I often think about budgeting, saving, investing and so on. In the end, it's all part of being smart with personal finances.

But how does it all work in everyday life? How do you set up a good enough system that automatically sends money where it needs to be, without you having to spend hours paying bills or recording transactions?  

Intro to my autopilot system

So today I will describe the system that I set up and have been using for the past year.

With this system I save automatically, I pay bills automatically and I transfer money between my accounts, so i guess it makes sense to call it my bank-accounts-in-autopilot system. At the end of each month I just check that everything went smoothly (or make corrections if necessary) and record the totals in my budget.

My goal is to spend the minimum time dealing with all this stuff during the month. But by the end of the month, I have a record of where money was spent (from the bank reports). This way, I only need to record my cash transactions for the month. Every time I pay something with cash, I write it down immediately in a note on my phone and then I transfer these expenses into my budget and delete the note.

I believe that this system also works for couples because it helps with communication, and talking about money is always a sensitive issue! The autopilot system has helped me and my partner to set some common long-term goals, while also providing us with a sense of personal freedom.

Step 1 - Bank Accounts

It doesn't really matter where exactly your money is, as long as you have assigned them a job to do! Maybe a single bank account works for you, or maybe 2 or 3. In reality, I have opened an account with pretty much every major bank institute in my country, plus another one with Revolut and N26. My partner 4 more of his own (yeap! we are true minimalists...).

But things get pretty simple when you decide which one is your main bank account. You can think of this bank about as the heart of your system, it collects all the incoming money and sends it where needed. For couples, this can be a joined account to reinforce the feeling that you are a team working towards a common goal. In my case, there is no mine or yours we share one common wallet.

Step 2 - Pay yourself first

I bet you have heard about paying yourself first.

That's keeping some of the money you earn BEFORE you start sharing it with others. In practice, for me it means saving money first and then starting to pay bills and other expenses.

The truth is that until last year I did the exact opposite. First I paid bills, then i took care of all the daily expenses and then if anything was left i set it aside. The result was that, of course there was nothing left at the end of the month. Other times I would actively try to save, so I went through the whole month stressed out and feeling pressure not to spend a lot of money. I finally realized that this should not be a matter of willpower or strength of character (or weakness of character, in my case) but of setting a system and following it.

So set an automatic transfer and as soon as you receive money, your standard amount to your emergency fund. Once you have collected a big enough lump (everyone says 3-6 month expenses, they must know something) then set your next goal or goals and send your standard amount towards them.

This the first thing I do now, as soon as I get my hands on some money, before anything else. So it doesn't take much effort or energy or thinking and regretting, to put some money aside. It's done automatically at the beginning of each month, so I don't even see this money in my account. Out of sight, out of mind!

Actually, I keep my emergency fund in an extra account, and my savings in a third account. Ever since we started paying ourselves first in 2020, our savings rate took off!

Hint: I calculate the savings rate by adding this standard amount from Step 2 to the what is left (if there is anything left...) in my main account at the end of the month.

On the next part, I will describe how the remaining areas work for me, but you get the general idea from the super-professionally designed diagram above. 

Cheers!