We make so many decisions every day and life can become so overwhelming with everything that is going around us.
I wish life would be much simpler so that we do not have to worry about everything in our life.
Finances are one of the main things which create a lot of STRESS in our lives. We have become so advanced that we need everything but there is a cost to pay. We have been using so many services and it can create a ripple effect on our life and credit if we miss even single payment. We need to stay on top of our game all the time, what if we can put our finances on autopilot that we never have to worry about missing any payment?
WHAT AUTOPILOT FINANCE MEANS?
- Setting a pre-authorized payment method that you never miss any payment.
- Not to personally manage payment and investments. You never have to go to the bank or go online every single month to make a payment.
- Automatic your INVESTMENTS, so it keeps growing. Money is taken from your account directly, so you do not have to remember to invest every single month. This way, you never have to worry about targeting the best time to invest because you are investing all the time.
- Receiving your salary and payments with direct deposit. Why does someone want to go to the bank and deposit a check? It is a waste of time and it may take a few days to receive the amount to your account.
WHY YOU NEED TO SETUP YOUR FINANCES ON AUTOPILOT?
HABIT OF SAVING
Habit of saving is more important than saving. You do not have to worry about saving money at all once it becomes a habit. It becomes easier when you have set up an automatic financial plan of investing a certain amount of money every month. Money in your investment account just builds up without you managing the investment at all.
BUILD AND MAINTAIN GOOD CREDIT IS FAR MORE IMPORTANT
What creditors like the most? People who pay on time. And when you do that, you get rewarded with good credit.
You cannot miss any payment if you want to build and maintain good credit. It takes time to build credit, but it goes away very quickly. Just missing a few payments and boom!
So, setting up pre-authorized payment is the best thing you can do for yourself. You must do this first thing after you start any new service.
WORRY FREE LIFE
It is impossible to remember every single thing in our lives and specially no one can remember dates for all the payments that need to be made. You will have to write them somewhere and then make payment on the exact day without missing the date but there is always a better way of doing things, Automate it.
Set up pre-authorized payments and get rid of half of the stress of your life.
WEALTH NEEDS TIME
You will never invest in Index funds or Mutual funds if you do not automate your investment. There is no way to remember or to have a time to invest it every single month.
Most of the people never invest because they never take the time to automate their investments.
You just need to make a time one time and sit with someone to start investing $25-$100 a month and then gradually keep increasing it every single year.
It is always difficult to start it but it’s very easy to increase it every single year once it’s started.
It takes a lot of time to build wealth and it is better to start as early as possible. Start as small as possible but you need to automate so payment can be taken directly from your account without you doing anything.
NO LATE FEES
Do you ever realize why credit card companies are giving you credit cards, and you pay it every single month without fail then how they make money? They make money when you miss your payment with late fees, or they start charging enormous interest rates to keep you in debt forever.
Let us take an example of someone making $15 per hour, credit card will charge around $35-$50 late fee for the first missing payment. Now imagine this person is giving away his 2-3 hrs of work to credit card for nothing. Imagine working for the next 3 hrs and not getting paid or giving away that money to the credit card company. This is very painful to imagine.
NO NEED TO REMEMBER PAYMENT DATES
I don’t think we are that sharp anymore to remember every single date for payment. You can use your phone to set up reminders but that’s extra work. Credit card payment dates can change by day or two every month depending on the number of days in the previous month.
It is too much hassle to remember all dates and set up reminders and make payment every single time according to that. Who has time for this?
CORE METHODS TO SETUP EVERYTHING ON AUTOPILOT
1. AUTOMATE USING CREDIT CARDS
Credit cards used well can be game change in the long run.
a. GET A GOOD CREDIT CARD
It is important to have a decently good credit card. Main point here is to get a credit card and use it to automate all your expenses and payments.
Personally, I use my credit card for every single payment and I just set up pre-authorized payment on my credit card. That is it, JOB DONE.
I don’t like to use too many credit cards either and just using one credit card, so I don’t have to worry about making too many payments. We must make sure we have enough money in our current\savings accounts to make payment for credit cards. It becomes difficult to control the money when you are using too many credit cards.
Try to minimize the use of credit cards to 1-2 cards max. It is good to accumulate points on one credit card as having them together gives you more options to use it.
NOTE – Never get into credit card debt, we want to use the credit card to automate our payments, not to get into credit card debt (that is the worst thing you can do). Avoid using credit cards if you cannot manage them well or tend to overuse it.
b. BUY ALL NECESSITY ITEMS ON CREDIT CARD (ASSUMING YOU ARE ABLE TO MAKE PAYMENT EVERY SINGLE MONTH)
If you are good with managing your expenses and do not overuse your credit, then put all the necessary item payments on the credit card.
