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February 23, 2011

4

Automate, Automate, Automate

In the last post, I shared the secret of financial stability and gave you a strategy for making it happen.

Today, I want to talk about how the wonders of technology can make growing your savings painless.

When I got my first bank account more than 20 years ago, it was a pain.  I was working part time at a hardware store, bringing in about $65 a week.  To put it in the bank, I had to find time to go to the bank and stand in line.  Then if I wanted any money out I had to go back to the bank and take it out.  It was much more convenient to just go to the local currency exchange, pay a couple of bucks and put cash in my pocket.  It was convenient, but not very smart, because I’m sure you know just how quickly cash can burn a hole in your pocket.

Fast forward a year or so, I was working as a telemarketer.  This time I had a bank account and this new thing called a debit card.  I still had to go to the bank and put the money in, but now I could get it out any time I wanted.  A few years later, working for a package delivery service (side note:  if you ever find yourself having nightmares about a job, it’s probably time to move on,) I was introduced to direct deposit.  Now I didn’t have to go anywhere near a bank if I didn’t want to.  The money went straight into the bank and I could get it out any time I wanted with my trusty debit card.

Every year, technology makes our lives a little easier, but easier is not always the smartest play.  Making something easier can be pretty destructive over the long haul.  But with a little forethought, we can have the modern conveniences of banking with just enough difficulty to keep us from indulging in more destructive habits.

Since you’re reading this, I’m assuming you have at least some internet access.  And that’s really all you need.  Just about every bank out there has some form of internet banking.  You can withdraw money, transfer money, pay bills, even apply for a mortgage or a car loan with a few mouse clicks.  Even if your bank doesn’t have a full featured internet presence, another bank is always just a click away.

As of today, I have 5 savings accounts spread over two different banks.  I use my local bank account for paying bills and holding onto my emergency fund.  For my automatic savings account, I use ING Direct.  I use this bank because it has a higher than average rate of interest and more importantly, it takes three business days to transfer money.  So even if I do see something I just have to have, there’s a three day cooling off period.  That’s usually long enough for me to lose interest.

How does all this tie together?  By leveraging the universe of services in online banking, you can effectively put your savings in a lockbox that’s protected from the kind of impulse buying that blows most budgets out of the water.

Use direct deposit to get the money into the bank, set up automatic transfers to move it the same day, and have a cooling off period before you can take your savings out again.  Before you know it, you’ll have more money than you’ve ever had at one time.  And you’ll be amazed how much piece of mind this will bring.

Until next time, keep saving.

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