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Create your automatic money flow


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Create your automatic money flow

  1. 1. “A unique voice on money, i w r d an do i l l ail d i wn fo ds, one singularly attuned to…his generation.” t e y t nt loa a c ac er I WIll h y tic act Vis u t o l tip e sp —San FranciSco chronicle o a iv it b e r s, b re i c on ads h . us h co m ee ts TEAch You by RAmIT SEThI founder and writer of ToBE No Guilt. No Excuses. No B.S. Just a 6-Week Program That Works
  2. 2. SAVE WHILE SLEEPING Create Your Automatic Money Flow N ow that you see how it works, it’s time to implement your Automatic Money Flow. You’ll start by linking all your accounts together. Then, you’ll set up automatic transfers to happen on various days. Below, I’ll assume that you’re paid once per month, but I’ll also cover slight tweaks to implement if you’re paid biweekly or if you’re a freelancer who’s paid irregularly. To get set up, you’ll need a complete list of all your accounts, their URLs, and the login/passwords. Make a chart that looks something like this. URL Login Password Account checking account savings account credit card(s) 401(k) Roth IRA any regular bills* Alternatively, remember that on page 88 I mentioned that I use a PBwiki account to store all of this information. It’s well worth taking an hour to get all these handy account numbers in one place so you never have to do this again. 131
  3. 3. I Will Teach You to Be Rich Also, before you start linking your online accounts, you may need to work with your employer to get your paycheck going to the proper places. If you don’t already have it, talk to your HR rep and set up direct deposit into your checking account. (This is easy. It basically entails giving your checking account number to your employer.) In addition, you need to get everything squared away with your 401(k) contribution. Ideally you already set up your 401(k) way back in Chapter 3, but if not, DO IT NOW! Even if you already have a 401(k) going, you may have to adjust the amount you contribute every month based on your shiny new Conscious Spending Plan. link your aCCounTS First, you’ll need to log in to each account and link your accounts together so you can set up automatic transfers from one account to another. When you log in to any of your accounts, you’ll usually find an option called something like “Link Accounts,” “Transfer,” or “Set Up Payments.” These are all the links you need to make: If you haven’t already done this, connect your paycheck to your 401(k), n so it’s automatically funded each month. (I cover this on page 82.). Connect your checking account to your savings account. n Connect your checking account to your investment account/ n Roth IRA. (Do this from your investment account.) Connect your credit card to any bills you’ve been paying by using n your checking account. (If you’ve actually been paying bills by writing checks with a pen, please understand that man has discovered fire and combustible engines and join our modern times.) For example, if you’ve been paying your cable bill by check each month, log in and switch it so that the bill is paid by your credit card instead. Some bills can’t be paid using a credit card, like rent and loans. n For these regular bills, link them to your checking account. (Do this by logging in to the company’s website, and initiating the transfer there.) Set it up so that all your credit card accounts are paid from your n checking account. (This is set up from your credit card’s “Transfer” or “Link Accounts” page.) Finally, there are payments that simply can’t be automatically drawn from your checking account. For example, if you’re renting from a little old lady, 132
  4. 4. SAVE WHILE SLEEPING where you can enter your checking account information and automatically transfer money each month. Sigh. Get it together, Mildred. Anyway, you can still automate payment using your checking account’s bill-pay feature, which is free with nearly every account. Example: If you pay rent by writing a check and sticking it in an envelope each month, log in to your checking account and set up automatic bill pay for your rent. Your bank will then write a check for you each month and mail it to your landlord. Just make sure you schedule it so that it has enough time to reach your landlord in the mail. WHERE THE MONEY FLOWS This account . . . . . . Should fund this account Paycheck 401(k) ■ Checking account (direct deposit) ■ Checking account Roth IRA ■ Savings account (which is sub-divided ■ into savings goals) ■ Credit card ■ Fixed costs that don’t allow credit card payment (like rent) ■ Occasional spending cash Credit card Fixed costs ■ Guilt-free spending ■ 133
  5. 5. Get the full book at About the book At last, for a generation that's materially ambitious yet financially clueless comes I Will Teach You To Be Rich, Ramit Sethi's 6-week personal finance program for 20-to-35-year-olds. A completely practical approach based around the four pillars of personal finance—banking, saving, budgeting, and investing—and the wealth-building ideas of personal entrepreneurship.