3 Reasons Why You Need to Automate Your Savings and Investments 1

To achieve long-term financial security, you need to constantly be keeping up with your finances. In particular, that would be your savings and investments. You might be thinking that you are handling your finances just fine so why do you need to automate it? In this post, I’ll be sharing 3 reasons why you might want to consider automating and what are some considerations to think about.

1. You’ll Forget to Do It

At one point or another, you’ll forget to make a deposit into your savings or investment account. With so much going on in your life sometimes it can become a hassle to remember to make a deposit every few weeks, so it makes sense to automate it. When you automate your savings and investments, you no longer need to focus on it anymore. It frees up the attention and time for you to concentrate on something else, like the big picture of your finances.

2. Out of Sight out of Mind

When you don’t see something you don’t think about it. This applies to your finances as well. When you automate your savings and investments, you don’t see that money in your bank account so you’re less likely to think about it. A consequence of seeing your money is that it gets you thinking about things that you want to buy.

Suppose you don’t automate your savings and investments when you are transferring the money over to your savings and or investment account(s) you might think about what you can buy with that money instead. It can get tempting to choose between the delay gratification of investing that money versus the instant gratification you get from buying something you want, but not need. Now, if that money was automatically transferred, the chance of it happening is much less.

3. Let’s You Focus on the Bigger Picture of Your Finance

When you automate your savings and investments, it allows you to spend that time and energy towards seeing where you’re at towards your financial goals. Now, you might be wondering just how troublesome is it to contribute to your saving and investment accounts yourself? So, let’s see how it can become more tedious than you might think with an example.

Suppose you work for a company and you get paid bi-weekly, have a health insurance plan with a health savings account (HSA), and a 401k plan. Outside of work-related plans, you have a high-yield savings account (HYSA), Roth IRA, a long-term taxable brokerage account, and a short/mid-term taxable account. In total, you have 6 accounts that you contribute to ever paycheck with 4 (HYSA, Roth IRA, two taxable brokerage accounts) of them being manual. That amounts to 26 paychecks per year, which means you’ll have to manually contribute 104 times per year. That amounts to more work than it should when you can easily automate the contributions don’t you think?

Some Considerations to Automating

Despite the benefits of automating your savings and investments, there are some cases where it falls short.

Variable Income

If you don’t get a fixed rate of income then it can be difficult to automate. It can make the difference between overdrawing your bank account or not. In such a case, it is best that you handle contribution manually to avoid any issues.

You Tend to Set It and Forget It Completely

Automating your contributions to savings and investments only lets you forget about doing the contribution yourself. It doesn’t mean you can forget about the accounts you are contributing to. If you find that automation is making you too hands-off with your finances to the point where you don’t know the big picture then you might want to reconsider automating. If being hands-on with your finances is what it takes to get you to know the big picture of your finances then it is a worthwhile trade-off in my opinion.

I hope this post was helpful to you. If you found this post helpful, share it with others so they can benefit too.

Are you already saving and investing? Do you automate your contributions? What are your reasons for choosing to automate or doing it manually?

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