Despite our best intentions, how many of us have time to actively manage our finances each week?
Active saving and mindful spending are key to financial wellbeing, but it's easier said than done. That's why I've put my money on Autopilot. Instead of spending hours tracking my spending to ensure my needs and wants are covered and then shuffling money around for savings, I automate the entire process.
So how does it work?
Why a money Autopilot works
The one-time task of setting up an Autopilot system ensures your desired money behaviours become the default position. It removes temptation and decision fatigue by making your mindful spending decisions up front and ensures you actively save by “paying yourself first”.
Automated transfers mean your money is divided up each pay day, separating saving and spending goals into different bank accounts. This way, you can easily track your progress with a quick glance at account balances, eliminating the need for time consuming expense tracking or spreadsheets.
Creating transparency around your money allows you to focus your attention on the money decisions that matter.
Setting up a money Autopilot
A basic autopilot system helps you to save, ensure you set aside money to pay for your needs (the essentials) and use what is left to enjoy life (your wants). It is easy to set up.
Step 1 – Set up your bank accounts
Allocate or open separate bank accounts for savings, needs, and wants. Bank First has a range of savings and transaction accounts you could consider. More details on the types of accounts to use are provided below.
Step 2 – Arrange for your salary to be paid into your save account
Apply the principle of 'pay yourself first' by asking your employer to pay your salary paid directly into your savings account. This ensures you're actively saving from the get-go, including any additional income from overtime or bonuses.
Step 3 – Allocate your mindful spending plan
Decide whether to manage your money weekly, fortnightly or monthly
Determine how much of your salary is required for your needs and your wants each period
Set up a recurring transfer for these amounts from your savings account to your needs and wants accounts the day after pay day.
Read more about mindful spending with Autopilot.
Step 4 – Automate your bills
Set up direct debit (PayTo) arrangements or use your debit cards for subscriptions. Essentials like rent, internet, and utilities will come from your 'needs' account, while you can pay for streaming subscriptions or your gym membership from your 'wants' account.
Step 5 – Streamline day to day spending
Use two labeled debit cards for daily spending – one for needs and one for wants. This way, you can easily pay for purchases from each account and you’ll know if you are on track with a glance at your remaining balances.
Step 6 – Monitor and refine
Life changes, and so do our expenses. Fortunately, tweaking your Autopilot system is simple. Just adjust the amounts of your recurring transfers between accounts to match your evolving needs and wants.
Customise your system to fit your lifestyle and savings goals. Consider adding additional accounts for specific goals, like a holiday fund. Read more about how to develop a mindful spending plan for your Autopilot system.
My suggestion? Don't aim for perfection, just get started. You'll learn from any hiccups and soon it will become second nature. Autopilot simplifies money management – savings grow, bills are paid on time, and you know exactly how much you have left for extras. Put it on autopilot – it's that simple.
