How to Automate Your Finances (Money on Autopilot!)

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2:50What's up, everybody? Welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be diving into a much requested episode about how to automate your money. If you guys have any questions, make sure you join the MasterMoney newsletter by going to MasterMoney.co slash newsletter. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player.

3:28Now, most people, they think they're bad with money, but what most people don't realize is you are not bad with money. It is not you. It's that you don't have a system in place that is going to allow you to build wealth. And in today's episode, my entire goal is to teach you the money on autopilot system. This is our system on how we completely automate our money. Now in Master Money Academy, we have a bunch of people who started to automate their money and they cannot believe how much less they have to do with their finances just by automating their money. And once you get your dollars working on autopilot, it is incredible how much faster you will build wealth.

4:05Why? There's a number of different reasons that we're going to talk about in this episode, but I am really, really excited for you guys to learn how to automate your money. Once I started to learn how to automate my money very early on in my finance journey, all of a sudden, everything became easier. I was spending less time thinking about did that transfer over to that account. I was spending less time thinking about my bills. I wasn't worried anymore on if my dollars were getting invested or if my bills were getting paid or if I was saving enough money in my emergency fund, I knew how much was going to those accounts every single month.

4:38And the beautiful part about this was I didn't have to do anything. So all you have to do is set up your automation system early. And once you have that set up, then we're going to talk about some things that you can do after to just make sure it is running smoothly. But automation is how you spend less time on your finances and more time on the things that you actually value. Spending time with your family, Spending a hard time earning more money so that you can take those extra dollars and put them towards future you. This is really where I want you prioritizing your time is spending more on the bigger financial decisions.

5:11I don't want you in every single budget category having to worry about every single cent and dollar. No, instead, I want you to automate your money so you can think about the big decisions, your taxes, where you're gonna be living, how you're gonna be allocating your investments, how are you gonna be thinking about earning more money, negotiating your salary. Those are the big ticket items that I really want you to think about. And so you can go through this entire process. And a lot of people, once they start to see money automation, they say to themselves, holy crap, I could automate literally almost everything.

5:40And a lot of people will come back to me and say, oh my gosh, I've been making my finances way too hard. This is so much better overall. And you can get all of this done pretty quickly, actually, over the course of one weekend, if you actually buckle down and set this up. Now, we're going to have a free automation checklist that you can download in the show notes down below. So make sure you check that out because that checklist is a free printable downloadable checklist that is available to each and every single one of you. So, again, we will have that linked up down below in the show notes. Also, at the end of this episode, I'm going to give you some screenshots.

6:13We're going to try something new here. So if you're watching on Spotify or YouTube, I'm going to give you some screenshots that you can utilize and screenshot on your phone. And so you have some extra things to consider. And it's also going to give you a list of items that you should be automating first. So the 12 things that you should automate first, I'm going to have that at the end of this episode so that you can just screenshot it and take it with you and take some action right away at the end of the episode. All right. So if you're ready to automate your money, if you're ready to dive in deeper, without further ado, let's get into it.

6:43So the biggest thing I want everybody to realize today is that automation is a superpower. So your biggest problem isn't your income. it's chaos your finances most likely if you're new to automation are chaotic or you're just spending a lot of time in your finances bills are coming out of three different accounts that is one thing i see a lot of people do where they have multiple accounts that just over complicate their finances random charges are hitting at random time and you have no idea when that is actually going to happen you're trying to pay some of these bills manually some of your bills are on auto pay but a lot of them you are paying manually maybe you're even sending out checks if you're on 1995 still you're try to remember when daycare hits.

7:21You're trying to remember when the next phone bill is going to hit. You're trying to remember when your mortgage hits and you can't keep it all straight. Then you have to transfer money for groceries and then you have to transfer money for items that you forgot to remember. All of this is complete financial chaos and automation removes all of this. It removes those late fees. It removes those money fights with your spouse where you're going back and forth because you forgot to have enough cash on hand in order to pay the electric bill. It It removes the investments and the big opportunities that you're missing out on because you did not automate your investments.

7:52It removes the emotional decision making. So where you're thinking about, man, should I invest these dollars or should I go treat myself? Should I go splurge a little bit? No, it removes that from your equation because you know exactly what you're going to be doing. We're going to set up a plan that allows you to transfer those dollars. It removes guilt. It removes overwhelm. All of these things are why I absolutely love automation. And if you are someone out there, most people hate this word. When I say this word, I see a lot of people cringe. It removes the need to always have to budget. The B word is something most people don't like.

8:26Now, there's gonna be seasons where you're always gonna have to budget. If you are in a season of life where maybe you lost a job. Well, if you lost a job, you're gonna have to budget because you didn't even know where every single dollar was going. But once you get this automation set up and once you get this system in place, you have to budget way less, if not at all, depending on what your income is and how much room you have. And then it also just eliminates procrastination, which most of us are guilty of when it comes to our finances, myself included. And so removing procrastination from your equation is really, really important.

