Start Here: “The Ultimate Guide to Starting an Online Business”

Automating your money — especially entrepreneurs and freelancers

24 Comments- Get free updates of new posts here

0

How can entrepreneurs and freelancers with irregular income automate their money?

Lots of people have been interested in the section of my book on irregular expenses and income — like entrepreneurs or freelancers –so I thought I’d go into some more detail on how I handle automation.

Brian D. writes:

I’m just wondering when you deposit money into your account does it automatically put 5% into savings, 10% into 401(k) …etc or is this a manual process. Also when the 5% goes into savings do you automatically split that into your savings account sub accounts, or is this manual?

Brian probably read my monster post on The Psychology of Automation: Creating a Bulletproof Personal-Finance System, which included this image:

 

Here are the answers:

1. It’s automatic (see how to automate it). But in your sub-savings accounts, you have to specify an absolute number, such as “withdraw $150/month from my checking account and put it in my sub-savings account for the new iPhone”)

2. Brian then wrote a followup: “What if you got $500 for your birthday and deposit this into your checking. Does it automatically spread itself out or do you do this manually?” While my bank (and most) require an absolute number, you can still semi-automate this. I deposit the money into my checking account, as usual, and then execute a monthly sweep on the 25th of each month, where I tidy up all loose ends.

You’ll remember my sub-savings account (how to use a sub-savings account):

Here’s how the monthly sweep looks in Google Calendar:

Google Calendar for personal finances

Note that I don’t recommend you sock away 100% of unexpected earnings. In fact, I force myself to spend 25%-50% of any unexpected money within a month, a technique I developed to keep motivating myself to earn unexpected income. (For that, I keep a “tobuy” tag in delicious.)

Just like GTD, the key with your personal finances is to set up structures to catch the wild one-offs and put them aside for a regularly scheduled time, usually once/month.

Once you set this system up, your money will flow from your paycheck to your investment accounts (401(k), Roth IRA, etc), sub-savings accounts (like for the new iPhone), and down to your checking account for guilt-free spending — all automatically.

Read more about automating your money.

Join my FREE Private List on automation, investing in yourself and living a rich life

Automation is critical not just to making your accounts play nice, but to getting ahead in life overall. That’s why I created an exclusive (and FREE) Private List of advanced material that I never share here on the blog.

Each week, I’ll send you:

  • Advanced psychological insights to dominate
  • Detailed, tactical advice on negotiating
  • How to use systems & automation to grow your money automatically
  • Ways to earn more using skills you already have
  • Much, much more

You can sign up for free below:

0

Related Articles

shoes

How to use personal branding in all areas of life

Personal branding is one of those buzz phrases like “clarifying your vision” and “aligning your mission.” They sound nice, but ...

Read More
standard post picture

Finally, I cooked eggs right

Well, I finally did it. This might be my greatest accomplishment of 2016 Sometimes I think the internet makes us ...

Read More

24 Comments

0
 
  1. Ramit – when I was making most of my money as a freelancer, I used to do things slightly differently. Instead of making my checking account my primary cash receiver (now that I have a regular income I do exactly what you suggest), I would make my savings account the big pot and then pulled from there. That way, when I got a big check for some work, I didn’t see it in my checking account and think that was money to spend. Instead, I pushed ‘spending’ money to it. I also had a separate checking acct I pushed the money I paid my bills to.

    I realize this is just semantics, really, but it gives you the illusion of a regular paycheck even when you only get really big deposits occasionally.

  2. Christopher Lee Link to this comment

    Ramit,

    If you are considering a tour to China, my friends just started a touring company targeted towards the younger demographic. It may be worth investigating?

    http://tour-ing.com/

  3. Hey Ramit, I’m a partner in a software company. We have a CPA but I never feel she’s really worth what we pay her for … quarterly payroll costs about 900$ can I trim that cost and do it myself?

    • Hey Eric. Honestly, taxes at that level are pretty complicated. Sure, it’s possible you could do it yourself, but your business is software, not taxes — so I’d probably pay to get someone else to do it. If you’re not sure you’re getting a fair price, check with others on how much they pay. Email me for some more details if you’re curious about my accountants.

