My Saving and Investing on Autopilot

Yesterday, an article appeared on Kiplinger offered a list of year-end financial tricks aimed to help us to be more organized and disciplined for our personal finance. Among the suggestions, the one that I like the most is "Put your savings on autopilot," and we have been doing that for quite a while. Here's our monthly saving and investing schedule:

• Saving: On the day we get our salaries, $300 is transferred from the checking account to the EmigrantDirect savings account; additional transfer may be possible in the middle of the month.
• Mutual fund investing: I dollar-cost-average the minimum required amount (either $100 or $50) into ten of twelve mutual funds on the 5th of the month using the fund's automatic investing plan. I choose to invest into mutual funds early in the month because dividends are usually declared and distributed at the end of the month and fund price may dip after the distribution. I also want to avoid buy-the-dividend.
• Bonds: After canceling the weekly 4-week T-Bill purchase, I now only buy $200 I-bond on the 28th of the month. There is no reason to buy bond earlier as you will get interests of the full month even if the purchase is made on the last day.

Every month, I put some money in our savings and investment accounts and I do it on fixed dates. No, I am not trying to time the market, but rather making sure that saving/investing comes first.

Both my wife and I get our paychecks every two weeks, and most of bills (mortgage, credit cards, phones, and utilities) are paid in the first week of the month. Initially, the credit card due dates spread out through the month, making it difficult to manage the bills. I then called the credit cards we used most often and asked for new payment due dates. Now they are all within the first ten days of the month and I can pay them all at once. Since I didn't set up automatic bill pay for credit cards, I let Yahoo send me reminders five days and three days before paying the bills and another reminder a couple days later to check if the payments are in place.

After paying off all the bills, additional transfer to high interest savings account in the middle of the month may occur depending on how much is left in the checking account at Bank of America. Recently, there is an interesting discussion at Blueprint for Financial Prosperity on how much should be kept in the checking account. While I agree that a brick-and-mortar checking account should enough funds for daily expenses and emergency withdraw, it won't be financially wise to put an excessive amount in a zero-interest checking account. How likely that we will need thousands of dollars in cash immediately? Not impossible, but very, very unlikely. Therefore, the balance in the checking account is usually between $3000 and $4000, anything above this level will go to the savings account.

Since most of the expenses are predictable, this automatic saving/investing schedule has worked very well for us.

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