Paying off your debts and saving money for the future is not always an easy task. Sometimes, debts seem bigger than you can manage, and you can feel like you are in over your head. However, through automation, you can organize your finances to prevent your bad habits from having a continued negative effect on your financial health.
Open the Right Accounts
The first step toward automating your way to financial freedom is having the right accounts. At a minimum, you should have a checking account, savings account, retirement account, and one or more credit cards (choose one with no annual fee that will earn you cash back on purchases). Your income should be set up to directly deposit into your checking account, and all of these accounts should be linked so that money can be moved between them with minimal effort on your part.
Have a Cushion
One problem many people run into when automating debt payments is that the timing of their pay and the timing of the bills does not match up. To avoid overdrawing your checking account when the automatic payments start coming out, make sure that you have a cash cushion in your checking account that covers about half of your expenses for the month. This will also protect you against any unforeseen issues that might arise when pay is delayed due to a bank holiday or similar event.
Take Care of Current Financial Problems
You do not want to begin automating your finances while large debts are hanging over your head and collectors are calling you. When you are behind on your debt payments, creditors can request a bank levy that will freeze and ultimately seize the funds in your account to pay that debt. Instead of avoiding creditors, negotiate an installment plan or other repayment terms to prevent a potential bank levy against your funds. If you are struggling with tax debt in particular, it’s wise to get professional help to improve the outcome of your situation.
Set Up Automatic Payments
Once you have your accounts set up and your finances in order, you can
These simple steps will start you on your path to financial freedom. You will find that automating your accounts saves you quite a bit of time, and, because your payments to your bills and credit accounts are no longer late, it saves you a lot of money in the long run, as well.