- Have you ever found it kind of annoying
and difficult to do the right thing with your money,
whether it's investing for the future, paying your bills,
budgeting, or even making the right decisions in general?
There's a solution out there to help you
make better decisions with your money
without even having to think about it.
It's called automating your finances.
Now, I don't believe that you should take
a completely hands off approach with your money.
But setting up systems, then managing
that system can make the whole thing a lot easier.
There are many different ways to accomplish this,
so in this video we'll cover things like explaining
what financial automation is, what it can do
for your financial life, specific ways
that you can automate your finances,
the upsides and downsides to financial automation,
and what to do if there isn't technology
created to automate your finances.
Stay tunes because in the next few videos
I'll be introducing you to some free software
that will help you with automating your finances.
Hey, I'm Jarrad from Debt Free Blueprint,
where I show intelligent people like you
how to get out of debt and create freedom
through your finances using the Debt Free Blueprint.
Don't forget to smash that thumbs up button,
and leave a comment down below.
Let me know what part of your
financial life needs to be automated.
If you want more personal finance videos,
then hit that subscribe button and notification bell
so YouTube knows to deliver them to you.
So, what is financial automation?
Well, financial automation is exactly that,
putting systems in place to automatically
make smart money decisions to help prevent our crazy brains
from sabotaging us when it comes to personal finance.
Think of it like a self-driving car in today's day and age.
You can turn on the self-driving mode,
but you still need to be alert just in case
you have to grab the wheel for some reason.
Mainly, because us as humans make the roads way
more dangerous than any self-driving computer does.
You also have to still take care
of the routine maintenance of the vehicle as well.
Oil changes, making sure that there's
enough air in the tires, filling it up
with gas, and all of that fun stuff.
So, what can this do for your financial life?
Automating your finances will guarantee
that specific things will get done based on a plan
that you've already laid out and set in motion.
This is great, especially in the area
of investing for your future.
This could be the difference between retiring
with enough money and having to work until
you're 80 years old just because you didn't make
smart personal finance decisions early on in your life.
The theory behind it is the less decisions
that you have to make the more likely
the important things will actually get done.
Out of sight, out of mind, removing the barriers
between what you want to do
with your money and the actual thing getting done.
Unfortunately, we can not automate
all of our financial decisions in life.
This is actually kind of a good thing because you don't want
to completely lose touch with your money.
But don't worry because I'll show you
a workaround later on in this video.
Before you even attempt to automate
your money it's important to have a budget set up
so you know where your money is going.
A budget is going to give you a nice foundation
to operate on when it comes to automating your finances.
If you just press play on automating your finances,
then it's like driving a car with no windshield wipers.
You'll be able to get by for a little bit
until you realize that it's going to rain.
Then it turns into one of those arcade driving games,
where it's like nearly impossible to steer.
You know what I'm talking about.
The budget is going to be the cornerstone
of this whole thing because it's the overall plan
you've laid out for where your money
has to go every month before pressing play.
This will help you automate specific areas,
along with the exact amounts, based on the budget.
I'm in the process of creating a money course
where we cover things like this in more detail.
So feel free to sign up to get
on the waiting list after you watch this video.
The link is in the description.
I'll also throw links in the description
for some money management videos
that I've already put out there for you.
Let me show you an example of financial automation in use.
Part of my system looks like this, minus the debt.
Retirement investing in a 401(k) or 403(b) are taken
directly from your paycheck before you even see it.
The remainder of your money is sent to your bank account.
From there, you will want to have
an automatic contribution set up to go
towards your IRA for additional retirement savings.
Next, you want to have automatic payments set up
to pay the minimum payments on your debts if you have them,
your monthly expenses like utilities and things like that,
and your credits, so that you reap the benefits
of the cash back rewards that you put right back
into investing to grow even more.
If you're trying to save up for specific things,
then create a separate bank account that is more difficult
to get to, like through an online bank.
And have more money automatically withdrawn
from your local bank to the online bank on a specific date.
Or you can get the money sent to your
online bank from your monthly paycheck.
Keep in mind that you don't have
to do all of these examples.
You can start out with just one.
So, how do you actually set up a financial
automation system with your money?
You're going to need to set up the system
so that it does what you want.
Now, this may sound like a daunting task,
but it's really not that bad.
All you do is set up the initial rules
on the specific websites, then manage it at a high level.
For your 401(k) or 403(b) your employer
should have some sort of portal that you log into
to decide how much to pool from each paycheck.
For your IRA you'll want to go to the specific website
of the company to create a specific withdrawal date
and withdrawal amount, I personally use Vanguard.
Since you and I are able to invest up to $5500
per year in an IRA, you could set up to automatically
withdraw $458 per month from your bank account.
If you want to do less that's perfectly fine,
whatever you can afford.
