#007 | How I Automated My Finances
If it can be automated, it should be automated
Hey friends,
If you asked me what makes the biggest difference in my financial life, the answer would be simple - automation.
I spend less than 15 minutes per month managing my money, but in the last year, I paid off ~$60k of student debt, built a 6-month emergency fund, and grew my investment portfolio to over $30k.
Thanks to the tools provided at most banks and brokerages, it only takes a few clicks to put your finances on autopilot. You don’t need to know how to code or have any other special knowledge.
There are many pros to automating your finances, but I find the biggest benefit is it allows you to reclaim your time.
This means more time to build your business, create content, learn new skills, work out, expand your network, catch up with family, or whatever else you want to do.
“You don’t get rich by spending your time to save money. You get rich by saving your time to make money”
— Naval Ravikant
The Prerequisites
First, determine how to budget your income and identify the right amount to save, invest, and spend. The hyperlink will direct you to a past newsletter I wrote on this topic.
Second, I opened a few different accounts:
Checking account: Where paychecks get deposited
HYSA: Emergency fund and other medium to long-term saving goals
Brokerage account: Investments I plan to liquidate before 59.5
Wealthfront Cash Account: This account earns interest like a HYSA but doesn’t have a monthly withdrawal limit (which is usually 6 for savings accounts). I transfer money here for near-term bills so that my funds accrue interest until their payments are due
Lastly, determine when to run your automation. I prefer to align it with my pay periods, which are bimonthly on the 15th and 30th.
Now, let’s discuss the 4 steps to automate your finances. Note that they don’t need to be performed in any order.
Set Scheduled Transfers to a High-Yield Savings Account (HYSA)
Every payday, I transfer 16.5% of my take-home pay to my HYSA.
This step ensures you pay yourself first, build your emergency fund, and achieve other savings goals.
It also takes advantage of higher interest rates and compounding, which boosts your savings effortlessly.
With Ally Bank, I created scheduled transfers from the app (Tasks → Bank Transfers → Input the amount and frequency).
Create Recurring Investments That Dollar Cost Average into Index Funds
Investing consistently, even in small amounts, can build a large nest egg over time.
Another 16.5% of my paycheck is transferred to my brokerage account and split evenly between VTI, VOO, QQQ, and SCHD.
Dollar-based investing (or fractional shares) ensures every penny goes to work. This allows you to invest a fixed dollar amount rather than buy a set number of shares.
Dollar-cost averaging pairs well with dollar-based investing, given its simplicity and effectiveness over the long term.
On Robinhood, you can create recurring investments in a few clicks (Profile → Menu → Recurring Investments).
Use a Dividend Reinvestment Plan (DRIP)
Dividends aren’t just extra cash - they're an opportunity for accelerated growth.
A DRIP will automatically reinvest your dividends back into a stock or ETF, compounding your returns.
This seemingly small action can make a huge difference in the value of your portfolio over time.
Don’t believe me? Look at the difference of $10k with and without dividends reinvested below.
This feature can also be enabled on Robinhood (Profile → Menu → Investing → Dividend Reinvestment).
Enable Auto Bill Pay
Once saving and investing are done, all my leftover money is for guilt-free spending… But there’s a handful of bills that need to be paid from this bucket.
Auto bill pay eliminates the need to remember due dates and ensures you won’t miss your payments.
Not only is it more convenient, but some companies give you a discount when you set it up!
For example, my wifi provider takes $5 off my monthly bill for using autopay.
For known bills, I like to set the money aside in my Wealthfront Cash Account, this way it accrues ~5% APY until the payment date. These bills include rent, credit cards, wifi, utilities, etc.
Conclusion
Learning how to automate your finances empowers you to take control of your financial future.
It’s a “set it and forget it” approach that makes it a matter of when you will achieve your financial goals, not if you will achieve them.
Automate your finances today and give yourself the freedom to focus on other aspects of your life.
That’s all for today - thank you for taking the time to read!
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