How to Make a Financial Plan That Actually Works

Money management has never been a more fluid enterprise. We can now easily split a bill between friends with an app, swipe a smartphone to pay for groceries, use a single click on Amazon to purchase just about anything online, and deposit a check or transfer money between bank accounts without ever seeing a teller.

Social media companies have caught on, redefining “social capital” by introducing features to pay your pals through Cash App or send a buck to a buddy through Venmo. While technology has made it easier than ever to spend money on stuff, at BrightPlan we leverage technology to help you reach your financial goals through intelligent saving and investing.

We believe that while it has never been easier to spend money, now saving, investing, and charitable giving have also become more effortless than ever before. Why? Because today just about all of your best financial decisions can be handled automatically.

Automating Good (Financial) Behavior

Automating key financial decisions uses technology to reinforce your financial plan.  If you’ve tried to stick to a financial plan before and failed, automation may be the perfect strategy to reach a new level of financial health in your life.   

After programming smart money choices once you can reduce your stress and spend without guilt, confident because you have a plan for your money.  This strategy can work because it takes the biggest contributor to financial failure out of the equation: your bad choices.

Most New Year’s Resolutions, budgets, diets, and other self-improvement plans fail because while we know what we want to accomplish, in the day to day moments of life we fail to act in sync with our goals. Carl Richards, a long time financial planner and author calls this phenomenon “the behavior gap.” We know what to do, but fail to do it. So how can we close the behavior gap with our finances? He says one answer is automating good financial behavior wherever you can:

“If you’re trying to eat well, you don’t bring a box of donuts home. So if you’re trying to save $100 a month for your child’s education, don’t force yourself to remake that decision every month. Automate it. We have access to a lot of tools that make good money behavior automatic, so it’s ridiculous to not use them where possible.”

Imagine the relief you would experience knowing each month that your financial plan would be implemented without you lifting a finger. Automation is a powerful and simple tool to direct your money to work both smarter and harder for you. How can you practically automate your finances? The following are three areas of your plan to consider automating.

Pay Yourself First with Automatic Saving

The key to building wealth is not what you earn. It’s what you keep. There is no way around saving if you want to achieve financial security. As a savings start point, most financial advisors encourage having between 3 months to a years' worth of living expenses saved in an emergency fund to give cushion to your other financial commitments.

If six months of savings seems out of reach for you, break that big goal into smaller goals by setting up an automatic savings plan and steadily working toward it month by month. Don’t plan on saving whatever is “left over” at the end of the month. It won’t work. The leftover savings plan is a sure method of saving less than you could, or nothing at all. So as soon as you get paid, automatically send a portion to your savings account and watch your savings grow.

You can likely set up an automatic transfer to a savings account through your bank or your payroll company. By “paying yourself first” you ensure that you’re not sending all your money straight to taxes, bills, and other expenses with nothing left for yourself, your goals, and your future at the end of the month. Building wealth starts with saving, so make it automatic.

Build Wealth with Automatic Investing

Anyone contributing substantially to a company 401k can attest to the benefit of the automated investing strategy. Contributing a percentage of every paycheck to investing can build serious wealth over time. And best of all, because contributions come out of your paycheck before entering your checking account, often times you don’t miss the money.

The investment snowball starts small, but paycheck by paycheck it builds in size and momentum. All of a sudden, you look down at a quarterly statement and say, “Wow! Where did this money come from?” It came from the magic of automation.  

Automated investing driven by your unique goals and life plan is a great idea outside of your 401(k) too. Building wealth starts with saving, but planning and investing gives potential to accelerate the growth. No matter what your financial goals are, at BrightPlan we want to help you plan and invest to achieve them.

We’ll take automation to the next level for you: after helping you to create life goals and build a portfolio to reach them, automation will take care of investing deposits according to your goals, rebalancing your account to make sure your risk level aligns with your objectives, and optimizing your portfolio to minimize fees and taxes.

By tailoring your strategy for each goal on the front end you can avoid agonizing over what investments to buy each time you make a deposit. Your sole focus can be on how much you need to contribute to stay on track with your goals.  Investing is key to reaching your dreams, so make it automatic.

Make an Impact with Automatic Giving

A final area to consider while automating your finances is the realm of charitable giving. Making a giving pledge isn’t just for the ultra-wealthy. Winston Churchill once said, “We make a living by what we get, but we make a life by what we give.” Americans have taken this wisdom to heart. The United States is consistently among the top countries for charitable giving and 70% of that giving comes from individuals, not foundations or other organizations.

Anyone who has given consistently to a cause can attest to the benefits that come with helping others financially. If there is a charity you care about, you don’t need to wait until the “Giving Season” at the end of the year to send your support. By automating your giving both you and the charity of your choosing experience numerous benefits.

• A deeper partnership with fewer organizations. Rather than getting a dozen letters from different charities you have contributed to sporadically, you can make a greater impact through gifts given month after month and year after year.
• Help the organization budget. Charities receive 30% of their funds in December alone as year-end gifts come in all at once. Help them breathe a sigh of relief by spreading your giving throughout the year.
• Permission to say “no” (or yes!). Your plan gives you a filter when you are inevitably asked to give elsewhere.  Automating your giving helps you to confidently say “yes” or “no” based on your overall giving plan.
• Don’t get sidetracked from giving. Life gets busy, money gets tight. By planning your giving in advance you ensure that this important part of your plan does not get neglected.

Organizations that depend on charitable donations understand the power of automation. Most charities will allow you to link a credit or debit card, sign up for a recurring Electronic Funds Transfer from your account, or pay through an online service like PayPal.   Your giving can make a difference, so make it automatic!