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How To Put Your Money On Autopilot
Your Bills On Autopilot
Use a rewards credit card, online bill pay or automatic bank draft to put all your bills on autopilot. Be aware that using your bank account for automatic payments has some concerns like:
- There is maintenance required in case you change your biller or bank.
- If phone bills get racked up due to unfair roaming charges and get automatically debited from your account, your cell phone company may not give it back.
- Bounced payments incur additional bank charges and penalty.
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SIMILAR ARTICLES & IDEAS:
Regular monthly bills
The bulk of your budget is made up of necessities like rent, phone and internet bills, insurance, etc. If you can lower your monthly expenses, you can save a lot for unplanned events.
Debt when you're on a tight budget
There are a couple of paths you can take to pay off your high-interest debt when you're on a tight budget.
- The snowball method. For those who need to see progress, pay off the lowest balance first. You'll feel inspired to keep going.
- The avalanche method. Choose the debt with the highest interest rate to pay off first. This may require larger monthly payments and will take longer to see progress, but you will save the most money in the long run.
- If you need to prioritize your credit score, focus on paying down your credit cards first. Paying the ones you are near to maxing out will improve your score quickly by a few points.
- Set up payment plans, even if you can only afford a few dollars at a time. That way, your lenders can see you're paying something.
Incorporate unplanned entertainment in your budget
Financial professionals will advise you to cut out expensive nights out. In truth, you will have night's out, even when you're dirt poor.
To incorporate unplanned entertainment, set aside an amount each month. Be realistic. You can open another savings account for fun spending or you can use cash only.
How much you should save every month
The popular 50/30/20 rule states that you should reserve 50 percent of your budget for essentials like rent and food, 30 percent for discretionary spending, and 20 percent for savings.
But ...
Why 20 percent is recommended
Assuming you're in your 20s or 30s and can earn an average investment return of five percent a year, you'll need to save about 20 percent of your income so you can reach financial independence when you're older.
Financial independence means that you can maintain your chosen lifestyle entirely from the interest of your investments and dividends.
The four percent rule
The four percent rule states that you could withdraw four percent of your principal balance every year and live on this indefinitely. That means you need to save 25 times your annual expenses to become financially independent.
The four percent rule is not perfect. There is no risk-free investment that yields that much today. Sudden inflation could also cause a problem.
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Key Idea
The Golden Rules of Personal Finance
- Spend less money than you earn
- Always plan for the future: you should always look forward beyond the current month
- Make your mon...