  4. I like the idea of automating finances, but the real missing link here is the ability to have transfers occur truly automatically according to a set of rules (10% of each deposit goes into savings, 25% of each paycheck deposit is also transferred to an account for rent, each week, 15% of luxury account balance over $X is dropped into checking to spend, etc.). Is there any good reason why online banking services don’t offer this? If not, could it be possible to have some type of 3rd party service add this capability (given authorization and credentials)? I’m spending a good bit of my free time learning programming, and it’s obviously not a difficult type of functionality to implement in software, but I don’t know what kinds of red tape might exist within the banking establishment to slow down progress. Any thoughts?

  5. […] recent post by Ramit Sethi on his blog I Will Teach You To Be Rich made me feel good about myself. The flow chart diagram he […]

  6. Ramit,

    In order to keep costs down, I share an apartment with two other guys. I have found it quite helpful to setup a separate ING checking account to handle bills, cleaning supplies, and other misc. items. Everyone has access to the account via the web. We all contribute an agreed upon amount each month and I recently setup automatic bill pay. This has taken the headache of chasing down money that I could better use elsewhere.

    -AB

    BTW, I love your new book!

  7. I agree with Dees, and I was curious about this myself when I was setting up my accounts after reading your book. It would be much easier to do percentages for those of us paid hourly with varying hours worked per pay period. I haven’t been able to find anything so I thought I’d ask as well.

  8. Interesting stuff, must try to buy the book. Thanks

  9. I love to use Google Calendar for my misc financial reminders too!

    I make an agenda/list and then put a big fat DONE after its taken care of.

  10. Google Calendar now has tasks also so you can feel even better about have that DONE with an official looking line through the task,

    There’s always calendarbudget.com also for reminders like this.

  11. […] Some interesting advice on automating your money […]

  12. […] Automating Your Money – ever since I stopped being someone’s employee, I had this question – how to automate savings when there’s no longer a steady paycheck and when income fluctuates from one week to another and from one month to the next. Well, I wasn’t alone in trying to figure this one out and neither are you, thanks to Ramit’s most excellent article. […]

  13. […] enough, by chance, I came across this quote from Ramit Sethi (I Will Teach You To Be Rich): I don’t recommend you sock away 100% of […]

  14. […] For more reading, a great explanation of one method of automating finances can be found here. […]

  15. I had a great father who successfully managed an academic think tank with a $10M budget but he was horrible managing his own money. Gas would be turned off, cars would be repossessed periodically, etc. Income wasn’t the issue – personal money management was. While he made up for the financial insecurity with being a great dad, I just wish he knew about this system. You advice doesn’t only create a solid financial foundation – it can create more stable families!

    Thanks for sharing!!!

  16. Hi Ramit! You’re great. Thanks so much for all the advice.

    I have a question though about the 401k. I am a freelancer/independent contractor and currently I live outside the U.S. though I work for a U.S. company and get my paycheck deposited in my U.S. checking account. I investigated and found that at my home bank, Schwab, I could open a Roth IRA as well as an individual 401k and manage my retirement accounts that way. I opened the Roth IRA and that’s going great. I am still working on getting the 401 K, but I was wondering if it makes sense to do it. It seems like the benefit of a 401k is when you are having your employer put it in there before any taxes come out, that way you make interest on those unpaid taxes until retirement and then finally pay the taxes when you retire but you get to keep the interest. However, my employer doesn’t take any taxes out because of the fact that I am living outside the U.S.; therefore, would it make sense to use the 401k in that situation? If not, should I just double up on the Roth IRA? I would LOVE to hear your opinion on this. I’m not sure if there’s something I’m missing or the way I’ve interpreted the situation makes sense.

    Thanks so much. You are building a better future for so many people and I don’t know how to thank you. I wish you success and happiness in your endeavors

  17. それは、内部の回転ベゼルで1000メートル防水のダイバーズウオッチができない多くは言います。IWC時計コピーなぜですか?まあ、それは内部のベゼルを回転するクラウンに関係があります。時間よりも設定でき、クラウンと違ってきつくねじ込まれ高耐水性を確実に、内部のベゼルを調整するための冠を機能的にする必要があり、深い水の中にあった。このジレンマの一部を全くアカデミックな人と住んでいるディープダイブすることさえできませんので。だからあなたは内部のベゼルを300メートルを確実に水の抵抗のために冠を持っていることが理論的には、それからねじ止めとそれを越えてする必要があります。lum-tecじゃないような些細なことに興味を持っています。それは、内部の回転ベゼルで1000 mのダイバーウォッチを作りたいです。ロレックス スーパーコピー私は、彼らが挑戦の攻撃方法を見るのが待ち切れないです。 http://www.gowatchs.com/brand-200.html

