Pay bills, use credit cards wisely, and boost your 401(k) plan with advice from financial experts.

By Alexa Erickson
February 09, 2021
Advertisement
smiling woman with coffee cup looking at computer
Credit: Tempura / Getty Images

A big obstacle that stands between people and wealth is the ongoing to-do list—the simple idea of having to plan and take action can be a daunting thought. But as many financial advisors will tell you, the secret to success is finding ways to automate your budgeting, investing, and even savings. Overall, automating the way in which your money is saved or invested can go a long way in strengthening your financial wellness.

Here, we spoke to financial experts for their best advice—and here's how you can use them to automate your own wealth.

Download apps to help you save and invest wisely.

You're already using your smartphone for everything else, so why not make it your avenue to wealth? Whether you're looking to save more money or invest, Nadia Aziz, general manager of home loans at Opendoor, suggests using a set of budgeting apps. "Finance apps make it easy to adopt new habits through budgeting and tracking of your funds. Others help take some of the mystery out of investing and help you achieve your financial goals."

Set up automatic payments for bills.

"Enrolling in automatic payments will not only save you the hassle of remembering when bills are due, but may save you extra money, too," says Aziz. "For example, many student loans offer a rate reduction with an automatic bill payment plan. A history of on-time payments can also help boost your credit score." Consider automating your mortgage, car loan, credit cards, utilities, and so on.

Greg McBride, CFA, senior vice president and chief financial analyst for BankRate.com, agrees. "Paying on time will save you from late fees and additional interest, and building a good credit score will save you significant interest cost on future borrowings."

Choose the right bank.

Banks are always looking for new customers, and most have enticing offers to convince you to make the switch. "Many banks offer sign-up bonuses for new customers, along with considerable cash incentives for setting up a direct deposit," says Aziz. "When looking for a new bank, search for one without monthly fees and overdraft penalties."

Sign up for, or boost contributions to, your 401(k).

Committing to a 401(k) or other workplace retirement savings plan is a surefire first step in automating your wealth. "If you're not maximizing an employer match to your workplace retirement plan, you're leaving free money on the table," says McBride.

Aziz agrees. "Are you familiar with all of the benefits you can access through your job? If not, it might be worth talking with someone in HR to understand where you can save additional money," she continues. Opendoor, for example, gives exclusive access to special employee discount pricing on paint, paint accessories, and appliances as well as other discounts and seasonal savings. "Check with your employer to see what savings, 401(k) matching, reimbursement, or other cost-cutting measures they provide."

Sign up for automatic monthly transfers from your checking account into an IRA.

Multiply your savings quickly with a different kind of account. "If you, or your spouse, have earned income, then you are eligible to contribute to an IRA," says McBride. "Don't think of a 401(k) or IRA as an either-or proposition. Instead, the answer is often to utilize both."

Shop around for better rates.

While it's enticing to go with the first reasonable price you see, shopping around can save you a lot of money in the long run. And you can get someone to do the work for you. "Whether you're shopping for a new policy or loan or evaluating your current ones, talk with insurance providers and lenders to make sure you're getting the best deal. You can also leverage various online tools that provide a side-by-side comparison of rates from different providers," says Aziz.

Direct any windfall money.

McBride recommends directing bonuses, tax refunds, stimulus checks, and more to your savings account or retirement account. "Money you weren't counting on receiving is low hanging fruit to boost your savings."

Use credit cards wisely.

Credit cards can be your worst enemy or your closest companion in terms of financial wealth. They can help you build healthy credit, accumulate points and savings, and unlock special offers. Aziz advises keeping your credit card utilization rate (the percentage of your total available credit you use) below 30 percent. "As your credit improves, call your card issuer to negotiate rates, increase your credit limit, and thereby reduce your utilization, or complete a balance transfer to save money you would otherwise spend on interest," says Aziz. "For example, using a card with an introductory zero percent APR could save you hundreds of dollars in interest in a short amount of time—especially if you plan on making a big purchase."

Sign up for automatic monthly investments into a 529 college savings plan.

Putting money aside for your family's college funds does more than just ensure you can fund their education. "Saving on a tax-advantaged basis can give you further bang for your buck," adds McBride.

Eliminate high-interest debt.

High-interest debt hurts your wealth, plain and simple. Pay it off directly or replace it with lower interest debt. "There are several products available for refinancing your car loan and student loan," says Aziz. For example, reducing your rate by just two percent on a $10,000 loan will save you $200 a year. "Or, if you have sufficient equity in your home, you can also do a cash out refinance and use the money to pay off high rate loans. Along those same lines, home equity loans tend to have lower interest rates than many other debts (like credit cards) and can be another way of accessing funds to pay off high interest debts."

Comments

Be the first to comment!