As humans, we naturally desire stuff. We just like stuff. That’s why it fills our apartments, garages, and closets. And in order to buy that stuff, we need money.
And the fact is, most of us want a lot of money.
But here’s the problem, in general, we just aren’t that interested in money.
We just don’t care.
Oh, we still like money, don’t get me wrong. But when it comes to our finances and managing it, it’s boring as all get out. It’s the last thing we want to think about.
Most of us just don’t feel like it’s worth the time to actually sit down and figure out.
And frankly, it’s a complete pain.
Unfortunately, as you can imagine, that creates a major problem.
See, it’s a fact of life that we’ve got to deal with money. Even if you’re unlike most people and don’t really want more
Even if you’re unlike most people and don’t really want more stuff, you’ve still got to buy food, shelter, and clothes.
Now, I could tell you to just suck it up and learn to deal with money even if you don’t want to. Get over yourself, get off the couch, and just do it.
And that might work for some.
But, what if I told you there’s actually a way you can deal with money so that you don’t have to deal with money.
What if I told you that you can create a system that does all of the work for you so that you can get back to more important things like finishing the next episode of The Walking Dead?
Well today, I’m going to show you how.
You’re going to be able to put in the minimal amount of effort possible, to get huge results. With these steps, you’ll get your money working for you, so you can just forget about it.
I’m going to walk you through a plan popularized by the famous Paula Pant known as the anti-budget.
You’ll be able to spend just a few hours to get everything set up.
And once you’re done, you’re done.
Like literally done.
It’s awesome. Let’s dive in.
Step 1: Create a Money Plan (not a budget)
This is the hardest part, but it’s so very important. You’re going to want to spend some time here thinking about what you really want.
But it’s important to note that a money plan is different than a budget. Instead of creating budgeted line items for each and every expense, I just want you to answer 2 questions.
- Why do you want money?
- What do you want to save for?
To get your brain going, here are a few ideas for why you might want money.
I want money because:
- I want to travel
- I want to provide a nice life for me and my family
- I want to take care of my parents
- I don’t want to stress about paying bills
- I want to buy new clothes often
By answering this first question, you’ll be able to easily answer the next one (hint: it’s based on your answers to number 1).
I want to save for:
- A vacation through Europe
- A down payment for a house
- A new car
- Retirement so I don’t have to work until I’m 80
- An emergency so that I don’t need a loan when my car breaks down
- A new dog
This is the first step in managing your money when you don’t want to manage your money. You need to get really clear on what you actually want to do with your money.
Typically after answering these 2 questions you’ll then be able to put your answers into a few different categories like:
- Long-Term Savings
- Short-Term Savings
- Emergency Money
All three of these are important so let’s define each one.
Long-Term Savings: This is for things like retirement money and college savings for kids. These long term goals are for 15 – 20 plus years away and you want them to build slowly over a long time. (hence the name)
Short-Term Savings: This is anything that isn’t long-term. Ha, I know this is really rocket science here. But seriously, even if you’re wanting to buy a house in the next 5 – 10 years, although that may seem long, it’s still short-term. Good things for this category are new cars, house down payment, vacations, etc…
Emergency Money: This is a set amount that you try and maintain in your savings account at all times. A general rule of thumb is 3 – 6 months of expenses. This is for things like job loss, car wreck, and medical emergencies…. This is for actual emergencies, not money for buying an outfit that just went on sale and it’s an “emergency” because the sale ends tomorrow.
For example: as of writing this, my current savings goals are:
- Retirement savings (long term)
- Emergency fund – I want to grow this from 3 to 6 months for security sake. (emergency)
- New dog – Hanna and I are currently saving for a Frenchton (short term)
- Western U.S. backpacking trip through California, Arizona, and Colorado (short term)
Alright, so once you’ve answered the 2 questions and categorized your answers you’re ready to move one to the next step.
Step 2: Automate Savings
This step is THE step if you want to not worry about managing money, so pay close attention.
All you gotta do is… look for the bear necessities.
Actually, all you gotta do is automate savings first.
Back to your answers from above, let’s call them Savings Goals.
You’ll typically have at least one short-term savings goal and retirement savings. And if you don’t already have your emergency fund built up, you’ll want to do that as well.
