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Plan Well, Retire Well

Saving and investing your money
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Save Time by Automating Your Finances


I don't want to spend any more time than necessary managing my own finances. So I recently spent some time thinking about how I could simplify things. I like the idea of automating tasks. Once they're set up, they require little or no attention. Best of all, these tasks now get done at the right time instead of waiting for me to get around to them.

I bet you're already doing some of these, like using automatic deposit for your paycheck, pension, or Social Security check.

Maybe you also have some of your reoccurring bills automatically debited from your checking account. This is very common for utility bills, car and mortgage payments, and insurance. My only caution here is, if you switch banks, make sure all your bills have started debiting from your new checking account before you cancel the old one. Also, read everything you receive from the payees. I have one utility that cannot seem to switch directly from one bank to another; there's always one bill in between that I have to pay manually.

How about automating your savings? The best way to make sure that you save some money each month is to pay yourself first. And the easiest way to do that is to make it happen automatically.

  • Are you planning a vacation or another major purchase? You could open a savings account specifically for that goal. Have your bank automatically transfer a specific amount from checking to savings each payday.
  • If your goal is to build up an investment account for long-term goals, open an account with a no-load mutual fund and set up automatic transfers from your bank account to the mutual fund. For small, repeated purchases like this, a no-load mutual fund is usually preferable to a brokerage account or an exchange traded fund (ETF) where you would pay a commission on each transaction.
  • Do you scramble every year to get money into an IRA before the April 15 deadline? There's no need to wait until the last minute. Decide the minimum amount you want to contribute for this year, say, $3600. Set up an automatic transfer of $300 each month into your IRA account. When tax time approaches, you can make an additional contribution if you decide you can manage it. Remember, there are income limits for contributing to a Roth IRA. There are income limits for deductible IRAs if you or your spouse have a retirement plan at work.
  • If you have a retirement plan available at your job, it is one of the easiest ways to save. You normally fill out a simple enrollment form, select an investment or agree to accept the default investment option (which is probably a target date retirement fund), and voila! You're saving money every payday.

If you're retired and are pulling money from your retirement accounts and other investments for your living expenses, you could also automate that.

Arrange with the financial institution where you have your IRA or other retirement account to automatically transfer your required minimum distribution to your checking account. To make budgeting easier, you might choose to do this monthly instead of annually. Check the balance each month just before the new deposit goes in. If it's increasing, you're spending less than your income. If it's decreasing, you may need to make some adjustments in your spending.

As I explained last month, you may also have the option to automatically rebalance your investment accounts.

Have you found other ways to automate some financial tasks? What else have you done to simplify your finances? Please share and let others learn from your experiences, too.


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