I'm Saving So Much Money and Time By Automating My Finances

Discussion in 'Investing and Retirement Saving' started by Alistair, Oct 7, 2013.

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  1. Alistair

    Alistair Newbie

    Six months ago I read two personal finance books that made a tremendous difference to my life, the books that I read were The Automatic Millionaire and I Will Teach You to Be Rich. Both these books recommended that I put my finances on auto pilot to save money and time. I now want to share some of the ideas that I used from these books which has helped me to save several thousand pounds over the past six months.

    The basic idea behind these books is you automate your finances, you have a plan for retirement, an investment plan, a plan for saving and a budget. You then use these plans to automate all your bank accounts, saving accounts, investment accounts and retirement accounts. You set up how the money moves initially and then leave it alone knowing that everything is being taken care of.

    After reading these books I set up my own automatic payment plans and automated my finances and it's saved me so much time, saved me money and made me better with my finances. I have listed all the steps I took and how my salary was distributed after receiving the money in my checking account.

    I start with £3076 after tax:

    Automation 1 - Retirement Account

    My employee matches 100% of what I put into my retirement account up to a maximum of £300. Before I even get my money in my bank account I've opted for £200 to be taken into my retirement account, my employee matches this and it becomes £400, the government adds another 20% which makes it £500. By taking this simple step which took a few hours in terms of paperwork helps me more than double my money instantly!

    Salary Left £2976.00

    Automation 2 - Self Invested Personal Pension Account

    As soon as I receive my money in my bank account £100 is transferred out to a SIPP Account. The government adds another £25. The money is invested in an index fund which has a really low annual charge which is lower than 0.5%.

    Salary Left £2875.00

    Automation 3 - Investment Account

    Once my retirement accounts are funded I concentrate on my investment accounts. An automatic transfer of £1000 is taken into my Fidelity investment account and is split between 5 index funds around the world. most of these index funds are diversified and having several location independent index fund lowers risk even further.

    Salary Left £1875.00

    Automation 4 - Insurance Account

    I have another investment account with OptionsXpress.com which allows me to buy options. I buy small quantities of cheap puts for £100 over a longer period of time just in case the markets collapses. This really helps me to sleep better at night.

    Salary Left £1775.00

    Automation 5 - Mortgage

    The next automation is my mortgage repayment of £1000. The mortgage is interest only at £539.00 however I make an over-payment of £461.00 to pay it off sooner.

    Salary Left: £775.00

    Automation 6 - Budget

    All my bills are on direct debits and cost me £276 per month, all the bills are taken automatically so I dont have to worry about missed payments.

    Salary Left - £500

    Automation 7 - Food clothes and Groceries

    As a single frugal person I spend less than £200 on food clothes and groceries. Most of the items I buy are used. I do my grocery shopping once a month and have it delivered to my door.

    Salary Left - £300

    Automation 8 - Having Fun

    I know I have approximately £300 in my bank account to spend on anything I want to have fun with. Most of the time I decide to be sensible and save most of the money in my emergency fund.

    As you can see everything is automated, I don't have to worry about missed payments, retirement accounts, or emergency fund. Everything flows in and goes in all the right places.

    If you've got a better automated system please share as it gives me something to compare with. Thanks in advance.
  2. Thanks for sharing this it's really useful. At the moment I've just automated my $100 to go to my savings account. you're system seems much more sophisticated and the money seems to be going to all the right places. I guess I have to take another look and then organize my finances so I can just get on with my life and not worry about money.
  3. Shobir

    Shobir Administrator Staff Member

    Admin Post
    I've read both these books and they're great if you want to turn your finances around. IWTYTBR is more targeted towards the younger generation whereas the automatic millionaire is something we can all read and learn from. I like how you've automated your finances and it's inspired me to look at my own ones and come up with some spider diagrams! Thanks for sharing.

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