8:57Now, here's the big thing, is willpower is something that is finite, meaning willpower is going to dissolve, it is going to go away. We cannot rely on our willpower, we must rely on our discipline. And so when this happens, most people, when it comes to their finances, are trying as hard as they can to rely on their willpower, and it's impossible. It is absolutely impossible to rely on that. If I relied on my willpower, I would never be where I am today. Automation changes that for you, and you only have to set it up once. So let's dive deeper into what we need to do. Now, I'm going to talk about the first thing you need to do, because we have six steps in this episode that I'm going to talk about.

9:31The checklist that we have for you to download is going to break it down even more. But in these six steps, we're going to go through all of these. So we're going to build our flow account, where our money is going to pass through and flow through. We're going to automate our wealth. We're going to automate our bills. We're going to go through a spending plan and we're going to automate some safety nets as well so that we can preserve some of our wealth as we go through this. And then lastly, at the end, I'm going to give you the 10 minute monthly review that you need to be doing in order to make sure that your automations are running correctly.

9:58So let's get into step one next. So step one is we're going to build our flow through account. So most of you have a flow through account and you just didn't know that that's what we're going to call this today. But this is where everything starts. Every single one of your dollars needs to flow through this account so it can go towards the proper automations. Now, what is this account called? It's called a checking account. And every single one of you has a checking account. But I want you to train your brain to reframe what the checking account is. All this account is, is a place for your money to flow.

10:30So your paycheck is going to hit that checking account and it's going to flow and trickle down to all these other places. This is why typically I keep my checking account pretty lean. The max I tell most people in Master Money Academy to ensure they have in their checking account is right around a month's worth of expenses max. You can have a month and a half if you really want to. If that makes you nervous, it depends on your personal preference. But I don't want you to have more than that in your checking account. Now, some of you may be saying, man, I'm just trying to get by. I barely have enough money in my checking account.

11:01And others may be saying, well, I have$100 ,000 in my checking account. Why do I have so much? Let's talk about this. You need to make sure that you're running this thing lean because we want to optimize where our dollars are going. We want to put them in the best possible places. And in order to do that, it needs to flow out of our checking account. A checking account is a terrible place to hold your money. Unless you have a high interest checking account, you really don't earn any money in your checking account. And a lot of times it gets commingled in there and people just end up spending those dollars that are already in their checking account.

11:29Most of you are listening right now, nodding your head, noting that a lot of times if you have money in your checking account, you know, hey, I go on those target runs and I spend that money. Or hey, I just went over to Dick's Sporting Goods and bought myself a brand new driver because I had enough money in my checking account. That's what happens to a lot of people. And instead, what you need to make sure that you are doing is moving that money into places that it needs to go. So I like having around a month, a month is gonna give you enough buffer where anything could happen and you still have enough cash on hand in your checking account.

11:59If you wanna run it leaner, if you're really on top of your finances, you absolutely can, but you gotta make sure that there's no surprises and nothing jumps out at you. So this is where all your income lands and this is where all your automations are gonna flow from. So you can think of your money automation system as a waterfall. This is the top of the waterfall before everything kind of flows down and trickles down into all the other places. It's gonna pull some of your bills. It's gonna pull some of your transfers and flow through. All of those different areas so it's not scattered across a bunch of different accounts.

12:28Now, if you're a couple or you're in a relationship, then finding ways to build up, even if you keep your finances separate. Now, I'm a big proponent of having combined finances, but some people just do not want to do that. And it's personal preference. If you don't want to do that, whatever your reason is, personal finance is personal. And so if you do not want to have combined finances, what I would say is at least have a combined checking account where you transfer your bill payments into that one combined checking account. Because it's going to allow you to ensure that you can at least get your bills paid together so you're not Venmo-ing each other back and forth.

13:00Money automation doesn't work when you are Venmo-ing your spouse back and forth. And so I want you to make sure that instead you have your either finances combined, number one, and or if you don't want to do that, you at least have a combined check-in account that you pay your bills out of. Got it? Perfect. So that's what we're going to talk through here. We don't want any more chaos in our life. And so this pass-through account is going to be the starting point. Now, where do I have a check-in account? You can go to your local brick and mortar bank if you want to. Mine's at Chase just because it's the closest bank to my house.

13:27That's literally the only reason I am not a big proponent of brick and mortar banks. Credit unions are also great, but I want ease of access. That's the only reason why I have it at Chase, because if I have to go get cash for something or if I just have to make a deposit really quickly, I can do it and it's close because I know it's going to take me an extra week if the bank is farther away. And so that's the reason why I keep mine at Chase, but you can keep yours wherever you want to. It's all up to you. Now, step two is we are going to be talking about the most important thing that we can do with our dollars.

