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6 Steps to Prevent Automatic Debits From Delaying Your Retirement

Almost everyone has experienced it: That pit-at-the-bottom-of-your-stomach feeling that happens the moment you realize your wallet/purse is missing.

Ugh. This day just took a turn, and it ain’t up. Or is it?

There is an upside to losing your wallet. And no, it’s not the fun daytrip to the DMV.

Losing your wallet means losing your credit and debit cards. And if you’re like most people, then you probably have A LOT of automatic debits applied to those cards – membership fees, country club dues, car payments, vacation home expenses, etc.

Automatic debits are nice because you don’t have to think about them.
And automatic debits are dangerous because you don’t have to think about them.
Automatic debits = nice and dangerous.

By signing up for auto-pay, you agree to spend that money every month with no conscious thought or further decision-making on your part. But your wants and needs change over time, so some waste is bound to happen.

And guess what? The market changes over time, too, so even the stuff you still want or need may be available at a lesser cost. But because of auto-pay, you’re stuck paying what you agreed to.

Once your cards are lost, you must manually opt back into every single expense; in my experience, just going through that process leads most folks to reduce their automatic spending by 5-10%. Losing your wallet is really an opportunity to lose expenses that aren’t improving your life.

So why not skip the identity thievery and choose to lose your wallet?

Our simple 6-step plan for losing automatic debits that will delay your retirement.

Step 1 – Find Your Happiness.

Take a minute to discover what really makes you happy.

Reflect on the last month (consult your calendar, credit-card statement or social media for inspiration), and write down a list of the top five moments when you felt the happiest, the most content, the most joyful.

Was it sharing dinner with your family? Coming home to a spic-and-span house because your cleaning service came? Planning a fabulous getaway with a girlfriend?

Don’t judge; just observe.

Step 2 – Record Your Regulars.

Now, compile a list of every regular monthly charge – every single consistent monthly amount.

Do they all come through your bank account, a credit card, or a combination of several places?

Utility bills, house or car payments, memberships, subscriptions, parking/commuting, gasoline, groceries, superstore purchases, online shopping, eating out, beauty products or services, personal coaching sessions, family support payments – include it all!

Step 3 – Connect the Dots.

Compare the two lists – how closely are they aligned? How does the way you’re spending your money support your happiest self?

Only you can determine this, as the same purchase can mean radically different things to different people.

For example, for some, a swimming pool serves as a gathering place for creating invaluable memories. For others, it empowers fitness and longevity. And for others, it provides a lovely view for savored moments over morning coffee.

Step 4 – Keep or Sweep.

Now, use that comparison to decide what stays and what goes among your monthly debits.

How much happiness do you get from having access to 1,000 cable channels? You may be better off spending a little more to get a lot more benefit – if you hate your dreary gym, then spending twice as much to join a gym you love might bring four times the enjoyment and three times the use.

Bottom line: Be mindful!

Step 5 – Think Through Trades.

Sometimes it’s helpful to think of expenses in terms of tradeoffs.

For example, “If we sell our vacation home, we can take two $15,000 family trips each year to various destinations.” Or, “Downsizing to a condo would mean two more nights a week we could dine out.”

This is a deeply personal exercise; don’t let others’ judgments or opinions sway you or color how you think of things. Only you can make the right choices for you.

Step 6 – Assign Your “Extra.”

Once you’ve opted back in to the monthly expenses you want, turn auto-pay to your advantage.

If you’ve found $1,000 of monthly savings, then raise your 401k contributions accordingly.

Or set up an automatic transfer from your checking account for the day after payday.

Or you can reallocate some or all of the savings for new purchases or debits – maybe you’ve been wanting to get a personal trainer, or treat yourselves to more fine dining.

A Few More Flickers…

  • Consider switching to an annual schedule for recurring expenses like insurance, memberships or subscriptions. You’ll likely think more about the costs writing one large check instead of twelve small ones, and you can request a discount for paying in advance.
  • If you keep a journal, the next time you sit down to write, add and complete this sentence: The best money I spent today was…
  • Studies have shown that we spend credit much more freely than cash. Consider doing a “financial cleanse” by switching to a cash system as much as possible for a week or a month.
  • Calculate the potential of your “Latte Factor” using this worksheet.

Share the Wealth

EmberHouse is committed to extinguishing the taboo of talking money. Take part by sharing this article with your circle! This article can especially benefit those many years from retirement. A life of being conscientious with automatic debits can provide for an earlier retirement or a less risky portfolio.

Then, share your story with us! Email us @ newsletter@emberhouse.com with your experience – tell us how much you’re saving or whether you feel happier spending your money more mindfully. We want to know what’s working for you!

And we want to know what’s eating you, money-wise? Got a question we can answer in a future newsletter? Please email us @ newsletter@emberhouse.com, and we’ll do our best to address it!

Share the Wealth!
Share the Wealth!

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