Is it possible to take one of Americans’ biggest worries and set it on “cruise control,” thereby promoting peace of mind and greater overall satisfaction?
Financial worry is a leading problem for many Americans. According to a report by the Center for Financial Services Innovation, approximately 85% of Americans are anxious about their finances. The cause of these worries: income volatility and expenses that outpace income.
But it’s possible to take steps to reverse many of the problems caused by financial uncertainty, such as wiping out debt, making payments on time and organizing your financial life so most of it runs automatically. Many refer to this as a sort of “financial cruise control”—and it may be more within your reach than you might imagine.
Creating a “Cruise Control” Plan for Eliminating Debt
Having a monthly household budget that’s in the red, thanks to large debt payments, can cause a great deal of stress—and even lead to certain health complications. Because debt payments can weigh down any budget, the best way to create a “cruise control” personal finance system is to construct a systematic plan of attack for eliminating debt as soon as possible. That may include the following strategies.
· Automatically check your progress. Using tools like Mint and Unbury.me, it’s very easy to put together a get-out-of-debt plan. Online tools, like Unbury.me, make it easy for users to choose between two payment methods to create a personalized plan—attack the smallest debt first (the “snowball method”) or the debt with the highest interest rate (“avalanche method”). There are other online sites, like Mint that can help you track your expenses. These tools can also inform you when you’ve spent too much on general merchandise when that money could be put toward debt instead.
· Consolidate debt. Consumers who use this method reorganize their debt with a third party to create one single debt payment. It’s important to double-check the math before considering this option, as debt consolidation may actually extend the time frame in which you’re paying off debt. However, the simplicity of debt consolidation can also make automatic tracking much easier.
· Automatically reduce expenses. To pay off debt, you’ll need to live below your means while putting more money aside for debt payments. That means finding ways to reduce expenses and make saving a habit. There are many methods to achieve savings. For instance, you could opt to exercise outside to save money on a gym membership. You could also downgrade your credit card to a no annual fee option.
How to Set Your Finances to “Cruise Control”
If you’re debt-free, it’s easy to put yourself on cruise control. Here’s how to use automatic transfers and payments to handle your bills, savings and investments without much work.
· Automate expenses. Contact your bank to see if it can automatically send a rent check to your landlord every month. Check for other expenses you can automate with a credit card as well. Not only will you avoid late fees; you’ll earn credit card points or cash back, too.
· Automate investing. Link your investment account with your bank and set it to make automatic contributions every month. Most modern services make this easy to handle in just a few clicks. In the first few months, figure out how much you can tolerate to invest, and adjust accordingly.
· Download your bank’s mobile app. Most banks now have mobile apps that provide remote check deposits and other money-management tools. This will help you monitor your automatic investing and handle any sudden issues, no matter where you are. Most banks allow you to set custom alerts, which can help you keep your spending on track.
· Talk to your employer’s HR department. Before connecting your bank account to your investments, first consider increasing the amount that’s automatically directed from your paychecks to your retirement plan. This will feel like “invisible” money, as you never get to touch it yourself before it’s invested on your behalf.
In today’s digital world, money management can easily be set to “cruise control.” Once you create a central bank account to serve as your financial hub and choose the tracking software to monitor it, most Americans will find it’s easier to live below their means and build up long-term wealth than ever before.