How To Put Your Retirement Success On Automatic

Without too much trouble you can automate your financial life. And if you do, you’ll have a much better shot at retirement success. Not only that, your current day-to-day personal finance management will become a whole lot easier too. You’ll save time, money and wring much of the “unknowns” out of your financial future. With so much to gain, let’s dive in right now.

Pre-Flight Check List

In order to make your financial success effortless, we have to do a little preparation. That includes knowing where you are now (current spending, investments, savings and income), where you want to be (how much you’ll need in retirement and what your income will be) and when you want to get this done. In other words, you have to do a little financial planning.

You can either do this yourself, use some ball-park calculators or hire someone to run a plan. It might even be smart to do all three. But even if you use the most rudimentary projections, if you want to automate for financial success you first need to map out a flight path and you do that by running your plan.

Retirement Liftoff

Once you know where you want to go and where you are starting from, you’ll know what you need to do in order to achieve the future you want for yourself. You can’t control how much your investments will earn but you can control how you invest, how much you’ll save and how much you’ll spend. These are the three most important contributors to your financial future and that’s why we want to automate them.

Automate Spending Control

You have more control over your spending than you do just about any other aspect of your financial life. For that reason, it’s super important to build your finances around this part of your financial life. There are many different ways to do that but the simplest and most effective is to first figure out how much you need to save each month to achieve your goals, automate those savings and investments and spend what’s left.

This is a really cool and empowering method of financial planning. It’s simple, quick and free. It puts your money where your priorities are and it helps you just not have to think about your finances all the time. It also puts a collar on your spending and/or gives you strong incentives to earn more.

Now, what normally happens is that once people get a taste of how empowering it is to hit their savings goals, they often want to bump it up. The way to do that is to then look carefully at the spending, make cuts, and increase monthly savings amount.

Automate Savings – Not Investing

As I mentioned above, I am a huge fan of automatically taking money out of the bank each month and plunking it into investment accounts. This saves time and insures that I’ll stick to my plan. It saves me from myself and my own tendency to procrastinate. Ever since I started doing this I just stopped thinking about whether or not I was sticking to my financial plan or not – I knew I was.

You can (and probably should) do this with both non-retirement money and contributions to your retirement plan.

With regards to investing, some people like a static allocation approach. I for one don’t subscribe to that strategy so I make my investment decisions once a month. In other words, I re-balance my accounts every month as a result of the new contributions and as a result of any changes to my model portfolio. You can either follow my lead or take a different approach of course.

The main point to keep in mind it pays off big time if you automate your investment contributions but your investments don’t necessarily have to be done automatically. In fact, I happen to be a huge opponent of “robo investing”.

Automate Bill Pay

I love bill pay and so will you once you set it up. This is another way to save time and money.

Contact all the people who bill you on an ongoing basis and tell them you want them to automatically deduct what you owe them out of your bank account each month. You will still get a statement and you’ll be able to audit the withdrawals very easily. I do that when I reconcile my bank account and credit card.

This won’t save you money per se but it will save you time. Rather than being stuck behind a desk paying bills and then running down to the post office, you’ll be out there enjoying your life – and feeling sorry for all your friends who don’t take advantage of bill pay.

Automate the Un-Automatable

There are elements of your financial life that really can’t be outsources or automated. Those include such items as estate planning, re-running your financial plan and tax planning. They also include your important periodic meetings with your spouse and mentor. While you can’t automate these events you can still automatically remind yourself to make sure they happen. I do this by simply setting up reminders in my calendar every quarter or year as the case may be.

There is nothing fancy or difficult about putting your retirement on the path for success and keeping it there. Once you do the prep work, put your savings on automatic. And that’s all you have to do to limit your spending. Periodically review your spending to see if it’s possible to save even more. While you’re at it, make sure to schedule a day and time each year to review your estate, tax and financial plan.

Don’t leave any of this up to ‘good intentions” or remembering to do it later on. At least this is the approach that has really worked for me and many of the people I work with.

What other tips can you suggest to increase the odds of retirement bliss?