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Episode: 287 - Automate Your Budget: 7 Simple Steps for Stress-Free Finances

One of the most common questions I hear from beginners is how to better manage their finances. Questions like, "How do I budget?" "How do I get out of debt?" or "How do I save for emergencies?" often top the list. The more you can simplify your financial management, the better chance you have of successfully executing your plan and sticking with it. By focusing on a few key steps, you can begin automating your finances and make managing money much easier. 

 

 

Understanding the Basics of Financial Automation 

In a recent podcast, I explored nine financial principles that everyone should follow. By automating certain aspects of your finances, you can implement three of these principles right away: 

  1. Have a Plan for Everything: Set a clear financial roadmap. 
  2. Protect Yourself from Your Own Financial Mistakes: Often, we’re our own worst enemy. 
  3. Let Banks Work for You: Make sure you’re not working for them. 

These strategies will also help you prioritize paying yourself first, which is essential for financial success. 

Step 1: Identify a Bill for Automation 

Start by automating a bill with a consistent monthly payment. It’s best to avoid complex payments like rent, mortgages, or credit cards at first. Instead, focus on bills such as your electric or gas bill, especially if you’re on a level billing plan. 

Step 2: Prepare for Automatic Payments 

Log into or create an online account with the billing company to set up payments. Most companies offer options like debit cards, electronic fund transfers (EFT), or ACH payments. To stay on track with your financial goals, avoid using credit cards. 

Step 3: Set Up Direct Deposit Splits 

Check with your employer or HR department to see if you can split your paycheck into multiple accounts. This allows you to allocate funds automatically between your main account and a new one. 

Step 4: Calculate Your Payment Amount 

To ensure smooth payments, divide your bill by the number of paychecks you receive each month. Round the amount up to the nearest five or ten dollars to create a buffer, so your account never hits zero or negative balances. 

Step 5: Open a New Checking Account 

Open a free checking account at a different bank to handle your automated payments. No fees! Make sure the account you choose has no monthly maintenance fees, no minimum balance requirements, and no hidden charges. Avoid ordering checks, and only get a debit card if absolutely necessary. This account should be dedicated solely to paying bills, helping you make the banks work for you, without costing you a dime. 

Step 6: Redirect a Portion of Your Paycheck 

Coordinate with your employer to direct deposit the calculated amount into the new account, ensuring that funds are ready for your automatic payments each month. 

Step 7: Set Up Automatic Payments 

Once your new account is funded, go back to your billing account and set up automatic payments using EFT or ACH. Make sure the payment schedule aligns with when the funds will be available to avoid overdrafts. 

Enjoy the Benefits 

Automating one bill simplifies your financial life and helps you avoid unnecessary spending. As you get more comfortable, you can automate additional bills or set up automatic savings for emergencies or vacations. By letting automation handle some of the financial workload, you ensure timely payments and reduce stress, while staying on track toward financial stability. 

Automation isn't just about paying bills—it’s about reclaiming control over your finances and simplifying decisions. Start with one bill today, and experience the peace of mind that comes from a more organized, automated financial life. 

Resources Mentioned

Get better results with your finances in 30-60 days - GUARANTEED. Watch this video to learn how! - https://www.debtfreedad.com/payoff-debt-in-60-to-90-days 

Free Tools and Downloads at www.debtfreedad.com

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Transcript: 

