Too many choices. Using automation to reduce choices and dominate your money.
I have known Ramit Sethi for several years now, first through PBWiki, which he co-founded, and later as someone I turned to with questions about the world and workings of finance. In a world of gurus who promote one method of investing and then follow another, it was refreshing to talk with someone who was willing to share real numbers and case studies from their experiments.
Ramit and I have also able to share a bottle (OK, many bottles) of wine and laugh about the downstream effects of titles we’ve tested and chosen, as both of our book titles sound like scams to most people: The 4-Hour Workweek and I Will Teach You To Be Rich.
Despite this self-imposed handicap, Ramit’s blog and advice have been featured in media such as NPR, The New York Times, and Fortune magazine. I specifically asked him if I could excerpt a few of the diagrams and call scripts from his new book. He and I both share a love of templates that enable us (and others) to duplicate results without reinventing the wheel…
Enter Ramit.
The Psychology of Automation – by Ramit Sethi
Think about the 50+ money decisions you have to make today: Should you save more? What should you cut down on? What about investing — real estate or stocks or index funds? Pay off debt? Did you send in that Comcast bill on time? Is it time to rebalance your portfolio?
Faced with an overwhelming number of choices, most people respond in the same way: They do nothing. As Barry Schwartz wrote in The Paradox of Choice: Why More is Less,
“…as the number of mutual funds in a 401(k) plan offered to employees goes up, the likelihood that they will choose a fund — any fund — goes down. For every 10 funds added to the array of options, the rate of participation drops 2 percent. And for those who do invest, added fund options increase the chances that employees will invest in ultraconservative money-market funds.”
Why do so many people believe that personal finance is only about willpower? The idea goes like this: “If I just try harder, I’ll start saving more, pay off my debt, stop spending all that money, keep a budget, learn about investing, start investing, rebalance ever year…” Unlikely. In fact, go ask your friends if they’re taking full advantage of their employer’s 401(k) match. The vast majority of people are not — even though it’s literally free money. Their answer? “Yeah…I really should do that…”
It’s not about willpower. More than anything else, the psychology of automation is critical to successfully getting control of your finances.
In one study, researchers found that making 401(k) accounts opt-out instead of opt-in — in other words, making employees automatically participate, although they could stop at any time — raised contribution rates from less than 40% to nearly 100%.
Defaults matter. We’ve all read The Four Hour Workweek so you know about the benefits of doing less. Today, Tim’s given me the opportunity to show you the details of the personal-finance system I’ve built over the last five years. It’s a way to automate the day-to-day decisions you have to make — paying bills, investing, rebalancing, cutting down on spending, increasing spending on things you love — and focus on the things you care about.
Using “The Next $100” Principle, which I’ll show you below, your automated money flow will automatically route money where it needs to go — investments, paying bills, savings, and guilt-free spending.
And you can focus on the things that matter to you, instead of being a slave to your personal finances.
Case study: Michelle’s Automation System
To see how this will work, let’s use Michelle as an example:
Michelle gets paid once a month. Her employer deducts 5 percent of her pay automatically and puts it in her 401(k). The rest of Michelle’s paycheck goes to her checking account by direct deposit.
About a day later, her Automatic Money Flow begins transferring money out of her checking account. Her Roth IRA retirement account will pull 5 percent of her salary for itself. Her savings account will pull 5 percent, automatically breaking that money into chunks: 2 percent for a wedding sub-account, 2 percent to a house down-payment sub-account, and 1% for an upcoming vacation. (That takes care of her monthly savings goals.)
Her system also automatically pays her fixed costs like Netflix, cable, and insurance. She’s set it up so that most of her subscriptions and bills are paid by her credit card. Some of her bills can’t be put on credit cards—for example, utilities and loans—so they’re automatically paid out of her checking account. Finally, she’s automatically e-mailed a copy of her credit card bill for a monthly five-minute review. After she’s reviewed it, the bill is also paid from her checking account.
The money that remains in her account is used for guilt-free spending money.
To make sure she doesn’t overspend, she’s focused on two big wins: eating out and spending money on clothes.
She sets alerts in her Mint account if she goes over her spending goals, and she keeps a reserve of $500 in her checking account just in case. (The couple of times she went over her spending, she paid herself back using her “unexpected expenses” money from her sub-savings account.) To track spending more easily, she uses her credit card as much as possible to pay for all of her fun stuff. If she uses cash for cabs or coffee, she keeps the receipts and tries to enter them into Mint as often as possible.
