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Do you consciously eat breakfast, brush teeth, or even sleep?
Probably no!!
These are daily actions you perform in your subconscious mind because you’re habitual. The absence of these essential habits will have you thinking about whether you should perform them or not.
The same concept of habit applies when saving money. When you inculcate these habits in your everyday finances, you end up prioritizing your future selves. But, developing these habits is a daunting task.
What’s the solution?
Not having to worry or think about investing and saving money. In other words, automate the saving for golden retirement years.
Photo by Owen Beard on Unsplash
With most Americans hoping to retire by 67, and most of them giving C-grade on their retirement savings – starting early with automation will be the difference between financial success and failure. The reason being the power of compound interest, which magnifies over the years and ensures you reach the financial goals.
Automation brings a new level of accountability as you don’t have to set alarms or continuously push yourself to save money from the next paycheck. Thanks to the transformation and evolution of technology, a fully-automated financial life is no longer a dream.
This is why recurring billing automation brings a new level of accountability as you don’t have to set alarms or continuously push yourself to save money from the next paycheck. Thanks to the transformation and evolution of technology, a fully-automated financial life is no longer a dream.
Here are six proven ways to automate your online pension for a carefree retirement.
1. Automate Contribution to 401(k) Plan
Fancy and unheard financial terminologies, number-heavy charts, and weakening global economy force investors to turn away from saving for their retirement.
How do you simplify things?
Start by automating contribution from your paycheck. The more you follow the golden rule of finance – ‘pay yourself first,’ the merrier it will be.
Transfer money to your investment account like 401(k) every month. In automatic transfers, you set the monthly payment and leave it alone. This way, you resist the urge to use the money for some other purpose. The idea behind automating 401(k) contribution is that you don’t see the dollars before maturity or reinvestment. Instead of deciding on a fixed amount, decide a percentage as it considers bonuses, incentives, and increments.
Is it worth it?
Apart from saving money for retirement, it stops you from investing money in dumb ideas and keeps you away from the investment money.
Tip of caution: As an employee, ensure to take 100% of the employer’s match because not taking full advantage is similar to leaving free money on the table. Furthermore, it mitigates the tax burden when saving for the future.
2. Use Automated Investment Platforms.
Thanks to the tech-savvy world, investing tools that were little known have become mainstream today. From Millennials to retired baby boomers, everyone is leveraging the benefit of Robo advisor in Canada, the USA, and many other countries.
Photo by Morning Brew on Unsplash
Robo advisors are automated algorithms that make an intelligent recommendation on how to allocate funds across different assets. They usually invest in ETFs and index funds, thereby offering a low-cost diversification portfolio. If the algorithm detects a deviation from target risk, it automatically rebalances the portfolio.
80% of Millennials are not investing for the future and if you don’t want to be among these Millennials, it’s high time you start intelligent saving options like Robo investing.
Furthermore, the market of Robo advisors is growing steadily at a rate of 26% annually and is likely to reach $US$2,487,280m by 2024. Now is the right time to use these intelligent services to save for the future.
Is it worth it?
Apart from ease of use and providing low-cost portfolios, it ensures that the investment portfolio is made using the best research. Furthermore, when investing using a taxable account, these advisors are renowned for increasing the after-tax returns.
Tip of caution: Those who prefer a face-to-face meeting with their financial advisors, most of these advisors aren’t for you. They don’t have a brick-and-mortar office where you can walk and directly list your financial goals. Apart from this shortcoming, these are great options to accrue wealth for the pension.
3. Automate your Emergency Funds
According to research, 21% of retirement plan participants have outstanding workplace loans. It leaves most people with little or no money for an unprecedented financial crisis.
This is where you need emergency funds.
Due to forgetfulness and shortage of will power, automating your emergency funds will help you sail through the tough times. It will ensure you save for emergencies as well as a pension.
Apart from setting up a separate high-interest rate savings account as an emergency fund, automate the transfer from your checking account each month. This way, you will have a lump sum amount post-retirement.
Is it worth it?
You can start with as low as $25 per week and accumulate roughly $1300 per year. It provides a financial breathing space while ensuring you have sufficient cash when you’re out of money.
Tip of caution: Those who have a home loan with an offset account, use the offset account as the emergency fund account. It helps you reduce the home loan interest rate and make money easily accessible.
4. Create an Automatic Saving Plan
You know you should save money, but saving money is easier said than done. That’s precisely why you need an automatic savings account. These plans reduce the hassle of saving, and you save money for your long-term goals like a pension.
An automatic saving plan is a savings account that transfers a fixed amount every month from your checking account.
Though such a plan reduces spending on other things, you subconsciously save money and become a motivator for saving in the future. These plans are an excellent wealth-building tool and bring a balance between your saving and spending. They enforce saving, which is otherwise impossible with a standard checking amount.
Is it worth it?
In economic turmoil and unprecedented times like COVID-19, when all other portfolios show losses, it takes courage to invest money somewhere else. An automatic saving plan is not dependent on the prevailing market conditions, and you continue to build wealth.
Tip of caution: If you want to avoid overdraft charges from the financial institutions, ensure you have sufficient balance on the day of automatic withdrawal.
5. Automate Recurring Bills
Got monthly EMIs or recurring utility bills or any other monthly bills?
Set up auto-debit instruction for all the loans, recurring bills, and even credit card payments. You cannot accrue wealth if you’re always paying the late fees. Most of the financial institutions and mortgage lenders offer this service free of cost. Once you have automated the recurring bills, it becomes easy to track your finances, and you can stop worrying about paying the bills on time.
Is it worth it?
A credit card’s late payment fee can be as high as 10% of the total outstanding balance. For example, if you spend $1900 using the card and default the payment, you’re likely to pay $190 as of late fees. Automate your payment and save $190.
Tip of caution: Out of sight, out of mind, the nature of automatic payments is something you should be cautious of. You tend to ignore interest hikes, hidden fees, and even billing errors. Therefore, once in a while, revisit all the automatic payments.
6. Use Automatic Saving Tools.
When saving for a pension, every penny counts, and with 4 in 10 American adults unable to pay a mere $400 emergency expense – even a ‘worthless’ penny can do wonders.
If you lie in the above category and hate traditional saving methods, technology has come to your rescue in the form of innovative automatic saving tools called round-up. Using these apps, you can round up the daily transaction to $1 amount and send the change to your savings account. At first, it might seem like a small amount, but it can add to a considerable amount over the years and over several purchases.
For example, Sam uses his credit card at a salon and pays $29.30. The round-up saving tool rounds this value to an even $30 and sends the extra 70 cents to your savings account.
You will come across an array of such apps offering such financial solutions to help you achieve long-term and short-term goals.
Is it worth it?
These Fintech apps help save more, invest more, and pay off the debt without spending time and energy. It creates a win-win situation because your wealth grows steadily without putting in effort or paying for the service.
Tip of caution: If you keep a low checking balance, you could accidentally run out of money due to automatic transfer. Apart from this scenario, it’s a great way to save extra money.
Wrapping Up
Automation is not a lazy man’s idea of saving money; instead, it’s a smart way to reach financial goals. It makes money management and saving goals much easier. It keeps you psychologically away from sinking into unnecessary spending while achieving a happy post-retirement life.
Automating your finances ensures a sound sleep because without spending time, your accrue wealth. It’s the next significant financial innovation and is likely to bring a paradigm shift in the savings procedure.
Start automating your finances today, and create a financial cushion.