HERE ARE SOME BENEFITS OF USING CREDIT CARDS
- You will get points and cash back for using a credit card. I can get up to $1000 in credit card points which I use for booking hotels every year for my vacation. Who does not like paid off vacation?
- You can see all your expenses and payments in one statement. It makes it easier to analyze your income\expenses.
- Builds your credit history.
- All your Purchases are protected by the credit card company. You have an extra level of protection in case of fraud.
- Some credit cards provide extra warranties, travel insurance and car rental insurance without extra charges. I used to have free car assistance service with my credit card which is worth $100-$150 per year if I had to get it from companies like CAA.
Personally, I am very scared to use my debit card, there are some small stores who do not take credit cards and it makes me very nervous.
c. SET UP PRE-AUTHORIZED CREDIT CARD PAYMENT
This is the most important part, make sure to set up pre-authorized payment for your credit cards. You cannot afford to miss the credit card payments, not just because of the fee but because it ruins your credit history. They are amazing when they are used well, and you have a good plan to make payments on time every single month.
- It is best for you to have your current\savings accounts in the same bank as your credit card.
- Sometimes, pre-authorized payment does not work first time because banks want you to set it up certain days before the first payment is due. Just be extra careful and double check for the first month if payment goes through otherwise call the bank right away.
- Setup online banking to manage your statements and payments.
2. SETUP BILL PAYMENT WITH YOUR BANK
We have many options to make payments these days. Pay Bills and Interac e-Transfers are very popular in Canada. Pay Bill option lets you search any type of service providers like insurance companies, City taxes, School Taxes, Car Registrations etc. It is very easy to set up.
I recently made payment to a plumber using Interac e-transfer by using his emailID, it is very easy and simple.
I have my 95% tenants paying their rent using Interac e-Transfers as well.
3. SET UP AUTOMATIC WITHDRAWALS FOR YOUR INVESTMENTS
Do you know what is one of the main reasons some people create much more wealth than others? IT IS THEIR PERSISTENCE.
You must invest over a long period of time with persistence, without stopping investment contribution. It takes 30-35 years to build a considerable amount of wealth and it is not possible if your investments are not automated.
Start small, you can start with $25 per month and gradually increase by $25 every six months or so. It is important to start because that is one step people never take. It is very easy to add an extra amount after a short interval. You should keep on increasing the amount to your investment account until you reach at least $300-$500 per month. I recommend using accounts like TFSA or ROTH IRA because it will have no taxes on your investment gains.
- Small amounts are not worth losing your credit rating. Make sure you don’t lose your credit for some small stupid fees by phone\internet provider.
- Make a payment to make sure you do not pay for late fees and it does not hit your credit and then fight for the amount in question. There is always some middle ground to get the money back.
- Setup your investment in RRSP\TFSA\RESP accounts with auto withdrawal.
- Do not invest just once a year. People are waiting for Feb- March to put all the money to their RRSP to save taxes for last year. Why wait till the end of the deadline, you should invest every single month.
- Weekly or monthly withdrawal helps you to invest in all up and down of the market, it’s the best way to get best results out of stocks.
- It is easy to invest $25 per week or month instead of thousands of dollars.
PRINT THIS AUTOMATION PLAN FOR YOURSELF
Sometimes, it is not just enough to set up pre-authorized payment, you must be very vigilant, especially for the first payment.
I recently got a new internet from BELL Canada who is one of the biggest internet and phone service providers in Canada.
I wanted to set up pre-authorized payment right away as soon as I got my internet setup done at my home. But the BELL online system did not allow me to do that for the first 1-3 weeks till they created the first bill. Not sure why the hell is that.
Anyhow, I set up my pre-authorized payment as soon as that option was available. Now, I expect them to pick up payment from my credit card directly as soon as the first bill is due.
But they did not use a pre-authorized method to pick up payment for some reason which I could not understand (Something like it needs to be done certain days before the payment day or it was set up after the bill is generated, I really don’t know for sure), It pisses me off though!
I had to call them to get it fixed and make sure they pick payment directly from my credit card next time.
Believe me, I do a lot of credit checks for tenants who apply for apartments at my rental properties, and I see phone and internet companies are the main culprit to ruin people’s credits.
Just be very careful and be vigilant. Make sure your first pre-authorized payment goes through.