In the middle of the month, Michelle’s calendar reminds her to check her Mint account to make sure she’s within her limits for her spending money. If she’s doing fine, she gets on with her life. If she’s over her limit, she decides what she needs to cut back on to stay on track for the month. Luckily, she has fifteen days to get it right, and by politely passing on an invitation to dine out she gets back on track.
By the end of the month, she’s spent less than two hours monitoring her finances, yet she’s invested 10 percent, saved 5 percent (in sub-buckets for her wedding and down payment), paid all of her bills on time, paid off her credit card in full, and spent exactly what she wanted to spend. She had to say “no” only once, and it was no big deal. In fact, none of it was.
Starting off: Scripts for negotiating with banks and credit cards
We’ll get to creating an automatic personal-finance system for you in a second. First, we need to iron out a few wrinkles to make sure your banks and credit cards aren’t screwing you.
The first steps are setting up the right financial accounts (saving, checking, investing), which I detail in chapters 1-3 of my book, but I’m just going to give you some core negotiation scripts to use against your financial institutions. With a customer-acquisition cost that’s typically between $300 and $1,500, financial companies don’t want to lose you — especially since most Americans are horrible negotiators and are afraid of using the phone. If you do it, you’re one of a select few who get preferential treatment.
First, I recommend you create a simple spreadsheet where you list all your accounts. Without it, you’ll activate a passive barrier that will make automation and negotiation far less likely to succeed. Download a spreadsheet here.
Next, I recommend you call up each account and negotiate like an Indian:
Script #1: Negotiating overdraft fees from your bank
You: “Hi, I just saw this bank charge for overdrafting and I’d like to have it waived.”
Bank rep: “I see that fee . . . hmm . . . Let me just see here. Unfortunately, sir, we’re not able to waive that fee. It was [some B.S. excuse about how it’s not waiveable].”
Bad Things to Say Here:
- “Are you sure?” (Don’t make it easy for the rep to say no to your request.)
- “Is there anything else I can do?” (Again, imagine if you were a customer-service rep and someone asked this. It would make your life easier to just say no. As a customer, don’t make it easy for companies to say no.)
- “Well, this Indian blogger dude told me I could.” (Nobody cares. But it would be cool if a thousand customers called their banks and said this.
- “Okay.” (Don’t give up here. Despite what you learned in sex ed, “no” does not mean “no” when it comes from a bank.)
Try this instead:
You: “Well, I see the fee here and I’d really like to get it waived. What else can you do to help me?”
(Repeat your complaint and ask them how to constructively fix it. At this point, about 85 percent of people will get their fees refunded. I have hundreds of comments from people on my blog who have taken this advice and saved thousands of dollars in fees. But in case the rep doesn’t budge, here’s what you can do.)
Bank rep: “I’m sorry, sir, we can’t refund that fee.”
You: “I understand it’s difficult, but take a look at my history. I’ve been a customer for more than three years, and I’d like to keep the relationship going. Now, I’d like to get this waived—it was a mistake and it won’t happen again. What can you do to help?”
You: “Hmm, one second, please. I see that you’re a really good customer. . . . I’m going to check with my supervisor. Can you hold for a second?”
(Being a long-term customer increases your value to them, which is one reason you want to pick a bank you can stick with for the long term. And the fact that you didn’t back down at the first “no” makes you different from 99 percent of other customers.)
Bank rep: “Sir, I was able to check with my supervisor and waive the fee. Is there anything else I can help you with today?”
Script #2: Negotiate your credit card APR
Your APR, or annual percentage rate, is the interest rate your credit card company charges you. The average APR is 14 percent, which makes it extremely expensive if you carry a balance on your card. Put another way, since you can make an average of about 8 percent in the stock market over the long term, your credit card is getting a great deal by lending you money.
So, call your credit card company and ask them to lower your APR. If they ask why, tell them you’ve been paying the full amount of your bill on time for the last few months, and you know there are a number of credit cards offering better rates than you’re currently getting. In my experience, this works about half the time. It’s important to note that your APR doesn’t technically matter if you’re paying your bills in full every month—you could have a 2 percent APR or 80 percent APR and it would be irrelevant, since you don’t pay interest if you pay your total bill in each month. But this is a quick and easy way to pick the low-hanging fruit with one phone call.
Script #3: Get your monthly/annual fees waived (credit cards and all bank accounts)
You: “Hi, I’d like to confirm that I’m not paying any fees on my credit card.”
Credit Card rep: “Well, it looks like you have an annual fee of $50. That’s actually one of our better rates.”
You: “I’d rather pay no fees. Which card can you switch me to that doesn’t charge fees? I’d like to make sure my credit score isn’t affected by closing this account, too. Can you confirm?”
