Automate Your Way to Wealth

Zebert L. Brown

Whenever I ask people what’s their #1 reason for not sticking to a budget, I normally get “lack of time” to manage it properly.  I then ask, “Have you tried automating your finances?” It’s at this point folks do that old “I Could’ve Had a V8” bonk upside the head thing.

In today’s busy world, it can be difficult to keep track of your spending especially if you’re still doing it the old fashioned way with pen, paper and calculator.  But if you automate your finances, your world will become a whole lot easier.  Trust me! 

I remember the first time I automated my finances using Direct Deposit back when it was the newest wave in banking.  At the time, I would receive paper checks because I didn’t trust the accuracy or timeliness of the Electronic Funds Transfer system.  But once I saw the benefits of it – no waiting in lines to cash my check and instant access to my money – I was hooked on the new banking technology and I haven’t looked back since.  I’ve even paid off three vehicles using auto-payroll deduction where the car payments were automatically deducted from my paycheck and my budget never missed it!

Today, there are multiple ways to ease the burden of maintaining your budget and you can increase your net worth in the process just by automating your finances.

  • Saving and Investing through Auto Payroll Deduction. The easiest way to get started in investing is to pay yourself first.  That means making regular deposits to your savings account.  But if making regular deposits into your savings account is a habit that remains elusive, you can take the strain out of the process by automating your savings using automatic payroll deduction.  The process is easy: Just contact your HR department, determine the amount of funds to be withdrawn from your pay each pay period, fill out the necessary paperwork and submit them to your bank, credit union or other financial institution and within a payday or two you should start seeing your savings increase.  You can also automate contributions to your 401(k) or IRA (whether Traditional or Roth) using auto-payroll deductions.  Not only is this a fast and effective way to increase your investment portfolio, you can also reduce your taxable income in some cases allowing more of your earnings to go into your bank account and less going to Uncle Same.  Once established, all you’ll have to do is sit back and watch your retirement nest-egg grow and grow and grow.

  • Online Bill Pay. Ever miss a payment on a bill and kick yourself for it?  You can save yourself the agony of watching all those late fees eat away at your hard earned income and stop kicking yourself in the butt in the process by paying your bills online.  In most cases, you simply log in to your creditor’s website, i.e., utility company, mortgage company, car finance company, insurance premium, etc., provide the appropriate account information and the payment is automatically withdrawn from your bank account or credit card.  The neat thing about online bill pay is you can either make a one-time payment or set up a payment schedule where a specific amount is withdrawn from your bank account at the interval you specify (i.e., once a week, bi-weekly, once a month).  There are three benefits to online bill pay: 1) your payment is usually processed within 24-hours saving you a late fee; 2) you save money on postage; and 3) you can stop or start the process, or change the payment method at your convenience.

  • Pros to automating your finances:

    • No hassle savings and investing.

    • Prompt payment processing

    • No late fees

    • Quick payment confirmation (usually via email)

    • Easy payment tracking (i.e., email confirmation, creditor’s website or banking app)

    • Saves time

       

  • Cons to automating your finances:

    • Easy to fall into that “out of sight, out of mind” mentality and forget to account for such deductions in your budget

    • Halting or changing payments made by auto-payroll deduction can take time for the required paperwork to get processed

    • An error in a payment amount could throw off your account balance and take time to correct

It’s important to monitor your banking statements and your budget in order to keep on top of your spending when automating your finances, but the pros far out-weigh the cons.  One word of caution:  You should automate your finances only when you’re absolutely sure your budget can handle it.  If your finances are tight and you’re still not comfortable with your spending being on auto-pilot, automating your finances may not be for you.  But once you get your finances on track and you start seeing consistent positive cashflow in your budget on a regular basis, I would highly recommend calling “All Systems Go” to automating your finances.

That’s my blogpost for this week. Join the discussion by posting your comments below. And don’t forget to tune in next week where I’ll once again share more ways you can break the debt cycle and then go…beyond.

Zebert L. Brown is the author of Break the Debt Cycle in 3 Simple Steps and a 16 year Navy veteran with specialties in administrative management, career development and public relations. Follow him on Facebook and Twitter.

Going “Beyond the Debt Cycle”

Zebert L. BrownThere are several reasons people fall into debt – a job lose, severe illness or series injury, divorce, death of a loved one, poor spending habits or plain old careless with their money.  Regardless of the reason why, the question each person asks once they find themselves in debt is “how do I get out”?

As I read over the various blogs that cover personal financial management, each mentions the following as important first steps towards resolving your debt woes:

  1. Acknowledging that you have a debt problem; and,

  2. Start a budget.

Both are prudent first steps, yet both can be very difficult steps to take.

Most people who find themselves in debt are afraid to admit they’re having difficulty managing their finances properly.  Simply put:  pride gets in the way.  At our core, we don’t want to be viewed as a failure. However, by acknowledging that you need help managing the household finances, you’re seeking the assistance you need to think through financial matters that not only impact yourself but your entire family.  As explain in chapters 1 and 2 of my book (see byline below), your family should be involved in the budgeting process so that everyone understands your household’s financial situation  and helps to keep things on track.  But what if you’re single?  Where should you turn for help?  As mentioned in a previous blogpost, “10 Tips to Improving Your Financial Literacy,” agencies such as Consumer Credit Counseling, your local community college or your bank can all be of assistance.