Chris HawkinsHost
00:00
One of the most common questions that I hear from beginners is how do I fill in the blank? And what I mean by that is, you may say, how do I budget? How do I get out of debt? How do I keep from spending too much money at the grocery store? Hey, how do you save for emergencies? Well, when you're learning how to better manage your finances, the more you can simplify something, the better chance you have of executing and sticking with it. Today, I want to walk you through a few simple steps that you can implement to help simplify your life and to help you begin to learn the power of automating your financial life. Begin to learn the power of automating your financial life.
00:55
This is the Debt-Free Dad podcast, where we help normal, everyday people like you take control of your finances so you can live a happier, less stressful life. My name is Chris Hawkins and I will be your host for today's episode. From 2005 to 2008, my wife and I paid off just under $100,000 in debt and have been debt-free, except for our house, for over 15 years. In a recent podcast episode, I shared with you the nine financial principles that I believe everyone should follow, and of those today, I want to walk you through a system that can immediately help you with three of those, and maybe even, down the road, a fourth. So what are those three financial principles? Well, number one have a plan for everything. Number two protect yourself from your own worst financial enemy, which is yourself. And three let banks work for you. You don't work for banks. If you'll implement this quick system that I'm going to share with you, eventually you can use this technique to begin paying yourself first, which is another of the nine financial principles. So what I want to do is share with you a way that you can automate your decision making, that you can put some stuff on automatic pilot, and when you can do that, a it reduces the number of decisions that you must make. B, it makes things happen automatically so you don't have to remember to do it. You can't forget to do it. And C, it really just. It makes your budgeting simpler. It protects yourself, as I mentioned, from your own worst financial enemy, which is yourself. And so let's start real quick with a few steps, and there's going to be seven of these steps here.
02:51
The first thing I want you to do is look at your budget and identify one bill, just one. Let's start this off really simple, really easy. Pick a bill that has the same amount due every month and for now, I do not want you to choose your rent. Don't choose your mortgage, right, because the dollar amounts are much bigger. I want to keep this simple to begin with. Also, do not pick your credit cards, and typically they don't have the same payment every month anyway. And the reason I don't want you to pick a credit card is because we're going to work to pay that off as fast as possible and it's a little bit more difficult to do when you've automated things. So for right now, let's don't pick a credit card and for the same reason, ideally don't pick your car loan or one of your car loans.
03:41
Again, when we automate, we want to kind of take things and make it just happen without having us tell it to do it. And if we're going to try to pay our credit cards off early and our car loan off early, we're going to want to vary how much we're paying every month on those bills. So let's pick something simple. One thing maybe it's an electric bill, a water bill or a gas bill. One thing maybe it's an electric bill, a water bill or a gas bill. If you're on a levelized billing plan, meaning you've worked out with the electric company that, even though the amount you use changes every month, what they're going to bill you does not Okay. So it can be electric bill, a water bill, gas bill, maybe your home phone, cell phone Internet bill, bill, gas bill, maybe your home phone, cell phone, internet bill, maybe it's tuition for private school or maybe it's the daycare tuition anything that has the same amount due every month.
04:35
And then the step number two, once you've identified one thing, that's it. One thing is to log into or create an online profile with that company. Most all companies now have some way to pay a bill online. And once you're logged in, look for the automatic payment section and look for what forms of payment do they accept. Most all are going to accept a debit card. Many more will also accept an electronic funds transfer or an ACH payment, which, in essence, both of those act like a check. So identify whether they accept one or more payment methods.
05:15
And I want you to exclude credit cards, because if you've been in this program, you know our goal is we want to help you get out of debt and we want to help you stop using your credit cards. So write down. Do they accept a debit card? Do they accept electronic fund transfers, ach payments and, as a last resort, checks? Okay, I want you to write these down because it's going to become important later. All right, now you can do these two steps in one evening. Shouldn't take you very long. So, again, we're keeping things simple here.
05:49
Step three is go into your HR department or, if you happen to work for a very small business, your boss, or maybe even log into your payroll service website or, if they have an app, log into it. So, for example, I own a very small business. I have a handful of employees, including myself. I use an online tool called Gusto as my payment provider, and so they have the ability to log onto their website or to use an app. Okay, so what you want to do is ask your HR department or the payroll service website that they use, or the app, how many different accounts that you can have your paycheck direct deposited into? Okay, all right, ask also for future reference what types of accounts can you have your check deposited into? So, obviously, checking accounts one, but can your company or your business or your boss direct deposit money into a savings account, a brokerage account, a retirement account, a brokerage account, a retirement account? Again, you're not going to use those right now, but it would be nice to know for future reference.
07:11
Now, assuming this is a big assumption that you can have your check split into two or more accounts. So, for example, I can have some of my paycheck go into my main checking account and some of my check go into another checking account. Assuming you can have your check split into two or more accounts, inquire what steps you have to do in order to have some of your paycheck go to one checking account and the rest go into another. So again, I know, using the Gusto app, my employees can go in, they can set up well over two accounts and they can dictate how much money or what percentage of their paycheck goes into each of those accounts, and they can do it themselves. In fact, it doesn't even involve me. If they ask me how to do it. I simply show them in the app where to go. Now, again, you can do that today, and if you're listening on the way to work in the morning or maybe you're at lunchtime, you can do it before you leave, or, at worst case, ask your boss tomorrow, or, if it's the weekend, ask on Monday.
08:13
The point I'm trying to make is so far, none of this should be overly difficult. Okay, step number four is let's go back to that bill, that monthly bill that has the same amount every month. I want you to take that amount and I want you to divide it by the number of paychecks that you get each month. So if you're paid twice a month or every two weeks, you're going to divide by two. If you get paid weekly, divide by four. And if you get paid monthly, obviously well, you're going to divide by one. So you're going to divide by one. And so you're going to get an answer and I want you to take that number and I want you to round up to the nearest $5, or, if it happens to end exactly in 5 or 0, I want you to add another $5. Okay, now this is going to be used to create sort of a buffer and so that your checking account doesn't ever go down to a zero balance. We don't want to risk it going to zero or even negative. So you're creating a little bit of a buffer here. You can even feel free to increase it by $10 or to the next you know closest $10. So let me give you an example If your bill is $121 a month and you get paid twice a month, bill is $121 a month and you get paid twice a month, well, dividing 121 by two is going to give you $60.50. So you would round up to $65. Okay, see how that works. So you're going to need this number in the next few steps. So you're going to need it a couple times. And again, this is a step that you can do very quickly. I mean calculator vision and by the end of the day, you've got maybe one, two, three or even all four steps done.
09:55
All right, now that you've got this information, it's time for some action. Step five is to go to a different bank than you use for your main checking, ideally as far away as you can get it. That way you are not tempted to go there and get money out of the account. So, open a bank account, a checking account, at a different bank. You can even choose an online bank. Okay, when you open the account, deposit the amount that you calculated in the previous step. So it was $65 in the example that I gave, deposit $65. Now, if you know that the bills can be due, say, in the next couple weeks, you might want to go ahead and deposit the full amount. In this case it would be 130. Because, remember, I rounded up to $65, two paychecks a month, that would be $130. And deposit that when you open the account. Now, make sure the account is going to be free as long as you have direct deposit.
10:57
Do not, do not, do not pay a monthly fee for this account. Remember, we're letting banks work for us. We don't work for banks. If they're going to charge you a fee, even with direct deposit, go to another bank. Find somebody who will give you a free account. They exist Now. Do not. Do not. Do not order checks.
11:18
And if the bill that you identified way back in the first step will take an EFT, electronic funds transfer or an ACH payment, you do not need to get a debit card. Only get a debit card if that's the only way they will let you set up automatic payments. The reason is is I don't want you to have another debit card at another temptation. The idea is, we want to protect ourselves from our own worst financial enemy, which is ourself, and if we don't have checks and we don't have a debit card, we can't spend the money in that account without going to that bank and removing the money, and that's why it's important to have it as far away as you possibly can. So only get the debit card only if that's the only way to set up the automatic payment, and make sure that you get the routing number for the account, the account number, so that you can set up the direct deposit and set up the automatic payment. So, step number six work with your employer to begin with your next paycheck having that amount in this case the $65 in my example deposited into your new checking account. Now you may have to complete a form. Your boss or your employer, your HR department, can give you that. Or, as I mentioned earlier, my employees can simply log into their app, or maybe you can log into your payroll portal and set that up. Okay, the idea of me being I want $65 to go into this checking account and the rest to go into my main account. I hope you're following along with this and, again, that's why you're gonna need the routing number and the account number to set this up.
13:00
And then the seventh and final step is to log back into the online portal for your bill. So let's say it's the electric company, log back in. You already know what forms of payment they will accept, because you looked this up a few steps earlier, and you're going to set up the automatic payment, ideally using the ACH or electronic funds transfer, which is where that routing number and account number come in handy. Okay, as a worst case scenario again, if they only accept debit cards, then that's where the debit card would become important. But only do this once you know that you're going to have enough money in the account. So don't set up an automatic payment for two days from now and knowing that you're not going to have the full amount in there unless you deposited the full amount in there, unless you deposited the full amount when you open the account. I hope that makes sense. So it's going to take a little bit of massaging to work this out.
13:54
So now that you have automated the payment of one bill without the money coming into your main checking account, you've made your life a little easier. You see, you can't spend the electric money on something else. Why? Because it never went into your main account. All right, and once you get the hang of this, you can modify your direct deposit. You can go back to your boss, or go back into the payroll portal or the app and just change the amount that you want going into that a second account, and that way you can then maybe add the water bill, maybe then you can add a cell phone, anything like that.