The vast majority of people don’t need to pay any annual fees on their credit cards, and because free credit cards are so competitive now, you rarely need to pay for the privilege of using your card. The only exception is if you spend enough to justify the extra rewards a fee-charging account offers. If you do pay an annual fee, do a break-even analysis to see if it’s worth it. Hundreds of my readers have either (1) had their annual fee refunded, or (2) switched to a no-fee card.
Script #4: What to do if you miss a credit card payment
You: “Hi, I noticed I missed a payment, and I wanted to confirm that this won’t affect my credit score.”
Credit Card rep: “Let me check on that. No, the late fee will be applied, but it won’t affect your credit score.”
(If you pay within a few days of your missed bill, it usually won’t be reported to the credit agencies. Call them to be sure.)
You: “Thank you! I’m really happy to hear that. Now, about that fee…I understand I was late, but I’d like to have it waived.”
Credit Card rep: “Why?”
You: “It was a mistake and it won’t happen again, so I’d like to have the fee removed.”
(Always end your sentence with strength. Don’t say, “Can you remove this?” Say, “I’d like to have this removed.” At this point, you have a better-than-50-percent chance of getting the fee credited to your account. But just in case you get an especially tough rep, here’s what to say.)
Credit Card rep: “I’m very sorry, but we can’t refund that fee. I can try to get you our latest blah blah marketing pitch blah blah…”
You: “I’m sorry, but I’ve been a customer for four years and I’d hate for this one fee to drive me away from your service. What can you do to remove the late fee?”
Credit Card rep: “Hmm . . . Let me check on that. . . . Yes, I was able to remove the fee this time. It’s been credited to your account.”
You don’t believe me that it can be so simple? It is. Anyone can do it.
There are other advanced negotiating strategies and tactics, including optimizing your debt-to-credit ratio, but I’ll leave those for another day.
Finally, if you decide to switch accounts, which ones should you use? I cover this in detail in the book, but here’s what I use ING Direct for savings and Schwab Investor Checking, where I earn interest and get 100% of ATM fees refunded from anywhere.
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- *“The Next $100” Principle Applied: Automating your Finances
Too many people try to save money on 50 things and end up saving 5% on everything — and causing themselves a huge amount of stress that makes them give up entirely. Instead, I prefer focusing on my top two discretionary expenses (for me, eating out and going out), and cutting 25%-33% off over a period of six months. This generates hundreds of dollars of extra cash flow that I re-route to investing and travel.
To show you how automating your accounts works, I’ve prepared a 12-minute video that shows you how to build a personal-finance infrastructure that automates your money so you can spend less than 1 hour per week monitoring your money. Everything will be done automatically — investment, savings, bills paid. Everything.
Ramit’s 12-Minute Guide to Automating Your Finances
First, you’ll need to log in to each account and link your accounts together so you can set up automatic transfers from one account to another. When you log in to any of your accounts, you’ll usually find an option called something like “Link Accounts,” “Transfer,” or “Set Up Payments.”
These are the links you need to make:
Examples: Your 401(k) should be connected to your checking account via direct deposit (talk to your HR rep about setting this up — it takes 10 minutes to fill out a form). Then log into your Roth IRA, savings account, and credit card, where you can link your checking account to them. Finally, there are some bills that can’t be paid through your checking account, like your rent. For those, use your checking account’s free bill-pay feature so they automatically issue your landlord a check on the precise date it’s due. Now, you never have to manually write a check again.
Set up automatic transfers
Now that all your accounts are linked, it’s time to go back into your accounts and automate all transfers and payments. This is really simple: It’s just a matter of working with each individual account’s website to make sure your payment or transfer is set up for the amount you want and on the date you want.
Most people neglect one thing when automating: dates. If you set automatic transfers at weird times, it will inevitably necessitate more work, which will make you resent and eventually ignore your personal-finance infrastructure. For example, if your credit card is due on the 1st of the month, but you don’t get paid until the 15th, how does that work? If you don’t synchronize all your bills, you’ll have to pay things at different times and that will require you to reconcile accounts. Which you won’t do.
The easiest way to avoid this is to get all your bills on the same schedule. To accomplish this, get all your bills together, call the companies, and ask them to switch your billing dates. Most of these will take five minutes each to do. There may be a couple of months of odd billing as your accounts adjust, but it will smooth itself out after that. If you’re paid on the 1st of the month, I suggest switching all your bills to arrive on or around that time, too.
