It’s always interesting when clients come to us with the following situation:
They have saved quite a bit in their retirement accounts through work (either their 401k or 403b), but their finances are in slight disarray. Often, they may have an IRA of some sort that had been set up at a brokerage, but the IRA was never fully funded. In addition, they don’t have much saved in their emergency fund and they may have some debt, or worse, late charges on their credit report.
At first I wondered how people are able to save so much in their company retirement plan, yet everything else is all fouled up. The only explanation I can come up with is the power of auto pilot.
The automatic deductions from a paycheck into the retirement plan have been their saving grace.
Now, let’s take a look at how to get everything on auto pilot
Credit Cards
Most banks offer auto pay for their credit cards, but often the only option is to pay the minimum payment. Mrs. Frugal and I pay off our credit cards each month (with the exception of a couple that have very low interest rates). So I use a free email reminder service to tell me when to pay the card. The one I use is called Memo to Me.
After setting up an account, you are able to set up reminder emails on a daily, weekly, every x weeks, monthly, or annually basis. I am reminded on the 22nd of each month to pay off my cards via email.
Saving
Mrs. Frugal and I have set up automatic deposits into our ING Orange Savings account. These, too, can be set up on a specific frequency (weekly, bi-weekly, or monthly).
ING has a nice feature. You are able to set up several accounts under the same login and name them whatever you want. We have several accounts (auto, travel, gifts, emergency fund) that are funded based on our budget. Since auto expenses, gifts (especially around Christmas), and travel expenses are irregular.
In order to set up extra accounts:
- Log in to your account.
- Go to “Open an Account” on the left near the top.
- Choose “Open Now” under “Orange Savings Account” (near the top left of the main part of the page).
- Select the type of account you want to set up.
- Give it a nickname (auto, gifts, etc.) and define how you want to fund it (you can select either an external account or another ING account).
- Agree to the terms and condition and click “Open Account.”
In order to set up automatic deposits:
- Click “Transfer Money.”
- Enter the amount you want transferred.
- Select where the money comes from and into what account you want it deposited.
- Under “When” select “Automatic Savings Plan.”
- Then define the frequency and when you want the deposits to start.
- Click “Transfer” and the deposits will begin on the date you defined.
This needs to be done for each account you want to deposit into.
By paying your credit card bills and saving automatically, you will soon be on your way to having some control in your financial life.