Automating your finances for fun and romance

This is probably one of the most important things you can do; but be sure to do it right. By the way, there’s not really any romance in this post. Fun? That’s your call.

Example of how my finances work:

Payday: the vast majority of the money that supplies the budget goes into my primary account. This account pays all the fixed (or at least relatively fixed) expenses and emergency accounts: mortgage, automotive/insurance, travel account, home maintenance, savings, etc. Then from that account I send money to two separate checking accounts.

One my wife uses for groceries. Every other week (because I get paid like that) this account receives half of the monthly food budget. I also include one quarter of the monthly car fuel budget for my wife. This is my wife’s primary card. If she needs to spend more (which she never does) she has the credit card for other expenses.

Whatever’s left after filling those two accounts goes into a second checking account. This one is used primarily for food which is not grocery related (restaurants and the cafeteria at work). It’s also used for discretionary spending on things we may need throughout the month.

Shopping and gas for my car I put on a credit card that I pay off monthly which gives us 1.5% back. Any major purchases we have go on this card. I even put our new furnace, AC, and heat pump on it. Any chance I get to max it out and immediately pay it off, I take.

Monthly bills; aside from our mortgage, all our monthly bills go on the card that gives us 1.5% back. If I could put our mortgage payment on it I would. Seriously, I try to do this on everything I can. The only caveat is; pay it off every month, even If you have to use your rewards to do it. Frankly, I’m amazed that they let me keep the card because I can’t remember the last time they made any money off me on interest. If you consider the points from the credit card passive income then I’d estimate that it generates about $20 a month based on our monthly bills and spending with the card.

Financial automation requires some accounts. I have a CapitalOne360 account because Capital One bought out OrangeING. OrangeING was the best, and even though they’ve been bought out CapOne seems just as good as it ever was. I have a few good reasons but the main points are, excellent customer service and a good interest rate. The interest rates were better pre-2007 (if you remember the Great Recession) and there may be other banks with slightly better interest rates but I haven’t shopped around in a while. Currently the liquid funds I keep in the CapOne account produce about $120 annually or about $10 per month (though I didn’t include this on day 3’s passive income estimate.

How does CapOne help? They allow me to create more accounts that my brick & mortar credit unions. I can just create a new account if I need one to help budget. There’s a savings account for mortgage which receives half of the mortgage payment amount every other week and then transfers it automatically to the savings account on the last day of the month. The mortgage servicing company then takes their payment out of that account on the first of the month.

I have another savings account that I put my bi-weekly (twice a month) portion of my automobile budget (six months’ worth of prepaid insurance and some extra for surprise maintenance). If you’re paying your car insurance monthly, stop it! If you can’t afford to pay for six months at a time, get a savings account and slowly start putting a little bit into it if you can so that at some point in the future you can. I can’t be sure exactly how much this would save you but I know it saves me at least a few hundred dollars a year. It wouldn’t hurt to keep the money you save in the same account as well; additional funds for car maintenance can help to smooth out your future finances if something comes up.

I also keep a savings account for vacation funds. A portion of my bi-weekly paycheck goes into this account so I can take the family to have some fun once or twice a year. I use the card with the points and then I pay it off using the vacation funds that were saved in advance.

Everybody that talks finance will also tell you to keep an emergency fund; automate that too.

Overall if you’ve automated properly, your rent/mortgage, insurance, savings, utilities, phone payment, etc. should all be taken care of without you having to touch anything. It should pretty much match your budget and leave you with an account that leaves you with your budgeted weekly or monthly discretionary spending allowance.

If you need more information on this topic, I highly suggest buying and reading I Will Teach You To Be Rich by Ramit Sethi. I know of no better advice for automating your personal finances. It’s a fantastic book and I learned quite a bit from it.

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