Call and say this: “Hi, I’m currently being billed on the 17th of each month, and I’d like to change that to the 1st of the month. Do I need to do anything besides ask right here on the phone?” Of course, depending on your situation, you can request any billing date that will be easy for you.
Now that you’ve got everything coming at the beginning of the month, it’s time to actually go in and set up your transfers. Here’s how to arrange your Automatic Money Flow, assuming you get paid on the 1st of the month.
2nd of the month: Part of your paycheck is automatically sent to your 401(k). The remainder (your “take-home pay”) is direct-deposited into your checking account. Even though you’re paid on the 1st, the money may not show up in your account until the 2nd, so be sure to account for that.
Remember, you’re treating your checking account like your e-mail inbox— first, everything goes there, then it’s filtered away to the appropriate place. Note: The first time you set this up, leave a buffer amount of money—I recommend $500—in your checking account just in case a transfer doesn’t go right. And don’t worry: If something does go wrong, use the negotiation tips above to get any overdraft fees waived.
5th of the month: Automatic transfer to your savings account. Log in to your savings account and set up an automatic transfer from your checking account to your savings account on the 5th of every month. Waiting until the 5th of the month gives you some leeway. If, for some reason, your paycheck doesn’t show up on the 1st of the month, you’ll have four days to correct things or cancel that month’s automatic transfer.
Don’t just set up the transfer. Remember to set the amount, too. Use the percentage of your monthly income that you established for savings in your Conscious Spending Plan (from Chapter 4 of my book; typically 5 to 10 percent). But if you can’t afford that much right now, don’t worry—just set up an automatic transfer for $5 to prove to yourself that it works. The amount is important: $5 won’t be missed, but once you see how it’s all working together, it’s much easier to add to that amount.
5th of the month: Automatic transfer to your Roth IRA. To set this up, log in to your investment account and create an automatic transfer from your checking account to your investment account. Refer to your Conscious Spending Plan to calculate the amount of the transfer. It should be approximately 10 percent of your take-home pay, minus the amount you send to your 401(k).
7th of the month: Auto-pay for any monthly bills you have. Log in to any regular payments you have, like cable, utilities, car payments, or student loans, and set up automatic payments to occur on the 7th of each month. I prefer to pay my bills using my credit card, because I earn points, I get automatic consumer protection and little-known benefits, and I can easily track my spending on online sites like Mint, Quicken, or Wesabe.
But if your merchant doesn’t accept credit cards, they should let you pay the bill directly from your checking account, so set up an automatic payment from there if needed.
7th of the month: Automatic transfer to pay off your credit card. Log in to your credit card account and instruct it to draw money from your checking account and pay the credit card bill on the 7th of every month— in full. (Because your bill arrived on the 1st of the month, you’ll never incur late fees using this system.) If you have credit card debt and you can’t pay the bill in full, don’t worry. You can still set up an automatic payment; just make it for the monthly minimum or any other amount of your choice. (Incidentally, paying your bills on time is the one of the top factors in determining and improving your credit score.)
By the way, while you’re logged in to your credit card account, also set up an e-mail notification (this is typically under “Notifications” or “Bills”) to send you a monthly link to your bill, so you can review it before the money is automatically transferred out of your checking account. This is helpful in case your bill unexpectedly exceeds the amount available in your checking account—that way you can adjust the amount you pay that month.
Tweaking Your System: Freelancers, irregular income, and unexpected expenses
That’s the basic Automatic Money Flow schedule, but you may not be paid on a straight once-a-month schedule. That’s not a problem. You can just adjust the above system to match your payment schedule.
If you’re paid twice a month: I suggest replicating the above system on the 1st and the 15th—with half the money each time. This is easy enough, but the one thing to watch with this is paying your bills. If the second payment (on the 15th) will miss the due dates for any of your bills, be sure that you set it so that those bills are paid in full during the payment on the 1st. Another way to work your system is to do half the payments with one paycheck (retirement, fixed costs) and half the payments with the second paycheck (savings, guilt-free spending), but that can get clunky.
If you have irregular income: Irregular incomes, like those of freelancers,
are difficult to plan for. Some months you might earn close to nothing, others you’re flush with cash. This situation calls for some changes to your spending and savings. First—and this is different from the Conscious Spending Plan—you’ll need to figure out how much you need to survive on each month. This is the bare minimum: rent, utilities, food, loan payments—just the basics. Those are your bare-bones monthly necessities.