14:34
Okay, and the idea is now your employer is doing part of the work for you. You're protecting yourself from your own worst financial enemy. They are taking part of your paycheck and putting it into a second account, and then you are using that second account to create automatic payments for, initially, one bill, but ideally, down the road, a second, a third, a fourth and so forth, and in this regard, you're using the bank as a resource, but you're not paying for it. Hence, let banks work for you. You don't work for banks and you are protecting yourself from your own worst financial enemy. Why? Because you never see the money, it never goes into your main account, it goes somewhere else that you can't get to easily and that your bills your electric bill or your water bill, your cell phone bill, your internet, et cetera they are automatically pulling money out of that account to pay the bill, and that has a result of making your life simple, easier.
15:39
It even makes budgeting easier. Okay, some people can just now budget based on the money that's going into their main account, and the idea here is the more you can automate things, the more you make things simpler. And the more you make things simpler, the easier it is to execute. And the cool thing about this is you can always add a third account, possibly maybe a savings account, and now you're going to have your employer put some money into that second checking account, some money into the savings account ooh, for emergency funds, or maybe vacation savings or sinking funds, and maybe even down the road you can have your employer put money in a retirement account. That's why it's important to know can they put money in a brokerage account or a retirement account?
16:27
All of these are examples, whether it's emergency funds, savings in a savings account, vacation savings, sinking funds, retirement funds. These are all examples of paying yourself first, which is that fourth principle. And the more that you can take the decision making out of your hands, the more you can automate things, the more simpler it is, the more things just happen on their own and it makes your execution much, much easier. So the more that you can master this, the less money that's deposited into your main account right, the more you are sure that your bills are going to get paid all without you having to do anything, and, in fact, you're going to end up doing less due to you automating your life. So I want you to give this a try with one simple bill and start to enjoy a simpler and more automated financial life.

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