One thing I’ve learned as a parent is that “idle hands are the devil’s workshop.” Keep children busy and you keep them out of trouble.
The same is true with money.
Cash sitting in your checking account is just begging you to spend it mindlessly. The longer it sits there, the more likely you are to fritter it away.
That’s one of the things I love about YNAB (You Need A Budget). This budgeting software encourages you to give every dollar a job. But once you give a dollar a job — whether it’s going to be saving or paying down debt or whatever — put it to work immediately.
Here are three ways you can do just that.
1. Make full use of direct deposit
With direct deposit, you can put your money to work without even touching it. It goes right from your employer to the place you need it to go. I fully utilize direct deposit, and there are a couple of different ways that you can use this tool.
The most obvious option is to take advantage of a 401(k). It’s terrific because your employer simply takes the amount of money you choose out of your check and puts it right into your 401(k).
You never see it, and you don’t touch it. You also never have a chance to miss it. It just goes right from your employer to your retirement account.
The other thing you can do is to set up multiple direct deposits with one or more banks. Did you know that you don’t have to have your whole paycheck deposited into your checking account? If you’re trying to save money, you can direct deposit a certain amount into a savings account, and the rest into checking.
You can even have your paycheck split between two banks. For example, you could have a portion of your check sent to your checking account at your local bank. You can then direct the rest to a savings account at an online bank, where interest rates are higher. If you don’t keep a debit card for the online bank on you, you’re less likely to spend that money on things you don’t really need.
In fact, with some employers, you can have more than two direct deposits. So your money can automatically go into a number of accounts. Try not to over-engineer this, but used properly, it can be a good way to save money.
2. Automate your bill paying and investing
Most of our bills — from the mortgage to utilities to cell phone bills — are paid automatically. It avoids the hassle of having to make the payments and the possibility of paying a bill late.
Automating your bills can also save you some money. Several companies now offer discounts for those who go paperless and automate their payments. Some examples include SoFi (student loan refinancing), many insurance companies, and even bank lenders.
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You can do this same thing with investing. For example, you can have an automated transfer into your investment account at Vanguard, Fidelity, Betterment, or wherever you keep your investments each month. It happens every month as soon as you get paid.
That puts the money to work immediately, and it’s out of your checking account. That way, you don’t risk spending it.
Resource: 5 Ways To Automate Your Finances
3. Physically or electronically transfer the money yourself
I invest in real estate with a really good friend of mine. We started investing in our first two homes in 2005. So, it’s been a little more than a decade, and we’ve already earned back the money that we put into the homes.
Recently, we started paying ourselves a monthly dividend from the cash flow.
We have a business checking account that’s got money in it for repairs and vacancies. We’re earning a nice cash flow, to the point where we are automatically sending ourselves $250 a month each from the account. I get the money in the form of a check, but we’re going to work on direct deposit to automate it.
For now, it’s just an old-fashioned check that comes in the mail. I immediately deposit it into my checking account. Then, before I spend it, I transfer it — in this case — to my Vanguard account.
Will that $250 a month make a big difference? You bet! Over decades, that investment of $250 a month will have a huge impact.
My concern is that if I just let it sit in my checking account, I’ll spend it and not even remember where it went. So, I don’t waste any time. As soon as the check clears, I transfer it right over to Vanguard and put that money to work.
Bonus Tip: Spend It
That’s right, you heard me. In fact, spending your money immediately can be a great way to put it to work (depending on how you go about it).
It’s advice I recently gave our daughter. Here’s the story:
She is living on her own for the first time while she finishes college. I’ve noticed that she regularly runs out of money just before payday. That’s not unusual, and it happened to my wife and I regularly when we were younger.
One problem this creates for our daughter is transportation. She finds herself out of money and out of gas. She can’t even get to work.
So, I’ve told her that as soon as she gets paid, she needs to fill the tank. If she’s halfway to payday with half a tank of gas, fill it up.
The point is to spend the money on necessities before spending it on wants. This ensures that your needs are taken care of before the money even has a chance to run out.
Learn More About How Much to Save (and How to Do It!)
So, these are just four simple ways to put your money to work right away, and they’re simple enough that anyone can do them.
It’s certainly better than frittering it away. Plus, you could even get slightly better returns (or pay less interest on debts) if you move that money to the end goal sooner rather than later.