Now, back to the Conscious Spending Plan. Add a savings goal of three months of bare-bones income before you do any investing. For example, if you need at least $1,500/month to live on, you’ll need to have $4,500 in a savings buffer, which you can use to smooth out months where you don’t generate much income. The buffer should exist as a sub-account in your savings account. To fund it, use money from two places:
- Forget about investing while you’re setting up the buffer, and instead take any money you would have invested and send it to your savings account.
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In good months, any extra dollar you make should go into your buffer savings.
Here’s an example of how I set up my sub-savings accounts:
Once you’ve saved up three months of money as a cushion, congratulations! Now go back to a normal Conscious Spending Plan where you send money to investing accounts. Because you’re self- employed, you probably don’t have access to a traditional 401(k), but you should look into a Solo 401(k) and SEP-IRA, which are great alternatives.
Just keep in mind that it’s probably wise to sock away a little more into your savings account in good months to make up for the less profitable ones.
If you have an irregular income, I highly recommend using YouNeedABudget as a planning tool. It uses a forward-looking system that’s very helpful if you don’t know what you’re going to make next month.
Your money is now automatic
Congratulations! Your money management is now on autopilot. Not only are your bills paid automatically and on time, but you’re actually saving and investing money each month. The beauty of this system is that it works without your involvement and it’s flexible enough to add or remove accounts any time. You’re accumulating money by default.
Most importantly, whenever you’re eating out, or you decide to buy a new pair of shoes or fly out to visit your friends or get the “Pro” version of that web app you’ve been eyeing, you won’t feel guilty because you’ll KNOW that your finances are being handled — automatically.
Excerpts from Ramit Sethi’s new book, I Will Teach You To Be Rich. Used with permission.
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The big assumption with this piece and that is regular streams of monthly income. What about those with lumpy income streams such as sales people that work strictly from commissions? Commission income can fluctuate wildly. Have I missed something?
Thank you for this article !!
I am looking for an equivalent of mint.com, but for France. And with automatic load of data between my bank and the website.
Cheers to all NR and enjoy your LD !!!!
Some of your advice is good to be sure. I appreciate that in theory changing all of the bill dates to synch would be great, but I have just spent hours on the phone with a # of utilities: cable, phone, health insurance, electric and none have been willing to change the bill date even though I told them it was to set up autopay. Electric will not take credit cards or change it as bill cycle depends on when they read the meters. I’m assuming gas heating will say the same. Phone says you need to change your phone # to do it as it ties into hen you open the account. Health insurance will not. Cable says they will, but you need to go to a retail location and they may refuse…but “keep trying other stores”! Maybe its due to living in Boston where everything seems to be a problem.
Excellent topic. Absolutely correct on automating your finances to gain financial independence. The key is to obtain residual income through various means in order to produce cash flow and pay your operating expenses (monthly expenses and debt payment). Once you have reached residual income exceeding your expenses, this is true financial freedom!
I really like his thoughts on automation but my major issue here is with how he develops his passive investment strategy.
I really believe that investment is not something that should be done passively, but if you must you have to pick your risk level before you start building your portfolio set. You cant just arbitrarily pick what it is that you want and determine your diversification if you would like a certain expected return. It’s probably just the finance guy in me screaming not to listen to financial planners.
Also, you might spend way more money if you automate everything and go check less versus physically writing them. You need to watch every single dollar you spend if you physically write the check and then have to add it to a register, etc.
Great advice with the the guilt free spending budget though. I have been doing this for years and its the only way to be on top of your stuff and stay happy.
excellent post. As usual full of great ideas to streamline life and leave more time for doing the good stuff! 🙂
Just IMHO, but once you’ve set up everything – ONCE – it should take an hour a month, not a week to monitor. When I saved the most, I never maintained my money in individual buckets although I can see why someone who has zero self-discipline would have to do that. I would maybe be concerned that there’s a bit too much automation involved. I don’t mind seeing more non-automation than you have here for the average person. For myself, I’ve kept $10k in my checking account for so long that I can’t imagine doing anything differently.
I really appreciate the fact that you talked about how to automate your finances for freelancers–something most financial advisors ignore. I am an artist and a single mom–self-employed for over 5 years–and I have been looking for this system for years! Thank you!
5% to 401k goes automatically; my question is when I set up the 5% to go to the Roth Ira — is it 5% from the gross amount of the paycheck? Or 5% from the check, after taxes? (same question for the other 2%,2% & 1% savings: is that from gross or from after taxes from paycheck?) Thanks for your help & info! much appreciated.
I just picked up Tim’s book at the library a few days ago and have since enjoyed reading the book as well as reading through his blog on here.
Since MINT is not available outside the US, any advice on which website to use in Germany?
Much appreciated, thanks for your help!
