Auto-Budgeting: Automatic Transfers, Direct Deposit, Automatic Bill Payments
Let's talk about the basics of what's known as "auto-budgeting". If you're unfamiliar with this concept, it means setting up your financial accounts to do your budgeting, saving and bill payments automatically. This can save you a lot of time and stress, and make paying bills, saving money and investing a lot easier. It basically puts your finances on autopilot. There are three main ways to set up your automatic budget, they are automatic transfers, direct deposit, and automatic bill payments.
With automatic transfers, how it works is you set up a weekly, bi-weekly or monthly transfer of money from, say, your checking account to your savings account. Or, you can set it up to go from your savings account to your brokerage account. Many combinations work for automatic transfers. Your money will automatically be directed where and how frequently you set it up to. This goes along with the idea of "paying yourself first", you act like it's a bill that you have to pay and you set it up to be paid automatically. With automatic transfers, you do not have to remember or make the effort to transfer money to savings or investments. The only thing you must be aware of is to keep enough money in your account for the automatic transfer to complete.
Another way you could set up your money to be automatically budgeted is to set up your direct deposit from your job to go to multiple accounts. Most jobs allow your money to go to at least 2 accounts, split as either a percentage, or as a specific dollar amount with the remainder being directed elsewhere. For example, one way to do it is to have a specific dollar amount of enough to cover your expenses go into your checking account, and the remainder go into your savings and/or brokerage account. Be aware that if your hours and the amount you get paid is variable every paycheck, you must have enough to cover the amount going into your checking account before any will be directed to a savings or brokerage account. Or, you can set it up as a percentage, where for example 70% goes to checking and 30% into a savings or brokerage account. Or all three accounts if your job allows. This is a good way to set up budgets such as the 50/30/20 budget, though we won't get into the details of that in this article. With direct deposit set up right, like automatic transfers, you don't have to think about or make the effort to save and invest your money. It can also keep you from overspending on impulse purchases, because you'd have to make the extra effort to take extra money out.
The last method of auto-budgeting that we're going to talk about is automatic bill payments. By setting up your bills such as your internet bill to be paid automatically from your checking account, you don't have to deal with writing checks, sending letters, waiting for the check to clear, worrying about bills getting lost in the mail, late payments, etc. The money just comes out of your checking account automatically without you having to do anything. However, as with automatic transfers, you must make sure you keep enough money in your checking account to cover the amount of all your bills. If you can do that, automatic bill payments is a great tool for you.
So those are the three ways to set up an automatic budget. You can set up automatic transfers into savings/investments, you can set up your direct deposit from work to go into multiple accounts, and you can have your bills paid from your checking account automatically. I highly recommend doing any or all of these in a way that works for you. I hope you enjoyed this article, and that you learned something that you can apply in your life. If so, please check out my other articles, and please also consider checking out Prosperfessional elsewhere online at:
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