Intro after long hiatus inaugurated by Dr. Dre:
Ya’ll know me still the same ol’ G
But I been low key
Hated on by most these bloggers
With no cheese, no deals and no Gs
Yeah, so, I’ve been absent from Bite Size Idea for awhile. The drive to write ebbs and flows.
While, now it’s ebbing.
Or perhaps flowing.
I probably shouldn’t use sayings that I don’t understand. Anyways, I’m in the mood to write.
Automate Your Finances!
One thing that’s been on my mind is all this talk about “automating your finances”. Automating your finances has become a buzzword (rather, buzzphrase) much like “synergy” or “networking” or “belieber“.
In a nutshell, automating your finances means setting up your various financial accounts (checking, savings, investing, etc) to automatically move money from one account to the other on a scheduled basis.
For example, one way to automate your finances is by setting up your IRA account to debit your checking account for a given amount the day after your paycheck hits the checking account.
One of my favorite personal finance bloggers, Ramit Sethi, has an epic post about financial automation, complete with a video! (Try not to get lost in his eyebrows, that’s just the way he is. Look past them and to the message he’s trying to deliver.)
Ramit is a big proponent of automating all of your finances. And he’s got some great reasons:
(INSERT REASONS HERE)
- Emotions and behavior have a huge impact on financial decisions. Most of our tendencies have negative consequences for our finances. By automating, you get out of your money’s way and let it go where it needs to.
- We’re lazy. When we have to manually write a check or authorize a transaction for our IRA, the chances of it actually getting done are about as good as Mariah Carey’s acting abilities.
Unautomate Your Finances!
For 100% honesty, I must say that I haven’t read Baker’s ebook, but I’m familiar with the theories.
(INSERT THEORIES HERE)
- The big problem with automation is that you don’t know how much you end up spending on stuff. If your cell phone bill is set to auto-debit your checking account or credit card, you could be running up fees and overages, then paying for them and have no idea.
- The providers to whom you’ve given your auto-payment info could use it for evil. I listen to a consumer advocate’s (Clark Howard) radio show occasionally and he gets calls all the time from people complaining that one of their service providers has used their credit card info improperly.
With Our Powers Combined…
So who’s right? Both. Who’s wrong? Why does someone have to be wrong? Can’t we all just get along? A melding of the two approaches will give us optimal results.
What would it look like if Ramit and Baker had a love child? Probably something like this. How can we combine their powers for ultimate financial domination?
Here’s the short answer:
AUTOMATE YOUR SAVING AND INVESTING
AND UN-AUTOMATE YOUR BILLS
This approach gives us the best of both worlds: we trick ourselves into saving by taking choice out of the equation, since the money has moved to our savings/investing accounts before we could put our hands on it.
And we give due attention to bills because paying them is a manual process.
Just so you know, we practice what we preach in our family. Our IRAs and savings are set up to auto-debit from our checking accounts each month. Our internet, cell phone, utility, etc bills we pay manually each month.