I have preached the importance of "making it automatic" for years, but I still see so many people paying bills the old-fashioned way. (Okay so this isn't a new mistake, but it's an even bigger mistake now that we have so many electronic options for managing our money.) When you don't automate your finances, you may forget to pay your bills on time, which, as I've mentioned, will not only negatively affect your future interest rates and credit score but will also cost you a fortune. If you miss a payment on an account with a $500 balance, the late fee could be as much as $50. If you exceed your credit limit at the same time, the fee could be $100. In my experience, many people who haven't automated their finances tend to have underfunded savings accounts, leaving them financially unprepared for an emergency, retirement or helping with their children's future.
The Fix: Bottom line: The one way to create lasting financial change that will help you build real wealth over time is to...make your financial plan automatic!! Set up direct deposit for your paycheck so that you don't have to waste any time going to the bank; also set up an automatic payroll deduction to fund your retirement account, ensuring that you remember to pay yourself first. Finally, use your bank's online bill-paying service to automatically take care of your monthly minimum credit card payments and other bills. Follow the steps listed in the Automatic Millionaire 2.0 diagram—and you will truly have a foolproof, no-brainer "set it and forget it" financial plan that, I promise you, will work.
David Bach is the author of Debt Free for Life: The Finish Rich Plan for Financial Freedom and founder of FinishRich.com.
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