Today I’m sharing the number 1, single biggest thing I did to improve my money-management and build my savings. Seriously. This isn’t click-bait either – this is legit the one thing that keeps me on track and that I regularly kick myself for not doing sooner.
What is this miracle trick?
Automating my savings.
I call it a trick because it literally does feel like I’m tricking myself into saving.
It’s an awesome feeling to get to the end of the month and be like, “I saved that much? And I still have that much left over?”
That’s an actual feeling that I get nearly every month since I started automating everything. It’s. The. Best.
I know, I sound like an infomercial – but I promise this is all (in my experience) totally true. And also I’m not selling you anything, so there’s that too.
So what does “automating your finances” mean, exactly?
Typical personal finance response, but it means different things to different people.
In general though, it means setting up your finances in such a way that your money flows automatically to where you want it to go, without you having to manually and consciously move it.
For me, it looks like this:
- Bi-weekly automated transfers into my invested RRSP
- Bi-weekly automated transfers into my invested TFSA
- Bi-weekly automated transfers into my emergency fund (high interest savings account)
- Monthly automated transfers into my various savings accounts for things like vacations, gifts, car/home maintenance and future-dog fund (yes it’s a thing)
- Monthly automated payments to my student loan
- Monthly automated payments to my property tax account
- Monthly automated bill payments (mortgage, phone bill, internet, utilities, etc.)
The benefits of this are yuge. (Gah, sorry #toosoon)
The biggest one for me is the stress-free aspect of the whole thing.
When I used to rely solely on my budget and manual savings, I was always stressed out about how much I had spent on some particular budget category and how much I’d have to save next month to hit my target, and how any overspending or unexpected purchases (like my two flat tires within two weeks #fml) would impact my savings rate.
All of that is gone now that I’ve automated my savings.
If I need to buy something unexpected or I want to splurge on a staple item, I can do it without worrying that my savings are impacted; they’re not, because my money is already flowing into savings without me having to do anything.
It also means I can’t eff it up, because it works so smoothly in the background that I forget I’m saving.
Be On Time, Always
Another benefit? I am never, ever late on bills.
I mean, to be fair, I wasn’t before either, but I did get close sometimes just by forgetting what day of the month my billing period ended and when my bills were due, since basically every bill I get is on a different day. (yes I can maybe fix this by calling to change the bill date but that would mean actually making a phone call – ugh).
Automating my bill payments means I know exactly when the money is coming out of my account, and if I have a busy week and forget to pay attention to the billing dates, who cares – it’s already paid.
I am still, however, late for every single other thing in my life.
Reach Savings Goals
Real talk: I am not a goal oriented person.
Setting a target in the future and working towards it just isn’t motivation for me. Automating my savings takes the need for motivation out of it completely.
I still set “goals” in that I have an idea of what I want my accounts to reach; like I want my emergency fund to be at a consistent $10,000 and I want my vacation account to get to $5,000.
But if I relied on my own will to consciously and manually make deposits to get to that point, I’d fixate on it and I’d get nowhere.
Automating my payments means that each month, money moves into all my savings accounts, and then suddenly one day, I log into my accounts and realize I hit my targets without having to do any work.
I’m now finally paying myself first and not just calling whatever was left in my account at the end of the month “savings”.
It took me like… maybe an hour on the day I decided to automate my finances, and I’ve never had to touch it since.
I used to spend a disgusting amount of time tracking my bill payments and stressing about how much saving I needed to do.
I’d panic over every purchase, no matter how small or necessary, because I’d worry about not saving enough, and I’d check my accounts daily to see “how much money I had left”. That’s just not a thing I have to do anymore, which means I have so much more time for actual fun things.
Here’s the thing, you can do this too, because it is so easy.
Step One: Decide what you’re saving for.
Short term goal like vacation or a car? Long term goal like home ownership or retirement? How much do you need for that? Know your target amount and go for it.
STEP TWO: Choose your accounts.
Depending on what your savings goals are, do you need a high interest savings account that you can access quickly but that won’t give you big returns? Or investments that will grow, but that you can’t pull money out of as easily? Check too to see if there are limits to the amount of “free” transfers you can do out of your “from” account.
Step Three: Set up your automatic transfers.
Most banks allow you to set these up online, but check your own bank’s policies. It’s usually just a three step process of choosing a two and from account, setting the amount, and the frequency of transfers, and you’re done!
STEP FOUR: Set up your automatic bill payments.
I prefer to set my bill payments up so that the transfer initiates from my account to the bill, rather than the billing company automatically withdrawing.
I read a story once about a large province-wide utility company here in Ontario (that shall remain nameless because me and my tinfoil hat are scared of them but you know who I’m talking about) that arbitrarily pulled over $10,000 from a person’s account one month.
With those preauthorized payments, in any cases of disputes, you pay first and then you’re at the mercy of the company to fix it and pay you back.
This isn’t to say all businesses are like that, of course, and if you set your automatic payments to come from your credit card (though check to see if it counts as a cash advance, because you might be charged), you have a bit more protection.
STEP FIVE: Relax and watch your savings grow.
Honestly, this has done more for my stress level than yoga.
Do you automate your finances? Tell me how it’s helped you!