How to automate your money: One of the most efficient ways that you can streamline your finances is by setting up an automated personal finance system. Once you automate your transfers, deposits, and payments, your money will be going where it needs to before you can spend it. World leading financial journal, Forbes, says that automating your finances will help you achieve specific goals by systematically creating positive long-term habits while fighting the temptation to deviate from your financial plan.
Checking account: Although this is the equivalent of a current account that earns little or zero interest, it is the fulcrum of financial automation. It allows withdrawals and deposits and is easy to access. “The liquidity of this account is also the bait that lures people to financial misappropriation,” says James Njenga, a Nairobi-based personal finance coach.
The standing order: This is the form of automation that Maggie Ireri, a researcher and Managing Director of TIFA (Trends and Insights for Africa) Research Limited, uses. “I have a monthly standing order from my current account to a savings account. I accumulate money on the savings account for one year, and then I make a decision on where to invest it,” she says. With the standing order, you set up a regular payment that your bank makes from your account at a certain frequency and for a certain period of time. For example, you can authorize your bank to make a certain payment on the fifth day of every new month for a period of one year. To place it, you will need to go to your bank with your salary account and sign a standing order that specifies the amount to be withdrawn and deposited into your savings account. “Remember to track previous salary delays and set up a date that can accommodate any future delays,” says Njenga.
Pay yourself first: Every efficient automated personal finance system should be anchored by paying yourself first, whether you are in employment or entrepreneurship. This is what has worked for Elizabeth Munga is the Group Head of Strategy and Business Planning at Britam Holdings Limited. “The biggest lesson that I have learned when it comes to money is the principle of Pay Yourself First. Before I pay my bills, buy groceries or do anything else I direct a portion of my income to saving or investing,” she says. Also, you should pay yourself once money hits your account, irrespective of whether you have due financial obligations such as a loan. Forbes recommends that one of the most efficient ways to pay yourself is by automating a portion of your earnings towards your emergency fund and retirement savings once your paycheck hits your checking account. “Even if you have high interest consumer debt or student loans to pay down, you need to be contributing something towards your emergency fund and retirement,” says Forbes.
Automate savings: To avoid being static in your savings, you can automate your savings such that they increase bit by bit monthly, quarterly, or annually. This, though, might require more work, depending on where the savings are going. If you are in entrepreneurship, create a dedicated account for your enterprise and de-link it from your checking and other accounts to avoid getting tempted to dip in.
Check-ups: Once you have automated your finances, you will need to set up a corresponding calendar that alerts you to check your statements and payments to ensure that money coming in and going out of your account is received by the recipients you have dedicated it to.