Next, you want to set up automatic
payments towards your credit card.
Yes, I promote responsible credit card use
to take advantage of the free money.
This is only if you're able to pay
it off every single month though.
You will need to go to the website,
and choose the payment date and amount.
I have an automatic payment set up to pay off
my full balance at the same time every single month.
The specific date that I choose
is based on when the bank reports
my debt to the credit reporting agencies.
This ensures that my credit score doesn't take a hit
because of my debt to credit ratio.
Finally, you will want to take all of the expenses
that you have, and create specific automatic payment dates.
You should be able to time these payment dates
so that the bills get paid based on
when you get paid every single month.
I personally take advantage of this with things
like my gas bill, my electric bill, my phone bill,
my internet bill, and things like that.
Now, let's get into some of the upsides
of automating your finances.
Since there actually are quite a bit,
I'm only gonna name a few of them.
Number one, the whole process saves you a whole lot of time.
There's a small cost of time upfront to set everything up.
But after that all you have to do is manage it
at a higher level through your budget, as opposed
to logging into each individual account every single month.
Number two, having one less thing to worry about
will help prevent you from the, wait did I pay
that bill feeling that we've all had in the past.
It's going to help reduce your financial stress.
You will never miss a payment ever again.
Number three, this is also amazing
for investing for your future.
Most people will drag their feet when it comes to investing.
This can be a huge negative impact on your future self.
By forcing this investment decision
you will be setting yourself up for the next 20,
30, 40, or 50 years down the road.
And if you have any money left over
when you die you can just give it
to your heirs to help them start building wealth.
Number four, I think, the powerful feeling
that you get from hitting your goals consistently
is one that will help give you confidence
and feel like you're actually in control of your money.
Number five, automating your finances will guarantee
that money will get put in the right places.
Us as humans are the worst at making too many decisions.
Have you ever been in the toilet paper aisle? (laughs)
Being able to take some of those decisions off
of our plate will benefit you and I in the long run.
The downsides of financial automation are very minimal.
The upsides greatly outweigh the downsides, but I still want
to make sure that you're aware of those downsides.
Number one, when you want to pay extra money
towards your debts you will still need to do it manually.
Now, this is only the case if the extra money that you put
towards your debt will vary from month to month.
If it won't, then you can just disregard this downside.
Number two, another downside to automating your finances
is that you could lose touch with where your money is going.
Now, this isn't a huge deal when it comes
to investing your money unless you want
to reallocate where it's being invested.
This can be a big deal when it comes to some
of the bills that you have to set to auto-pay.
You'll still want to set a date on your calendar for every,
I'd say, one to three months to review
all of your expenses to make sure that you're not
still paying for a service that you don't use any longer.
Even if you are using a service it's always good
to reevaluate if you actually need it
or not at that point in time.
I know from personal experience
that it can be easy to forget about something
if it's completely automated and never looked at.
The last one is one of the more
annoying things to deal with.
Sometimes there are fees involved
with setting up automatic payments.
When this happens to me I will usually avoid
putting those things on autopilot.
I am not interesting in paying an extra two
to five doll hairs just to automate
my payments since I have a secret workaround.
And that brings us into the manual/automatic type
financial system I use to handle these types of annoyances.
There are going to be times where
a specific technological solution isn't available.
For these you're going to have to take a more
habit-based approach towards automating your finances.
This will come in the form of scheduling and setting aside
an hour per month to take care of your financial life.
For example, I'm able to automatically invest
into the money market account of my IRA.
But since I invest in ETF index funds I need
to manually log into my Vanguard account
to purchase the ETF from the funds
I've contributed into my money market account.
This works out for me since I utilize
a dollar cost averaging approach.
I do this at the same time every single month.
I'll use this blocked out time to tend
to the rest of my personal finance.
I'll pay any bills that I can't put on auto-pay.
And if I had debt, then I'd also use this time
to pay any extra money towards my debts.
If you're following the Debt Free Blueprint method,
then you'll already have one hour per week
set aside to review and update your budget.
So all you have to do is choose one week out of the month
to incorporate this routine of manual automation.
Even if you start out small with
automating your finances that is okay.
If the concept of financial automation
is knew to you, then take it one bill
at a time and one investment at a time.
Once you get used to having one thing automated move on
to adding more until you build out a system
that works best for your personal finances.
We're not performing brain surgery or splitting atoms.
The point of this process is to streamline
and make your finances a little easier to manage.
Sign up to get on the money management course
waiting list, link is in the description.
Make sure to smash that thumbs up button,
and pick up your free copy of the Debt Free Prep Workbook.
Hit that subscribe button and notification bell
to get more personal finance videos just like this one,
so we can start getting you to a point
where you're financially free.
I'll see you in the next one friends, adios.