Revamping your finances in 2020 doesn't have to be a time consuming chore — especially if you use the right strategies. Whether you're looking to build your wealth or save a little more in your emergency fund, one tool can help you get there: automation.
"We know that 401(k)s are effective in getting people to save because the money comes out of your paycheck automatically, every time you get paid," personal finance expert and co-founder of HerMoney Jean Chatzky tells CNBC Make It. "The goal is to try to implement that for your other goals in life in order to stay on track."
In practice, automating your finances means having money sent directly from your paycheck or checking account to your investing and savings accounts. That way, you'll never see it and have a chance to spend it.
Say one of your 2020 goals is to put $2,000 into an emergency fund. Start by figuring out how much you'd have to save per month or per paycheck over the course of the year to get there. Next, "have that amount of money transferred out of your spending account and into a savings account where you're less likely to touch it," Chatzky says.
You can use the same strategy for bills that you pay online, she adds: "Put bills on automatic payment so that you're not late. Because when people are late, they're not late just once — they're often late chronically."
If you have even bigger wealth goals, automation can help get you there, too. It helped one millennial, Grant Sabatier, save over half his income and eventually become a millionaire. "Automation is essential," he tells CNBC Make It. "When I first started saving and investing, I was a little more old school — I was trying to invest as much as possible into the online savings accounts I had set up and it was a pretty manual process. Now, one of the biggest recommendations I make is to automate as much of your savings as possible."
But beware, it can work against you as well. Remove automation from your spending habits by unsubscribing from retailer mailing lists that notify you of sales, disabling Amazon's "one-click" order function and not saving credit card information on websites. These strategies will create barriers between you and spending.
You should also review all of the monthly subscriptions you pay for and cancel any that you don't use anymore. These could be meal subscription boxes, magazines, video or music streaming services, iCloud storage or styling services like Stitch Fix or Birchbox.
"We're impulsive creatures. Anything that we can do to automate ourselves into adopting the right behaviors is helpful," says Chatzky. "Use technology to help you get out of your own way."
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