Money Management

It turns out that people are generally lazy…

…when it comes to money management. As a result of this laziness, people lose out on a lot of money. This could be due to keep too much money in the bank account rather than a savings account, not moving to the cheapest service provider or paying fees to banks. This is why nearly all the books I’ve read have talked about automating your finances as much as possible.

 

We had automated our finances to a large degree before I started this blog

There is a whole chapter on automating your finances in the book ‘I Will Teach You To Be Rich‘. Going through this chapter, I have already taken most of the actions with our finances. This includes:

  • Setting up direct debits to pay our bills
  • Setting up a direct debit to pay-off our credit cards (in full) each month
  • Transferring money from our bank account to savings and investment accounts.

The first two are set up to ensure we don’t end up paying late fines or any interest. The last point is to make sure that we pay ourselves before we pay other people. That is to say that we don’t wait until the end of the month to see how much we have left and transfer that. We have taken the advice from ‘The Richest Man in Babylon‘ and transfer money to our savings as soon as we get paid and then spend the rest.

 

Taking it a step further than the books

There are a couple of additional things that I have also done since reading these personal finance books. Such as:

  • Put in calendar reminders to review our service providers (insurance, mortgage, utilities etc) at the end of the respective contracts.
  • Updated our spreadsheet to automatically allow for the transfer of money from our bank account to our saving and investment accounts.

This topic still left me thinking that there must be more that can be automated to ensure that we don’t lose out on money just because we aren’t managing it every day.

My view on the future of money management

Imagine if there was a company that:

  • Carried out detailed checks on how much your were spending each month and then transferred money between your bank and savings accounts to ensure you only have what you needed in your bank account. The rest of your money is working to generate you more money.
  • Your savings spread across a wide range of accounts (in your name) to generate a better returns than in your bank’s current accounts.
  • Your investments held in the right assets at the lowest cost and managed in the most efficient way, i.e. avoiding the common mistakes most investors made (see ‘The Long and Short of Investing towards becoming a Rich Dad‘ for more information on this).
  • At the same time the company automatically switches you to the cheapest service provider once the current contract ends to reduce your expenses without you having to do anything.
  • All bills and credit cards are all paid automatically.
  • Of course the company would be updating your spreadsheet so you know exactly how much money you have and how much money your assets are making you. All this without you having to do anything once set up!

Wouldn’t that be great!?!  This would essentially lead to complete money management outsourcing.

 

Nobody would be losing out on ‘free money’

A company like this would make sure that you don’t miss out on ‘free money’. At the moment so many people miss out on ‘free money’ just because they don’t take the time to manage it. Let’s also be honest, managing money isn’t the most exciting thing to do so I would be happy to pay a small fee for someone (trustworthy) to do it for me.

This new world would also lead to a new role for personal financial advisors. They could be used to help people to select certain options when they set up their account. The key would be that they are not paid a commission so their advice is completely conflict free.

 

It turns out that this future could be a reality sooner than you think

I’ve been doing some research and there are some new companies which are doing parts of the above. Below I provide some examples of different companies which I’ve found. I note that I’ve included them for interest. These are not recommendations and I have no affiliation with these companies.

  • Automatically moving money from bank account to savings based on your spending patterns
  • Firms automatically reducing your utility bills each year

The world of Financial Technology (FinTech) is growing at a rapid rate. My dream for the future where all money management is done in a low cost manner could be here before we know it.

The key to make sure that the companies are working in the interest of us and getting paid a fee based on the effort they have saved us.

 

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The future of money management: Everything automated
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