The Dark Side of Managing Your Personal Finances Probably Isn't What You Think

About ten years ago, David Bach wrote the national best-seller, “The Automatic Millionaire.” His message: pay yourself first and make it automatic.

Today, the idea of financial automation may not seem revolutionary. But, you have to consider the times of when his book was published (2005) and the fast pace with which innovations have unfolded in the personal finance industry.

For example:

  • The first ATM may have made its debut in 1969, but they didn’t become ubiquitous until the 1990s.
  • Online banking began at the dawn of the 21st century; now it, too, is ubiquitous.
  • Mobile banking started gaining traction in 2008. But its rise since has been meteoric. According to the “Consumers and Mobile Financial Services Study – 2015,” published by the Board of Governors of the Federal Reserve System, 39% of smartphone owners access financial information and conduct financial business via their mobile devices – up from 33% in 2013 and 29% in 2012.

With these innovations, almost every aspect of managing your personal finances can be automated and documented. But here’s what I find fascinating about all of this:

The innovators have more insight into your behavior and habits with money than you do!

While you chew on that for a moment, let me provide three (3) examples for your consideration.

Example #1

You turn on the switch to save, pay your bills and invest automatically. Convenient and time saving, right?

Often, this convenience quickly and almost imperceptibly slips into complacency. Automating these “mundane” financial tasks supposedly frees you up to concentrate on the big picture. However, when you don’t download and review your statements it’s hard to evaluate the details that make up the big picture.

What is out of sight (because you don’t have to think about it), becomes out of focus.

Example #2

You opt to use an account aggregator like Mint.com (or something similar). So, you feel a tad-bit more organized and in control of your money. After all, you have faster, quicker access to all your financial information.

But information alone isn’t what translates into better choices and decision-making. You need insight, too.

However, you’ve confused having fast and easy access to your financial data as being attuned and engaged with your money.

Example #3

When you automate, you’re protecting yourself from yourself in a sense. Because you’re not relying on your willpower to do what you know you should do, but may not, to achieve your goals and maintain healthy financial habits.

Having way to offset the frailties of willpower is smart, but not without risk. Especially if it results in you not seeing how some of the choices and decisions you make by default are a form of abdication.

Stop operating on autopilot

I am not against automation.

I am against you operating on autopilot without any triggers that tell you it’s time to review and evaluate if what you’re currently doing is best for you – still.

I am against “outsiders” (read: the innovators) having more insight about you and your behaviors and habits with money than you do! Frequently, they know your patterns, tendencies and preferences better than you.

If you think about, I’m sure you’ll agree with me: it’s pretty ridiculous that they are using the information about how you manage your personal finances more than you’re using the same information about you!!

I am against you operating on autopilot because it tends to lead to poor choices and avoidable mistakes – the result of being haphazard with your money, instead of systematic and strategic.

I am against the dark side of automating your personal finances because when you don’t believe you have to think about the “small” things, you usually miss the “big” things.

Managing your personal finances on autopilot can actually stand in the way of you getting what I understand you really want: Better results from your money. This is what you want, right?

 

p.s. It’s “open enrollment” season. Right now, you are focused on your healthcare benefits. But what about your 401(k) – are you focused on getting better results from your mutual funds? If not, it’s likely because you’re operating on autopilot. And if you’d rather operate deliberately and strategically, click here to join me for a 3-part interactive training session.

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