13:58And what is that? We can find a place to grow our wealth. And so when we do this, we want to automate our money, automate our wealth, so we don't have to think about it anymore. Now, my friends, we are living in the 2020s right now, meaning that we have a beautiful thing available to us that allows us to automatically build wealth without even having to think about it. And so I'm going to talk about this today, but you need to make sure that you are automating your investments. So your investments are the number one way to build wealth. It is the only way that you will ever be able to retire. And so you got to make sure that you are automatically investing every week, every month, bi-monthly, whenever you set up the cadence.

14:37And so the cool thing about this is, is we're going to talk about this, but you can set up automatic transfers to Vanguard or Fidelity and you can automatically invest. In fact, Fidelity has been able to do this for a while. And Vanguard is now able to do this where you can literally automatically invest directly from your checking accounts into your brokerage accounts or whatever other retirement accounts that you have set up. So you don't even have to think about buying the investment. Instead, you can automatically buy investments directly from your checking account. And so here's the thing I want you to think about.

15:07When money hits my checking account, I want to pay myself first. You always pay yourself first, then spend what is left over. And so we want to make sure our dollars are getting invested and paying ourselves first. This is why this is the most important step and the first thing that you need to be doing. Now, you may be saying to yourself, well, which order should I be automating my money? Well, I'm glad you asked. And it depends on each and every single person. But here is the order of operations of how I would think about automating my dollars. Number one is getting your employer match. We know your employer match is free money.

15:38And every single person out there, if you are not getting your employer match, you need to make sure that you are getting it. Go to your HR department, look at your employee handbook and see what your match is. Take advantage of your employer match. It is free money. I love free money. I don't know about you, but I love free money. In fact, free is my favorite number. And so because of this, we want to make sure that we are getting that free money from our employer. They're trying to help you out there. And in fact, if you get your employer match every single year, even if it's a modest two to 3%, it will change your retirement over the course of 30 years by well over six figures.

16:11And I've seen a lot of times, if the match is higher, you can have a million dollar difference in your portfolio just by getting that employer match. You got to make sure that you are getting it if you are not already. Number two is if you have a high deductible health plan, you could take advantage of the HSA. So the HSA has triple tax advantages. And I like using it as a retirement account. So money goes in tax free, it can grow tax free, and you could pull the money out tax free as long as you have a qualified medical expense. We will link down below in the show notes our entire episode about the HSA, because this is a really powerful account that you need to take advantage of.

16:45Number three is the Roth IRA. So for a lot of folks out there, a Roth IRA or a traditional IRA, if you're going to do a backdoor Roth IRA, is a fantastic account for most people. Why? Because money goes in that's already been taxed. So your paycheck was already taxed. It grows tax-free and you could pull the money out tax-free. Number four is your 401k. So your 401k, typically the money from your 401k is going to go from your paycheck. So you don't even have to move it from your checking account. It's gonna come from your paycheck already. So how many of you out there have a 401k and you went and never looked at it because you didn't think about your finances and maybe you were working throughout your 20s and somebody told you, maybe an uncle, maybe your parents told you, hey, you gotta contribute to your 401k and make sure you're getting some dollars in there.

17:28And so you start to invest your money in your 401k, but you didn't look at it again. You just let those dollars go into your 401k and get invested. And it grew over time. And all of a sudden you opened up your 401k and you said, holy cow, I got way more money in there than I ever thought I did. Welcome to the magic of automation. This is what money automation does. It allows you to build wealth without having to think about it. And your 401k is the clear example that most of you have experienced that allows you to automate your money and build wealth automatically. I can't stress this enough. This is a really, really important step that most people need to note.

18:02And so your 401k is a great example. And that would be number four. Number five is your taxable account. So for most people out there, and I am starting to prioritize a taxable more and more and more because of flexibility, this is by far the most flexible account that you have out there. And so for people who wanna retire early, a lot of my audience does. For people who want to go out there and have additional flexibility when they retire, the taxable account is absolutely fantastic for that. And we probably need to do an updated deep dive on the taxable account and some of the cool things that you can do with it now in the next coming year because there's some new laws and updates that allow this to be even a more tax advantage account.

18:38And then number six is any other goals that you have a 529 plan for your kids, maybe your kids investing accounts. Those are gonna be the things that are last. Those come at the end. And the reason for that is you need to take care of your retirement first and then everything else comes into play. Too many people out there I'm seeing, there are way too many people out there that I am seeing investing in a 529 before their retirement. Do not do that. I know you wanna put your kids first. I get it. But guess what? You're going to be a huge burden to your kids when you need long-term care or you need some help and they have to financially support you and your long-term care because you did not put a retirement plan in place.

19:14You do not want to be a burden to your kids. You got to make sure that you contribute to your retirement first, then your kids come next. Understand? This is very, very important. There are no loans for retirement. And so you got to make sure that your retirement comes first before everything else. Now, step three, we're going to talk about those pesky things that none of us like to pay, which is our bills. Summer's right around the corner, and this is the time of year where I want to be planning trips, not stressing if we can afford them. And the goal is to actually enjoy the summer, knowing everything with our money is already handled.

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