With the proliferation of mobile and smartphone apps, it’s easier than ever to automate your finances. It can include automatic savings or automatic payment of debts, which is very valuable from a behavioral point of view. You’re more likely to stick with something if it’s done automatically in the background – completely out of sight and out of mind.
The biggest hurdle to automating your finances is getting the process started, so don’t hesitate to start the process to make sure you stay on track with your financial goals in the new year.
Here are seven ways to keep track of your finances and quickly track your goals.
Subscribe to Kiplinger’s Personal Finance
Be a smarter and smarter investor.
Save up to 74%
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with Kiplinger’s best advice on investing, taxes, retirement, personal finance and more – straight to your inbox.
Profit and prosper with the best Kiplinger expert advice – straight to your inbox.
1. Build an automatic database.
Since having savings is important, both for emergencies and for the long term for retirement, the first step you should take is to determine how much you want to save in your “bucket.” ” every month. You can put $100 in savings and then contribute more towards retirement.
As a general rule, it’s a good idea to have at least three months of expenses in savings, or six months if you want to be more conservative. When you translate that into dollars, many banking apps allow you to set savings goals and then set up automatic transfers to meet them and track progress. The app will help you stay on track or make adjustments as needed if you fall.
2. Make regular payments automatic.
You may have already taken this step at some point in your life. Automating all your payments is key to a stress-free financial game plan. This includes your house or rent payments, full credit card payments, car and cell phone payments, bills or other regular bills you have.
If it’s available in your business, you should invest directly in your salary as well.
Doing all this ensures that you won’t pay late fees or stress about deadlines. Additionally, this process should include turning off all automatic payments and removing those you no longer want, such as streaming services you no longer use.
3. Pay your future.
If your employer offers a company-sponsored retirement plan such as a 401(k), you should contribute a percentage of your salary to your pension, especially if your employer offers a matching contribution. . If they match the first 3% of your contributions, you’ll earn 6% of your 401(k) while you defer 3% of your pay. This is a 100% profit of putting your own money in stocks.
If you don’t have an employer savings plan, you can open an IRA (individual retirement account) with a brokerage firm and contribute to it. You can contribute $6,500 for 2023 (or $7,500 if you’re over 50) if you’ve earned up to that amount.
Like a 401(k), you can set up automatic monthly transfers from your bank to an IRA account. Instead of the money coming out of your paycheck, it will just come out of your bank account.
4. Consider how your 401(k) grows each year.
Your 401(k) plan may offer an annual increase feature, which allows you to schedule an automatic increase in your annual withdrawal rate. This means that if you’re saving 3% of your paycheck into your 401(k) right now, you can plan for that 1 percent growth rate by the end of the calendar year. each, so that in two years you will automatically save 4. %. In the third year, your deferral rate will be 5% and so on, usually up to the limit.
If you eventually max out your salary deferrals ($22,500 for 2023, or $30,000 if you’re over 50), you’re well on your way to a healthy retirement.
The IRS will adjust 401(k) contribution limits for inflation next year, so set a reminder in your app of choice by the end of December each calendar year. to reset the limit next year and adjust your deferral to take advantage of the higher limit. . This allows you to spread your contributions over the season and not miss any contributions that may be appropriate for the employer.
5. Make sure you get a good rate on your money.
An increase in interest rates also means an increase in interest rates on high-interest savings accounts. It’s easy to find accounts with APYs of 3% or more. A bit more attractive than a year ago.
Sure, the 3% rate may not keep up with today’s inflation, but it’s still more attractive than putting your money in a regular checking account that earns 0%.
Most big brick and mortar banks still don’t charge you money into your checking account, so it’s worth the time to investigate an online savings account. They are available from many banks and online credit card companies, and are fully FDIC insured (opens in a new tab) and usually charge zero or nominal fees.
These accounts can usually be opened online or through a mobile app and are easy to do online. If you already have a credit card with Capital One or American Express, for example, you can take advantage of their checking account.
If you already have their mobile app on your phone, it’s very easy to set up automatic monthly transfers into your savings account. Once this transfer is done, you will build your savings and get a better rate of return on your money.
Be sure to check rates to make sure you’re getting the best rate, as they change frequently.
Money management platforms like MaxMyInterest (opens in a new tab)StoneCastle (opens in a new tab) and Flourish (opens in a new tab) can help automate this process.
Sites like Bankrate (opens in a new tab) will help you compare the rates in different banks if you want to choose one yourself.
If you’ve maxed out your retirement contributions up to the account limit and your emergency savings are at an adequate level (you don’t want to have too much cash value, because you will achieve a lower return during your lifetime) , you can always add additional savings to taxable investments.
The money you invest in taxable investments can achieve a higher return, if invested wisely, than money to help your money outpace inflation over the long term, and is not subject to the limits of participation. You can easily set up automatic transfers to investment accounts, as well as purchase orders for selected investments (ie, mutual funds) with your income. For example, you can buy $200 in S&P 500 stocks with monthly contributions, which is a great way to get into the market.
7. Make your loan payments automatic.
Just like savings, you can also keep track of your debt payments. If you have a loan or debt with a payment plan, you can arrange monthly payments with the bank. If you have credit card debt or loans with higher interest rates, it usually makes sense to send the higher payments to the debts with the highest interest rates first so that to include lower fees. If possible (and this window may be closed), you may be able to get 0% financing on certain purchases.
Between family and work, life can be busy, and free time is best spent doing things we love. By automating our financial processes, we can reduce stress and ensure we are on track to meet our financial goals.
These tips will help you get started in the right direction, but for more advanced questions about savings and debt repayment strategies, a financial advisor can help.
As we head into another new year, rather than letting your summer savings goals lapse, spending time now to automate your savings and bill payments is will ensure you stay on track.
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment advisor located in Long Beach, California. Registration does not imply competence or training. Additional information about HH, including enrollment status, fees and services, is available at www.halberthargrove.com. This blog is for informational purposes only and should not be construed as personal investment advice. It should not be construed as a solicitation to offer specific financial transactions or to provide specific investment advice. The information provided does not constitute legal, tax or accounting advice. We advise you to seek the advice of a lawyer and accountant.
This article was written by and represents the opinion of our contributing advisors, not the Kiplinger editorial staff. You can see the SEC rate in the chart if you are close to the selected date (opens in a new tab) or with FINRA (opens in a new tab).
