The Willpower Free Key to Saving
Fab & Fru just came across these Get Out of Debt Tips from Ramit Sethi that are so straight forward and easy to do, we automatically wanted to turn around and share them with you!
Sethi happens to be the best-selling author of I Will Teach You To Be Rich and he says that the trick to saving more is not willpower – but AUTOMATION. Automation is a fundamental key in money management today AND it can also actually increase your credit score. Why? Because with just one missed payment, your credit score can drop as much as 100 points!
Automation also lets you enjoy those small things you love, like lattes or designer jeans (within reason, ladies) while ensuring that your savings account automatically grows each month.
Ramit shares his 5 steps to creating an Automatic Money Flow to managing your finances:
1. List Your Accounts in One Place
To set up your automated system, compile a complete list of all your accounts, their URLs, the logins and passwords. Ramit recommends one password to store this information.
2. Link Your Accounts
Log into each account and link you accounts together to set up automatic transfers from one account to another by using the “Link Accounts,” “Transfer,” or “Set Up Payments” options. Connect your paycheck to your 401(k), so it’s automatically funded each month; your checking account to your savings account, and your checking account to your investment account/Roth IRA. Pay as many bills as you can using your credit card, and link all of your credit card accounts to your checking account so you can pay in full and on time each month. Link all other bills that can’t be paid by credit card, like rent and loans, to your checking account and use the bill-pay feature. The links are free and electronic, but allow three to five days for the accounts to verify the links.
3. Organize & Consolidate Your Billing Dates
You’ll want to reset your billings cycles to create a well-timed Automatic Money Flow. Gather all of your bills and call up the companies to switch your billing dates. Most of these will only take five minutes to do, but once it is done all of your bills will arrive at the same time, and you can now go into your accounts and set up your transfers.
4. Set Up Your Automatic Transfers
Once your accounts are linked together, set up the core of your Automatic Money Flow- automatic transfers and payments. Work with each individual account’s website to make sure your payment or transfer is set up for the amount you want and on the date you want.
5. Tweak the System
You may need to adjust your Automatic Money Flow to match your payment schedule. If you have irregular income, making your accounts automatic could be harder to do, as the amount in your accounts will fluctuate. Decide what you need to live on, and add a savings goal of three months. Once you have saved up for three months, you may start investing your money into other accounts.
Now your money management is on autopilot! Not only are your bills paid automatically and on time, but you’re actually saving and investing money each month. It works without your constant involvement, and it’s flexible enough to add or remove account any time. You’re accumulating money by default – how Fab & Fru is that?!
Ramit is regularly featured in The New York Times and The Wall Street Journal. He has been a regular guest on ABC and has appeared on The Today Show and NPR. He graduated from Stanford with undergraduate and graduate degrees, where he studied technology and psychology. He recently moved from San Francisco to New York City.| Print