Put Your Finances on Autopilot

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Was 2018 a financial disaster for you?  If so, managing your money the same way will likely have the same result in 2019.  Why not try some tools that can help you manage your finances and make saving a breeze.

Technology has offered us many improvements and ways to simplify our lives. But sometimes it’s difficult to identify those apps and features that can really make a difference from all the others - especially when it comes to money. Are you leveraging technology to make the most of your finances? Using one or more of the following financial technologies in 2019 can help you reach your financial goals while your finances run on autopilot!

Set It and Forget It!

Today most banks offer an online banking feature. One of the features mobile banking suites often include is the ability to set up automatic transfers to your savings accounts. If you don’t already use this feature, the New Year may be the perfect time to start! The automatic transfer tool is ideal for building up your emergency fund.

I use the auto-transfer tool to fund my Roth IRA contribution. It’s literally a no-brainer. All you have to do is determine your contribution limit and divide that dollar amount by the number of pay periods per year. And if you need an added incentive, the 2019 IRA contribution limit increased to $6,000 (plus $1,000 for individuals age 50 or older). So, if you have 26 pay periods per year, set up an automatic transfer of $231 per pay period. If you’re age 50 or over, make that $270. You’ll reach your contribution limit effortlessly.

Have trouble getting your bills paid on time? No problem.  Another popular feature of online banking is automatic bill pay or automatic withdrawal. If you connect your billing information to your bank account, the bank will ensure your bills are paid on time. Consider setting this up for fixed expenses, such as car payments, auto insurance premiums and other bills where the payment amount is always the same. 

When it comes to variable expenses like credit card payments, get online and submit the payment yourself. It’s important to keep a pulse on your credit card activity. Otherwise, the “out of sight, out of mind” mentality of automatic bill pay could lead to frivolous spending. Who needs that?

Use Auto Escalation for Retirement Accounts

Many people who are in the accumulation stage of their lives set a goal of maxing out their 401(k). But getting there can seem impossible. One tactic to help you reach your goal is to enroll in the auto escalation feature of your employer-sponsored retirement plan. This program increases your contributions at regular intervals on an annual basis. For example, you could select to increase your 401(k) contribution percentage by 3 percent per year until you reach the maximum amount. The 401(k) contribution limit for 2019 increased to $19,000, plus a $5,000 catch-up contribution for participants age 50 or older.

Auto escalation allows savers to increase their savings without feeling much of a difference in take-home pay. If your employer plan doesn’t offer this feature, you can do it yourself. Put a reminder on your calendar to manually increase your contribution level at the beginning of each year.

Artificial Intelligence and Personal Finance

We’re hearing more and more about artificial intelligence (AI), but what exactly is it? Dictionary.com defines artificial intelligence as “the theory and development of computer systems able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.” Get comfortable with AI because it’s popping up in every industry!

Two features of AI have begun to make a difference in personal finance technology - roundups and auto-sweep. Apps that initiate these actions accomplish the same objective: saving in small margins.

A top-rated app called Acorns combines roundups and micro investing. Think of Acorns as an enhanced coin bank. Here’s how it works. It connects to your bank accounts and credit cards and rounds your purchases up to the nearest dollar and then invests the extra cents. Let’s say you buy a candy bar for $1.52.  The Acorns app logs your purchase as $2.00 and invests 48 cents in a brokerage account. As you might imagine, the cents can add up quickly, especially when they’re invested in a rising market!

Auto-sweeping is the use of algorithms to analyze your lifestyle, income, expenses, and upcoming bills to determine the amount of money that can be safely transferred to your savings. The app makes various small sweeps building up your savings over time, without you having to think about it. According to Apple’s App Store, Digit and Albert are popular auto-sweeping apps. Digit boasts a 4.8 star rating (based on 62,100 reviews) while Albert holds a 4.6 star rating (based on 15,700 reviews).

Summary

Technology has given us the ability to streamline our finances. Do the “future you” a favor this year. Set aside a little time and effort today to automate your finances so you’re on track from day one of 2019!

Kate Arndt is a Financial Planner with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website or email Kate.

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