I've Been Bad With Money Recently
I feel a bit fraudulent writing this.
This newsletter is a weekly dose of Personal Finance Best Practices.
Lately, I’ve broken most of them.
I haven’t looked at my budget in months and we’ve been buying random stuff for the house non-stop since moving in.
I used to check the Copilot Money app religiously and each month we’d make edits to the super detailed Wealth Planner from Money with Katie.
I wanted to know everything about our money.
But recently we haven’t prioritized that level of detail.
I thought not knowing the details would tank our finances.. Thankfully it did not.
We have a powerful safety net: An Automated Money System.
When you lose focus (or don’t have focus to begin with), money automation keeps you on the right track.
It’s worked for us. Here's how it can work for you.
Don’t let the term Automated Money System stress you out. All it really is are a few features on your bank account. Easy to set up, powerful to use.
Our three areas of automation are:
- Saving
- Debt Management
- Spending Control
Saving
Saving is automating the stuff Dave Ramsey and your mom would want you to do:
I’ve written articles on each of these topics. Together, they make up your financial bulletproof vest.
No matter what life throws at you, money saved in these accounts will be there to help out.
You don’t have to “remember to save” each month, this automation takes money from your bank account and puts it where it needs to go without you lifting a finger.
The next way to stay taken care of is automating the management of your debt..
Debt Management
Even “good debt” like student loans can cripple your finances if you aren’t careful.
You have to automate your debt repayments.
What does that automation look like?
Not sure how much to pay to things like student loans?
A financial advisor or coach can run the numbers. Or start with 10% of your income and refine later.
For your credit cards, your automatic payments should be your total balance.
If you can’t pay off your total balance every single month, take a 12-month break from your credit card.
That sounds drastic, but it will save you from snowballing into more and more debt.
Take the year to pay off your current credit card debt and then reassess if you want one.
Again, this may sound drastic, but in the long-run it’s not.
If you want a judgement-free conversation about your credit card debt, reach out - I’d love to help.
Spending Control
The final step is less automation and more rules-setting.
I’ve spoken to hundreds of people about money. I’ve not once recommended cutting a daily coffee or lunch.
Contrary to what boomers want you to think, discretionary spending on small things is likely not going to make or break your finances.
Plus, managing all the small things is harder and less impactful than managing the big three expenses:
- Where you Live
- What you Drive
- Large One-Offs
Keep your rent below 30% of your monthly income unless you live in a high cost of living area like NYC/SF.
When you’re thinking of buying a home, you should speak to someone like me to get an honest rent vs. buy assessment. The old advice of “buy a house no matter what” just doesn’t hold in today’s economy.
Keep your car payment below 10% of your monthly income and make sure you can put 20% down.
Pick a “Wait to Spend” threshold. When you want to buy something over a set amount (say $200), put it in a note on your phone. The next week, if you still want it, buy it.
Humans are inconsistent and busy.
Money can’t always be top of mind (even for personal finance nerds).
That’s what automation is for. It remains consistent for us.
Want help getting started with money automation?
Let’s talk.