Acknowledging you’re having difficulty managing your household finances may be easier than drafting and maintaining a budget, however.  The reason most people don’t like living with a budget is  they believe budgets are too restrictive.  I certainly use to think that way.  It wasn’t until my wife and I realized we were starting to miss payments to our creditors and beginning to bounces checks that we realized we needed to do something different about managing our household finances.  As we sat down with our bills, recent bank statements and our cash receipts and began the first rough draft of our budget, we began to see a couple of patterns emerge.  First, we were spending way too much on dining out (for lunch mostly).  Second, we were relying on memory to ensure one of us was paying specific bills on time.  Once we were able to see how negative spending habits and a lack of focus were hurting our bottom line, we were able to draft a well-constructed budget plan that took both our input into account. We also realized that we need to forecast our spending beyond the next paycheck to tackle any unforeseen circumstances that might crop up.  By forecasting our expenditures 3-6 months out, we were able to absorb added short-term expenses without significantly impacting our long-term financial goals.  And that brings me to a broader point concerning your budget:  it’s merely a tool to help you manage your money as you see fit.  Nothing more, nothing less.

Use your budget to help keep track of your earnings, expenditures and long-term financial goals.  I want to emphasize that last part.  I think it’s important for people to understand that your budget shouldn’t be a static document.  I should change as the circumstances of your life changes.  Furthermore, just because you may have to cut back and live within your means (or below them) in order to get your finances on track doesn’t mean you have to always go without.  You can – and should – incorporate leisure time activities into your budget plan. Such activities could be as inexpensive as planning a special family meal once a week or renting your favorite movies including everyone’s favorite snacks.  My point is, such leisure time activities don’t have to be extravagant.  Just plan ahead and be creative again taking input from your family.  Unfortunately, many consumers believe that “keeping up with the Jones’” – image – is more important than living debt-free.  To some, debt is just another part of life.  But I would argue that living debt-free is a better way of life because you’re in control.  Instead of being dictated to as to how to spend your money, you get to call the shots.  And wouldn’t you rather be in control of your financial future than having someone else control it for you?

Another aspect of your budget plan should be personal investments.  While most financial counselors suggest waiting until you’ve gotten your debts under control, I would suggest that you start by putting as much money as you can into an interest-barring savings account  and build up your savings over time when you can afford to save more.  The point here is to pay yourself first!  After all, you work hard for your money.  Shouldn’t you receive the benefit of its use besides just paying bills?

If you’re struggling with debt, take the first steps towards getting out of debt today by acknowledging your debt woes, seeking assistance and drafting well-constructed budget plan.  Try to forecasts your expenditures for the long-term, and don’t forget to include personal investments and leisure time activities into your budget plan.  Your family, your sanity and your financial future will thank you for it.

That’s my blogpost for this week.  Join the discussion and post your comments below.  And don’t forget to tune in next week where I’ll once again share more ways you can break the debt cycle and then go…beyond.

Zebert L. Brown is the author of Break the Debt Cycle in 3 Simple Steps and a 16 year Navy veteran with specialties in administrative management, career development and public relations.  Follow him on Facebook and Twitter.

Hello, Blogosphere!

LeeHeadShot4  I’ve wanted to say that for a long time and I’m happy that day has finally arrived. Since this is my introductory blog post, it’s only fitting that I provide a little background as to why I’m so excited to be starting my blog.

After the U.S. economy took a nose dive in 2008, I began to pay close attention to what was happening to the personal economies of hard working people such as yourself all across the country. I would read the headlines and follow story after story of families whose lives had been turned upside down mainly because a father or a mother – or sometimes both – lost their job and eventually their home because the main source of income was gone and their savings dried up. As sad as such stories were, I realized there was little I could do to help these people in their immediate situation. Even if some of them did managed to find new jobs, they’d still have their unpaid debts to deal with.  I mean, when was the last time you had a debt collector graciously wipe your slate clean? It just doesn’t happen. Still, I was left wondering how could I help?

As I kept abreast of the storylines involving home foreclosures, rising health care costs, rising student loan debt, income inequality, low-savings rates and dwindling retirement accounts by Average Joe’s like you and me, I decided to start digging deeper into these types of issues. At first it was to protect my own self interest – I didn’t want any of those things to suddenly happen to me if I could help it. But then it occurred to me!  With all the information I had gathered and the experience I’d gained keeping my own household afloat throughout the Great Recession, I could write a book based on the lessons I’d learned in personal financial management.

The title of my book is “Break the Debt Cycle in 3 Simple Steps”.  I wrote it specifically for individuals who are struggling with debt and want to learn how to take control of their personal economy, eliminate debt and start building lasting wealth. And that is what brings me to your computer screen today.

Although there are several books and countless blogs on the subject of personal finance, one thing I’ve noticed is that most give the same cookie cutter advice. I try to go beyond the debt cycle and provide information you can use to save money, protect your assets and get started in investing. That’s the level of content I plan to bring to my blog aptly named, “Beyond the Debt Cycle”.

So, I hope you’ll stay tuned for my weekly blog posts and help to make this an environment where good advice and shared experiences can make a difference in the lives of ordinary people just like you. Together, let’s get more hard working Americans to break the cycle of debt and then go beyond.

See you next week.