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Automating Your Finances – Smart or Just Plain Lazy?

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Is automating your finances a smart move to keep you on track to reach your goals or a lazy way to get things done?

Today’s show will explore whether or not automation is a help or a hindrance for building wealth.

We’ll look at:

  • why people automate some of their finances
  • the pros and cons of it
  • and finally we’ll consider where to draw the line when it comes to automating your family’s finances

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For listeners who also subscribe to the blog, you’ve probably seen my post about trying out Digit to give me a saving boost.

In case you’ve missed it, Digit helps you save money by connecting to your checking account and make small discreet transfers based on your spending patterns and upcoming expenses.

According to an interview on The Verge beta customers saved an average of 5.5% of their income, which is better than the average of negative 2% for adults under 35.

Digit’s tagline is ‘Save money, without thinking about it’ and for some, that’s a problem.

Derek from Life and My Finances wrote an article last week about why he refuses to automate his finances.

One of his main arguments against automation is that it causes people to think less and avoid making the necessary changes to grow.

…Now, if you begin to let a software package put some money into your savings for you, what is going to happen? You’re probably going to smile in the mirror and say, “Oh good for me, I’m actually putting money in savings now. This is the first time I have seen $50 in my savings in the past five years. I am really doing great!”

Your ego is lifted, your happiness level goes up, and you have a bounce in your step,but your brain is now turned off and your life really isn’t that radically different than it was just a few months ago. By automating your savings, you have done absolutely nothing to alter those bad habits or improve yourself through the good ones.

Your small success is equivalent to a baby learning how to roll over. Sure, it’s a great thing, but wouldn’t you eventually want to see that baby walk?? By automating your savings, you are inadvertently keeping yourself from walking and kicking butt at personal finance. Instead, you have grown content to save $50 a year. And without changing any habits, you’ll likely blow that on one night at your favorite restaurant.

I disagree – seeing a balance in their savings (maybe $50, maybe $300) that they wouldn’t have otherwise could be a turning point.

It could be their motivation to try and do better the next month, either with Digit alone or by going ahead and making some more pro-active changes in their monthly budget.

I don’t think the real source of Derek’s irritation is the automated services, I think it’s really a very specific segment of users.

Your Thoughts on Automation

How do you feel about automating your finances?

3 replies on “Automating Your Finances – Smart or Just Plain Lazy?”

Thanks for bringing up the topic again, CM! Most of the people I meet are just plain terrible with money, and it’s not due to lack of income, it’s just plain ignorance! And, I don’t think digit will transform ignorance. There needs to be a life changing event to get through to these people: job loss, large hospital bill, a friend revealing the struggles of their finances – things like that. I just don’t think seeing $50 in a savings account is going to change anything. Cynical? Maybe. I honestly hope I’m wrong.

I think your post has gotten people talking which I see as a good thing. While I know that some people need drastic shake-up to change, I believe that positive reinforcement can also be push to grow.

Thanks for sharing your take on automation!

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