Time to Set it and Forget It

In the Security tier of your plan, you likely set up some elements of financial automation. However, based on your comfort with having bills paid automatically, or the amount you typically had available in your accounts, it may not have been for the full amount. For example on a credit card payment you may have set it up to ensure just the minimum or a set monthly amount was paid. This would necessitate a second payment to ensure the full amount or whatever you could afford was paid up.

Now that you’re in the Growth tier of your plan, you may have reached a stage where you’re confident you can always pay the full amount of your bills and still have a nice buffer in your liquid accounts (e.g. a checking account). You may also have the ability to increase the amount you set toward saving or investing.

Finally, if you feel you have developed healthy habits like reviewing your transactions for accuracy and/or to keep an eye on where you spend your money, there’s no harm in getting the boring work of paying your bills into a fully automated state. 

Steps to Do it

(If this looks familiar, it’s because the steps below were outlined in a previous step of the Financial Priorities plan.)

1. 1. Bills, Saving, Investing: In the notes section above, make a list of all the bills or other recurring payments you have each month, the account that will pay that bill, how it will be paid and the amount. For example:
      • Capital One Credit Card, Schwab Checking, Automatic Transfer, ~$1,500 (variable)
      • Jane Doe Landlord Rent, Schwab Checking, Bill Pay, $1,100
      • Utility Bill, Schwab Checking, Automatic Debit, ~$50
      • Emergency Fund Saving, Schwab Checking to Ally Bank, Automatic Transfer, $250
      • IRA Retirement Saving, Schwab Checking to Schwab Roth IRA, Automatic Transfer and Investment in SWYNX, $500
        
        
   2. Link Accounts: Go to the websites for your various accounts (checking, saving, investing, retirement) and start the process of linking together your different accounts at different institutions. This may take minutes or a few days depending on how your bank allows for linking external accounts.
      
      
   3. Set up Transfer etc.: Set up the automatic transfer, payment, debit, or bill pay option you planned in step one by following the prompts on the appropriate website.
      
      
   4. Set Up Alerts: Review the notes you took in step one and decide what kinds of alerts you may want to set up. For example if you know your checking account usually has roughly $1,000 of automatic payments going out around the 15th of the month, set an alert that will notify you if your account balance drops below, $1,200. This way you can ensure everything stays on track.

<< Make Additional Investments Checklist

Lump Sum Contributions

If you’re making a lump sum, one time purchase, on most sites you’ll simply search for the ticker symbol of the stock, mutual fund, index fund, or ETF you’re looking to purchase, click “Buy” and follow the prompts on the site.

Recurring Contributions

If you’re looking to make a regular contribution (say on a weekly, or monthly basis) you may need to find a separate section that indicates “Automatic” or “Recurring” investing. Also you may only be able to select certain kinds of mutual funds or index funds (or ETFs, which are a type of index fund) since these funds don’t have transaction fees associated with purchases (the last thing you would want would be to pay a $5 fee every time you bought $100 worth of stock…this would seriously eat into your returns). 

<< Make Additional Investments Checklist

Consider Your Investing Time Horizon

• If you have a long time horizon (e.g. 10 years or more) and you want the best chance of making a positive return while also having strong growth, you’re going to be looking for a broadly diversified stock market index fund with low expense ratios.
• If you have a shorter time horizon (e.g. less than 10 years) and you want the best chance of making a positive return while likely accepting less growth, you’re going to be looking for a bond fund.
• If you have a short time horizon (e.g. less than 10 years) and are willing to potentially lose it all but also potentially get a great return (and everything in between!), you could buy an individual stock.

<< Make Additional Investments Checklist

New Investment Account Type? New Account.

If you’ve decided to use an investment account type you didn’t previously have, you need to open a new account.

If you have other investment accounts with an existing institution, you can probably open the account there and use your existing user profile and login information (e.g. you already have a 401k with Fidelity or Vanguard but you want to open a new standard “Brokerage Account”).

If not, you’ll want to open a new account with one of the major discount brokerage companies (e.g. Fidelity, Vanguard, TD Ameritrade, E*TRADE, Charles Schwab etc. etc. – we recommend searching the web for a full list of companies and comparison articles).

<< Pay Off Debts More Quickly Checklist

Well done!

If you have multiple “other” debts, use the notes section to make note of the ones you paid off completely and what is still outstanding. When you’ve completed paying off all your “other” debts, check this task off the list! Well done!

