per credit card). I’m wondering if they have to comb through the credit card statement, consolidating categories by hand, doing the math, then entering into their software (Banktivity for us). This seems tedious, but maybe I’m missing something. What’s the best way to track the budget when putting everything on a credit card?
Well, we just have one category. That makes it a lot easier. 🙂 It wasn’t that way at first, but we just kept combining and combining and combining and eventually were left with just one category: variable expenses (plus the usual fixed expenses like insurance and utilities.)