I like the concept, but I don’t get paid on the same dates each month, I get paid every two weeks, but the actual dates shift because each month is not exactly 30 days. So, the problem is that if I set dates for my credit cards to be paid at some point that date will not match up with the date that my paycheck is deposited. So then I have to keep watching it and changing the “automatic” date so I won’t get an overdraft. Any fix for that?
How about setting up a “float” amount in your checking account that’s equivalent to a month’s worth of bills? That way, deposits on top of this amount is what feeds the automation system.
I’ve heard alot about your website, fourhourworkweek.com and this post caught my attention. I think its something very important to someone who has been self employed for the past 3 years. Since being self employed my income comes and goes randomly on random dates. With that said I think I can still follow your system and do well with it. I’ll be picking up your book also. I think I saw it at Boarders in Anchorage Alaska which is what inspired me to look up your website.
I’ve been doing this for quite some time. I also do this with my cellphone company occasionally, including negotiating for custom plans.
Is this automation possible if you have different financial institutions handling the accounts? For instance I have savings, checking, money-market and one credit card in one bank, but I have a second credit card which I pay through a different financial institution.
I like ramits strategy to the youth of America. It is what we need. I will admit I used David Ramseys tools to get out of debt. It took me two years to get out of 20K credit card and car loan debt. I still have 6K on my school loan, but since I have no credit cards it is my only way of forming credit and it is also a 2% fixed apr. So I can focus on investing and earn a higher return anyway. (although I would love to pay off my loan)
I have my own budget that I have been using for the last two years and have found it very helpful (also I am a genius at excel lol) But I find I still spend way too much and do not save as much as I would like. I am giving YNAB a go for a month or two to see if it helps….but I am still confused about it… I am a personal trainer so my bills a stable, but my income fluctuates so I thought YNAB would help a bit..I also am in the mist of getting all my bills around the same date (I already automate). Ill check in and see if it helps
Ramit….I loved the book, but skimmed through it since I was already doing it 🙂 I wish I had this book three years ago when I started my financial quest. But I have passed the book on to others who it has helped greatly
My team and I are students of behavior change. One of our core values around finance is that success is less about accounting and more about psychology. I love Ramit’s philosophy of making the decision about how to save/invest, etc. automating it and getting on with your life. Too often we set ourselves up for failure by having too many decisions to make, too many categories to manage, too many things to worry about. Of course you’re going to fail.
Great work Ramit. We appreciate your inspiration. Keep it up.
Hi Ramit/Tim,
I was directed to this post as I’m in Ramit’s list. Boy, I’m glad I followed through, I love the post, the best part was to call up the bank to change the bill date for credit cards. This will definitely solve my issues on different bill dates. Thanks.
Ani from Malaysia
Hello
I love the book FHWW and I am listening to the audio in my car. I need to know how to have my
VA order supplies with my credit card securely. Is anyone doing this? Would you just dispute any unauthorized charges? Thanks in advance.
In your example of the rate of participation in 401ks vs the number of funds available, I think this is an extremely interesting paradox and it’s something we’ve been dealing with for years. If you’re in the web business, you’ll find that when you give your readers/customers too many choices conversions actually go down. They are really looking for between 3-5 options. Anything more and it just becomes noise. Very interesting topic!
Dear Tim et al
Have a look at this, regarding automation.
http://gadgetwise.blogs.nytimes.com/2011/09/23/7-ways-to-automate-your-life-with-ifttt/
Yeah, Tim, I have to agree with the first poster. You and Ramit are both younger than I am, but I WISH TO GOD you guys had been around when I was a lad. I never had anyone to teach me anything about money, and I grew up thinking that business-building and product manufacturing were impossible fantasies. So, predictably, I got into W4W and ruined my finances. It’s only now, with guys like you and Ramit, that I’m seeing that there are possibilities in this world beyond what I even dreamed when I was young, and it has me excited to be alive again. Thank you guys SO much, and, if there are others like you out there – others who’ve written easily-to-follow-and-implement books, PLEASE let us know about them.
I get pleasure from, cause I found exactly what I used to be having a look for. You’ve ended my 4 day lengthy hunt! God Bless you man. Have a nice day. Bye
It’s the best time to make some plans for the future and it’s time to be happy. I’ve read this post and if I could I want to counsel you few interesting things or suggestions. Maybe you can write next articles referring to this article. I wish to learn more things about it!
Great post..
it´s just about being assertive…
thats the name of the game..
Just read through this article and posts. I think it’s great. I have been doing most of these automation techniques for years, and it’s great to get re-confirmation that this is a good process!
