Did you know that the average adult is faced with more than 35,000 decisions each day?[1] Now that you know, you can give yourself a little break if you feel burnt out occasionally. Inevitably, some of those decisions that have to be made deal with money. Often, when we are faced with money decisions, we get stuck. Either we don’t feel educated enough, we don’t have time, or we just procrastinate. Other times we make decisions quickly and the consequences may haunt us later (like that impulse buy that is still on a credit card from a few months ago). Whether you feel confident with money decisions or not, a simple way to make sure that you get and stay on track to reach your financial goals is to try and reduce the amount of money decisions that you have to make regularly. The easiest way to do this is to automate.
How to automate
When it comes to your money decisions, automation means setting up automatic
contributions or payments toward your goals. The process of automation means that you only have to make the decision once, then you let it go. Occasionally, you need to check in on your progress and update the automated payment as your circumstances change, but more or less you set it up and let it work.
Often, I recommend automating debt payments and savings or investment contributions. This process takes some planning at first to determine what amounts to start with. Once you have settled on an amount, you set up automatic contributions to a savings or investment account and get started.
1. If possible, automate by deducting out of your payroll.
2. Try automating by setting up automatic transfers from your bank account.
3. I recommend setting up transfers in the same period that you are paid. Example: If you are paid monthly, set up a monthly transfer. This way you are paying yourself each time you get paid.
Start small…It adds up
It helps to break up large goals into small parts. Putting some money each day toward your financial goals can make a huge difference! Consider the chart below which shows that $15 per day over 40 years could build well over a million dollars. If you mentally had to set aside the $15 dollars each day, most likely it would never get done. However, if you set up an automatic contribution of $450 per month ($15 x 30 days) into your investment account you would quickly start seeing your account build toward your goals.
At first, setting up the contribution may feel daunting. You may feel like it will cramp your budget or you may be tempted with other ways to use the money. Each situation is different. Start with an amount that is affordable, but also slightly uncomfortable and get started. I have found that we are quick to adjust when money is automatically deducted for our goals.
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Removing scarcity
Sometimes, I find it can be difficult to get started with an automated system, because we worry that we won’t have enough money for other things. Most of us are used to a system where we make money, spend it and then try to save what is left over. This type of method comes from a mentality of scarcity. Our thoughts follow the thinking that we need to use money while we have it and it almost never leaves anything for us to actually save.
Scarcity mentality can come from experiences that we have had with money in the past or environments that have taught us to think like this. If you are dealing with these types of thoughts, it often helps to pause and observe the thoughts and evaluate if they make sense. Shifting to an abundant mentality involves the belief that your money will flow to you as needed and that smart money decisions will lead to accomplishing your needs and goals.
Of course, some wise people have said that belief means nothing without actions. Setting up automated contributions toward your goals puts your abundant mentality to work. This process makes sure that when you make money, you save first and then spend what is left over. When you follow this method, everything typically falls in order. You start creating abundance which leads to more abundance.
Get started
Don’t wait to put this into action. It is important to just get started. As you build toward your goals and you feel more and more comfortable, you should adjust your automated contributions. The key to progress is consistency. Let us know if you need help getting started!
Also, if you need some tools to help you get started, download your Balanced Money Toolkit here.
Centered Financial, LLC is a registered investment adviser offering advisory services in the State of California, Utah, Texas and in other jurisdictions where exempted. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques, strategies, or investments discussed are suitable for all investors or will yield positive outcomes. To determine which strategies or investment(s) may be appropriate for you, consult your financial adviser prior to investing. Any discussion of strategies related to tax or legal planning is general and is not intended as tax or legal advice. Please consult appropriate tax and legal professionals for recommendations pertaining to your specific situation.