  18. ルイヴィトンコピー 偽物激安ヴィトンコピー 販売階のほらを輸入する資格があって、全国の第一項のナイロンのふろしき包みは傲慢なシリーズの女性を配合して包んで、高級で派手で、私達はただふろしき包みの中のハイエンドのブランドだけをしま。ハイエンドのファスナー、私達の採用の高級なファスナーは大工場のOEMからで、ファスナーが順調で滑るのは丈夫で、高品質と高享受。 http://www.ooobag.com/watch/jacob/250a3b28b490109c.html

  19. “日本一流ヴィトン コピー、ヴィトン コピー 激安(N品)専門店、全国送料無料、ヴィトン コピー 通販,ヴィトン コピー商品,ヴィトン コピー 販売,当サイト販売したヴィトン コピーなので正規品と同等品質提供した格安で完璧な品質のをご承諾します、当サイトは最高級ヴィトン コピー激安通信販売店です ホームページをクリックして商品をご覧下さい.ロレックスコピー,業界No.1人気スーパーコピーロレックス腕時計専門販売ブランド サングラス 、ブランドコピー、ルイ ヴィトン サングラス、サングラス コピー、シャネル サングラス、グッチ サングラス、コーチ サングラス、D&G サングラス、偽物 サングラス 、激安 サングラス 韓国 人気 楽天市場 モンクレール 代引き 海外ブランド コピー ダミエ 偽者 ルイヴィトンコピーグッチコピーエルメスコピーロレックスコピーカルティエコピーオメガコピーブルガリ コピー 時計スーパーコピーも多彩な品揃えでお待ちしています。スーパーコピー,ブランドコピー,コピーブランド,シャネルコピー ブランド商品は信頼と安心のお店、ベルメゾンネットで http://www.okakaku.com/Super-Copy-195.html

  20. 経典でCalibre 13R0とCalibre 1315ムーブメントの基礎の上に、ブランパン改善技術、再び自主開発して生産した2種類の高級ムーブメント:めいカレンダーやパワーリザーブ機能のCalibre 13R5、めい月相損益表示と完備カレンダーのCalibre 66R9や、結合したはずみ車の回転機構とグリニッジ陀時間表示機能のCalibre 5025。また、Calibre 1315ムーブメントの「改訂版」、新しいムーブメントを備えCalibre 5215はGMTと5日動力貯蔵機能。スーパーコピーブランドそしてこの何項の革新ムーブメント、それぞれで時計をL-Evolutionシリーズの最終の落ち着き先。 http://www.ooobrand.com/distribution/index.html

  21. ブライトリングエアロマリンコピー時計の保護コーティングは、反時計方向に移動する、しばしば時計ダイバーで発見、tarnishing.Anベゼルを回転させる経過時間を防止するために添加されてもよいです 0.927600417 日本最高級スーパーコピーブライトリングエアロマリン時計通販専門店,高品質ブライトリングエアロマリンコピー,2015最新作、業界唯一無二.世界一流の高品質ブライトリングエアロマリンコピー,当店はスーパーコピー4専門店 . 0.166407381 ブライトリングエアロマリンスーパーコピー時計の手は主に白であるためには、のフレームも白色であるので、はやや困難に確認することができます . おすすめ人気ブライトリングエアロマリン時計,ブライトリングエアロマリンコピー. 人気ブライトリングエアロマリンコピー日本国内最高品質N級品通販専門店当店のスーパーコピー3時計商品は他店よりも質が高く、金額も安くなっております。 http://www.ooobag.com/watch/panerai/65f31967a874d183.html

  22. When you make a website, all your web pages are served from the server residing
    somewhere on the internet. Dream – Host is an online hosting company that offers products
    like domain registration, shared website hosting, Virtual Private Server (VPS), and public cloud services.
    The laws have been changing and many portals
    that offer services are finding it harder and harder to get their word out
    there.

  23. nice informations thank you for sharing this articles http://www.blogshouters.com/

*