Here are a few things I learned along the way. First, I used to track every penny and set budget for every single little bill or spending item. I have used Microsoft Money software on my PC since I’ve owned a PC (17 years).
I ran across an article on Microsoft Money website that was very intriguing that Iv’e been using for several years now. It’s related to budgeting not every small little item but break it down into a few categories.
These numbers are from GROSS INCOME
1. EVERDAY SPENDING = 60%
2. OCCASIONAL SPENDING (Emergency Fund) = 10%
3. RETIREMENT – 10%
4. FUN – 10%
5. SAVINGS – 10%
Elaborate:
1. All monthly bills, taxes on income, food, gas, etc.
2. Repairs, longer term bills (Property tax, life insurance, auto maintenance)
3. Self Explanatory (mine is direct debited to 401(k) plan, but I will be looking at Roth IRA after reading this article)
4. Dining out, vacations, sporting events, etc.
5. Saving for big ticket purchases (or use this category to eliminate any existing debt)
The other automation item that I have used for years: Money program has built-in bill calendar. I enter all my bills in there that I must pay. I get paid every two weeks on Thursday. I schedule my check for the following Monday “after payday”. On payday, I sit down to pay billls (almost all automated, I just double check everything is correct). In one sitting, I pay all the bills that are listed to be due before my next paycheck arrives . It only takes me about 30 minutes per 2 weeks to do my financial management.
Good stuff; I was a Ramit fan anyway (hence why I showed up here in the first place) but I came and found this again because I found myself needing to get some overdraft fees waived.
Clearly, I got the most stubborn adviser on the planet! I followed the script and remained polite but still got a firm no, spoke to the supervisor, more of the same. Took down the details for their complaints department, names, all that good stuff and I’m skipping off to have a little fun with that.
Also to look for a new bank. Inconvenient, and I do like HSBC normally, but this is fairly ridiculous.
H
Great article, very similar to the “payment processing” system I have in place for my paychecks and expenses. One thing I can’t seem to figure out yet how to automate is my monthly reconciling. I keep a personal financial statement tracking all of my expenses (according to category) against income. Because I’m so OCD about it, I enter all my numbers at the end of each day (from receipts of the day’s purchases). I’d rather not have to do this everyday if possible, but if I wait for, say, the end of the week, I can’t always remember what a particular transaction was for. Any thoughts on what I can do to streamline this process?
I enjoyed the article! As a new entrepreneur I’m having enough trouble managing my time and don’t need the added stress (and time suck) of micro-managing my finances. Automation here I come!
Where do you find an account that automatically moves money around by percentages? Or are you assuming salaried income? My net pay can vary as much as 10%. How do you deal with that? Also, how do you account for irregular/annual expenses in an automated system.
Did you ever find a solution to this? I’m looking for the same thing…
I don’t know if it’s just me or if everybody else encountering issues with your site.
It appears as though some of the text within your posts are running off the screen.
Can somebody else please comment and let me know if this is happening to them as well?
This could be a problem with my browser because I’ve had this happen before. Many thanks
Have to disagree. Thanks for the tips, but this article was confusing, verbose, the first half seemed oddly misplaced and confusing…
I don’t want lessons in talking to banks… plus your advice doesn’t work well. I’ve tried it, been there done that….. I came here to AVOID talking to banks about overdraft fees ever again. I’m assuming people reading this article AREN’T the kind of people who want to haggle with humans about corporate bull, that’s why we want to AUTOMATE everything.
There was just a link to Mint, without any explanation… dunno…. the whole article. Just seemed confusing and jumping around. Just give me a step by step…. all this focus on 401K stuff that I have no interest in. Honest opinion…. after multiple attempts, it left me frustrated, and basically just said, ‘automate everything!’…. that’s the part I knew…..
Ramit makes the unfortunate assumption that he’s talking to adults…his mistake lol. Ok seriously what were you looking for here? Read the whole book or better yet click on mint and find the “about” button. Goodness, take some initiative? This ain’t rocket science.
Another criticism…. don’t mix a video in with literature. It’s annoying. It makes you have to focus in a different way…. I like skimming the article and re-reading, etc. Now there’s mixed media, and honestly I hate the video.
I love this lifehack and thanks Ramit for really walking us through the process of setting everything up. The percentages can be tweaked on a case by case basis but as a general rule and smart way to set things up…this is great!
Changing the way you play life,
Simcha
Great guidance. This should help free up time so I can concentrate on other things. I like the concept of using the Credit score Cards for regular per month costs that allow it.
Have you tried IFTTT.com it stands for if this then that.