In order to illustrate how this works, let’s use my savings goals as an example:
- Retirement savings
- Emergency fund
- New dog
- Backpacking trip
1. Retirement Savings
The retirement savings is super simple if you have access to an employer-sponsored retirement plan like a 401K.
To figure out how much you need to be saving each paycheck, check out this post here.
All you’ll need to do is contact your HR coordinator at work and get them to help you set up a certain percent of each paycheck to automatically go into the retirement account.
Done. Easy as pie.
But what if you don’t have access to an employer program, or just don’t want to use it?
No problem at all.
Again, easy as pie.
Now, for the next three goals, you’ll want to first open a savings account with a bank that lets you split your money into different buckets (accounts).
Basically, you just want to be able to put savings in separate piles for each of your different savings goals.
Ally Bank has a fantastic savings account that lets you do this easily. Here’s a step by step walk-through of how to open an account with Ally, and below are screenshots of what my account looks like with different savings goals.
Ally Bank lets you set up automatic withdrawals from your linked checking account. And you can even set time limits on your automation.
Here’s how I would attack my savings for my next three goals.
2. Emergency Fund
Let’s say I would like to increase my Emergency fund by $3,000 total over the next year. I would go into my Ally account and set up a transfer from my checking account to my emergency fund for $250 every month for 12 months.
Here’s what it looks like:
3. New Dog Savings
Maybe I want to buy a dog, and also get a nice dog bed, leash, toys, and kennel. I might want to save $600 in 6 months to do this.
That means I want to transfer $100 each month for 6 months to a specific savings account for my new puppy.
Again, here’s the screenshot:
4. Backpacking Trip
My wife and I will be travel hacking a lot of this trip and will get our plane tickets and rental car for free. We’ll be going on our trip in 8 months from now and would like to have an extra $400 of discretionary spending money for the trip.
This equates to $50 per month for 8 months.
Using online banking allows you to set up all of these automatic transfers in less than 5 minutes once you open the account.
There’s absolutely no excuse for not being able to get all of this setup.
And here’s the great thing. Once you set it up, you don’t have to worry about it anymore.
Let’s move on to the next step.
Step 3: Automate Bills and Expenses
Alright so here’s the great thing, all of the hard work is pretty much done.
You’ve identified your savings goals and automated all your savings so that it happens immediately when you get paid.
Now you just get to spend whatever is left over.
Pretty sweet huh? It’s time for all that hard work to pay off.
But if you want to step your automation game just a hair, here’s 2 more things you should do.
1. Automate All Bills
Start automating every single bill that can be automated. This means rent, utilities, cell phone, Netflix, and even credit card bills.
You want to be sure that you never ever get hit with a late fee. And let’s be honest, you’re doing all this so that you don’t have to manage your money. By automating your bills, that’s even less you have to manage.
All credit card companies allow you to set up automatic bill pay features. Just log into your account and set it up to pay the bill in full each and every month.
The in full part is extremely critical here. If you don’t know what I’m talking about, read this.
2. Keep A Buffer In Your Checking Account
Since you’re now automating both your savings and expenses, you’ll want to keep a safety net in your checking account to ensure that you never go negative.
Keep at least $500 in your checking as a buffer. If you don’t have that much yet, that’s okay, just start saving to get there.
The reason you want to do this is because sometimes things come up and you may need to get some money quickly. If that happens and one of your automatic transfers comes through at an inconvenient time, you may not have the money you need readily available without transferring money around.
Save yourself the hassle and just keep a set amount of at least $500 in your checking account at all times.
On top of saving you frustration, this also helps you avoid the chance of getting charged an overdraft fee.
That’s it. That’s all the steps you need to manage your money. Now it’s time to stop worrying and forget about it. Now you get to spend the rest of your paycheck however you want.
Seriously. Spend it however you want.
No worrying about sticking to a specific budget each and every month. Just buy what you want as long as you still have money left from the paycheck.
This plan lets you literally stop worrying about your finances.
It frees you up to go on with your daily routine without worrying about the future, retirement, and savings. Kick back and let your money work for you.
Just be sure to check back in periodically when your goals change and re-evaluate how much you’re saving.
After you hit your savings goals you may want to start saving more or less just depending on what your next big goal is.
The nice thing about this plan is that it’s extremely flexible to suit your specific needs.
So what are you waiting for? Get out there and get this setup so you can get on with your life.