8 Ways to Automate Your Finances - Physician on FIRE (2024)

The problem with human beings is that we’re all human.

We know what we ought to do, but when faced with real-life decisions, we don’t always make the best choices. That’s why New Year’s Resolutions tend to be in jeopardy by the end of January. It’s the reason we need to make those resolutions in the first place — poor decision-making is in our nature.

One of the best ways to combat a lackluster decision-making process is to remove any need to make a decision. That’s where automation comes in.

If you don’t always make financial decisions that are in your best interest, automate as many of those processes as possible so that you’ll automatically be doing what you want to do whether you choose to or not.

Dr. Jim Dahle published a post on the following 8 ways to automate your finances in his first weeks of blogging on The White Coat Investor, and this is an updated version of that article with a few comments of my own sprinkled in.

You’re 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.

[PoF: A number of banks have a regular direct deposit as a requirement to waive fees on savings or checking accounts. My last brick and mortar bank had such a requirement, and I ditched them when I retired from my W-2 job.]

# 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 ataxable accountor a529 for your children. This helps you to pay yourself first, and this habit will lead you to financial independence. Remember, you’ll need tosave 15-25% of your incometoward retirement. Start today, and make it automatic.

[PoF: Automatic investing on a schedule can be set up with any brokerage, but there are now technology-first companies like M1 Finance that make no-cost, easily automated investing their primary objective. Any deposit you make, whether automated or not, is fully invested (purchasing fractional shares if needed) in the customized portfolio you choose or design.]

# 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. Most banks will also allow you to make deposits from anywhere using your cell phone.

# 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 evenget rewardsfrom 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.

[PoF: Rather than opening bank accounts for our kids, we are the bank — The Bank of Mom and Dad. It pays much better interest rates than even the best high-interest savings or checking account out there!]

# 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 likeVenmo. 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?