It will link and automate all kinds of sites.
It makes sights work together and also smart devices and phones.
You create a recipe or use those all ready created.
One that I use wakes up my son each morning with a weather report. It calls my house.
For instance if you post to Facebook it will post to twitter or goggle +
It calls me and lets me know if it is going to snow or freeze and reminds me to take in plants etc.
It can change the Phillips hue wifi connected colored lights if it is raining or important email comes in or text message, millions of possibilities.
It takes all pictures I am tagged in Facebook and puts them in Evernote and dropbox.
It saves all my posts in a file in google drive.
the uses are in the millions.
Awesome tips. Even tho I can’t automate the whole thing at the time (not sure about due dates and my CC is a bitch), your advices on getting waivers are priceless!
great advice. Actually I try to do many of the things said, but I realize that I’m not organized. This is the importance of a system.
Consumer protection in Indian finance: Going from ideas to action but this was very helpful. Much appreciated, Eric.
Thanks Ramit it is very nice.
You have written Really good content.
Like
Durgesh
no sooner than I finished reading this I used the late payment script. Worked great the removed the $25 late charge!
It’s a very informative and helpful blog. Thanks for sharing.
Hi Everyone,
I am pretty ashamed to ask this question, but aren’t the banks charging us fees when we transfer our money from (for exemple) a Schwab checking account to you ING direct saving? (today Capital one 360 I assume)
I am so sorry for my obvious outstanding lack of knowledge on the subject (yes I’m aware of it haha) but I’m new to it. I want to leave Bank of America and their ridiculous fees (and interest rate) to switch to Capital One 360 for months, but I haven’t found the courage to do anything due to my lack of knowledge on…well pretty much everything… I am young and new to this country as well, so it’s a lot to take in. I just found Ramit book and loved it!
So to go back to my ignorance, what kind of transfer are we talking about to set up those automatic transfer between different accounts from different bank? Or should all the accounts be in the same bank? I’m obviously confuse, please someone help me !
Thank you
Oh my gosh. Just called my credit card company RE a payment that came through late (paid too late on the due date and they charged me interest and a late fee.) They confirmed that it wouldn’t be reported to the credit agencies, and I asked for the fee to get removed – and they reversed that too! Whew! Good stuff on this blog post…thats for sure. Was nervous calling to negotiate…but it sure paid off!
Great article, but is it really worthwhile to rehearse some script and spend time on arguing against a late payment fee? I think the 7-10 EUR or so that it costs are in no relation to the stress that this would cause. To me that’s an example for doing something efficiently that is, at the same time, totally ineffective, as the time and energy spent on this could probably also be spent on something that generates more money than this loss.
Great advice. And I did it. Bank of America, refund $40. Capital One gave me a new product with no anual fee and a great cash back feature. LOL I feel like If I close a deal of $40million. “People perish for a lack of knowledge”.
Thanks Ramit, reading your book was very eye-opening. It is a pity that I only discovered it now at the age of 36… better now than never!
As I am living in Germany, does someone know about the equivalent of 401 (k) and Roth IRA? That would help, danke!
I came across this post through the podcast episode on Tim’s interview with Ramit and I must say that after reading this this post, I made a few calls and managed to save myself close to $90 a month on various “account management fees”. Well done guys, and thanks a mil!
Tim Ferris is a person with enormous experience and I really respect him. Thanks for this article. Contains a lot of data
Tim, I assume it is your automation procedure that tweeted this link to a 7-year-old article (which is still very valuable btw), but most of the links are outdated and the item linked no longer exists. I don’t think Ramit has written any new books, so do you know if he has written any updated articles about how he recommends automation? I assume he no longer uses these products which no longer exist as they did in 2009.
Ramit,
When I first read this I said, “These scripts are too simple they will never work.” But then I realised that I have this internal feeling of being scared of calling companies about finances. I have no idea where it came from. Maybe because all I heard growing up was how these big companies just want to take your money off you.
I literally made no progress. But I decided to pick up the phone, and using your scripts, I either got massive reductions or got fees waived.
So far I have had success with this method on my car insurance, gas and electricity bill, internet bill, and cell phone.
Have you done any re-search on why we’re so scared at making these calls?
Ramit’s book has become the defacto book for millennials looking to get their finances in order after college.
Inspiring and worthwhile!
Like everything else you share with your followers, this was so on point and helpful. Thank you
Hello! I see ING Direct is now Capital One 360 at 1.00% APY. There are now cometing companies such as Amex Savings and Ally with 1.65% APY with no minmum balance required. Would you recommend these accounts over ING now?