<< Pay Off Debts More Quickly Checklist

Add An Extra Payment

Go to your lender’s website and make the necessary changes (either increasing your payment or setting up a secondary payment). In some cases – often with a mortgage for example – the website will give you the option to add an “extra principal” payment.

Complete the Tasks

If you’ve determined you will pay off your “other” debts more quickly, you need to make the adjustments to your regular payments (either by modifying an existing one or setting up a secondary payment for the extra amount). Complete each subtask before marking this task complete.

Subtasks

1. Determine Extra Payment Amount(s)
2. Make Update with Lender(s)
3. Mark All Debts Paid Off

Time to Get To It

At this point, you’ve done the math. You calculated the financial impact of paying down debt more quickly vs. investing your extra cash.

Additionally, you’ve considered your own psychology. You’ve asked yourself if you would prefer to guarantee paying less money in interest vs. the potential larger growth of investments.

Based on both financial and psychological factors, you’ve made a decision and now it’s time to act. Follow the steps in the “Pay off Debts More Quickly” checklist, or follow the steps in the “Make Additional Investments” checklist. If you want, you can split your extra cash between paying down debt faster and investing to get a little benefit from both.

Calculate When You’ll Reach Your Goal

Since funding your “emergency” fund at the Independence level may mean something slightly different from what it meant before, you may want to take a moment to calculate when you’ll reach your goal based on your existing transfer rate. This may incentivize you to save more if you can.

To do this, simply take the value you would like your emergency fund to be, subtract its current value, and divide the remaining number by your monthly contribution. The result is the number of months it will take to reach your goal.

Example

• Desired Emergency Fund: $30,000
• Existing Emergency Fund: $20,000
• Monthly Contribution: $500

($30,000 – $20,000) / $500 = 20 months to reach your goal.

In the above example, increasing contributions to $750 a month, would reach the goal in 13.3 months, more than half a year earlier.

Don’t forget

The sooner you reach your emergency fund goal, the sooner the full amount of your regular monthly contributions can be used for something else!

Why should I review my credit card statement?

There are three reasons to review your card statements every month.

1. To get a quick reminder of how you spend your money
2. To identify fraudulent charges
3. To identify legitimate but unintended charges (subscriptions you forgot to cancel are a common example)

Let’s briefly review each.

Reminder of How You Spend Your Money

We’ve all been there. “Man! I can’t believe I spent $___ on ____!” Or, “Whoa Nelly I ate out a lot this month!” Simply put, when you see a monthly summary of your spending, you will understand where your money goes. If you struggle with keeping your spending in check – this can help you to spend more consciously. Both are good for your financial health.

Identify Fraudulent Charges

We’ve all heard about security breaches with major companies. Like it or not, these are a fact of life. At some point, your sensitive financial information is going to be exposed. Whether it happens today or two years from now, that information may be used without your permission. The good news is that credit card companies expect this. And that means they have processes in place to ensure that you don’t get stuck owing money for something that wasn’t your fault.

When you see a charge you think may be fraudulent, call your credit card company and ask for more information about the charge. Sometimes you’ll realize it was your own mistake and you actually remember what it was for. But at some point, you will identify a truly fraudulent charge. In either case, your card company should be courteous and help you work through the issue to get the charges removed. It’s pretty painless but you may need to take the first step. Not every charge will be identified automatically by the card company. 

Identify Legitimate But Unintended Charges

These generally fall into two sub-buckets. Charges that were your fault but unintended. Charges that were someone else’s fault but also unintended.

An example of a charge that’s your fault could be a subscription service you signed up for with a free trial and forgot to cancel. Or it could be an item you purchased and intended to return but forgot to. In both cases you may be able to get your money back by contacting the service or returning the item. And in the case of the subscription, even if you can’t get your money back you’ll at least stop future charges from occurring.

An example of a charge that’s not your fault but is still unintended, could be a double charge for meal or a grocery store trip. This can sometimes happen if your card doesn’t appear to “go through” when you first swipe but later  – only after you’ve “swiped again” – it shows that the first charge actually did go through. Many times these types of charges will resolve themselves because your card company will realize the error and automatically remove the second charge. But if you see this mistake on your monthly statement, it’s likely been missed by the card company. Giving them a call can resolve the issue. 

Pro Tip!

If you wish your card statement came at a different time of the month – say in the middle of the month instead of the beginning, or, on a specific date – you can change that! Simply call your card company and ask them to make the change. Note that it may take a statement cycle before this is in place and in the meantime you may get a “half month” statement as the schedule adjusts.