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How to Automate Financial Planning

February 18, 2020 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

How to Automate Financial Planning

Do you want to get on a good path with your money, but are not sure if financial planning is for you? You may be asking: Isn’t that for people who are already rich? How much does a financial planner cost? What if I don’t enjoy talking to people?

We get it. Financial planning can seem like something that only happens for the wealthy in a smoke-filled, wood-paneled room. But this is the 21st century, and options for financial planning today are a lot more welcoming.

Move over scotch and cigars, make way for craft beer and vaping. With the rapid growth of financial-advisor automation, more and more people—of all walks of life—are finding it not only accessible, but essential.

What Is Automated Financial Planning?

Think of it like putting your money on autopilot. It doesn’t mean you can completely lose track of your finances, but the ability to set and forget most of your monthly recurring expenses can help unload a lot of the day-to-day stress that comes with keeping a budget.

Automated finances include everything from setting up automatic payments on your bills to directing a portion of your paycheck to your 401(k). It requires some upfront legwork, such as linking your bank accounts and setting up online bill payments, but in this case, the only human involved is you.

As of this writing, there’s no one place to automate your entire financial life (although many of the leading fintech companies are running an Olympic-level sprint to get there.)

There are, however, a growing number of apps that leverage technology to provide insight into your financial life.

These apps allow you to perform recurring tasks like paying bills or making retirement-account deposits from one location simply by linking your checking account. Recently, SoFi launched its own goal management and personal finance tool to help users easily manage their finances.

There is a trend toward all-inclusive ecosystems where paychecks are directly deposited into a singular app, which then pays your bills, puts money into savings, invests, and gives you an allowance of spending money.

In fact, automatic financial advisors could even become the algorithm-powered equivalent of sitting down with a human and crunching numbers for your entire life.

That may sound a little bit like Big Brother, but one might argue that your digital apps already know you better than any human. If you’re utilizing mobile apps and linking bank accounts, those companies are literally in your pocket.

And as the technology continues to evolve, automated financial-planning bots could be as responsive to your needs.

Another aspect of financial planning that has already been impacted by automation is investing. An automated investing solution, such as the one offered by SoFi Invest, allows you to identify a goal and then builds a diversified low-cost portfolio for you that is rebalanced quarterly. This type of solution allows you to offload the complex world of investing so you can focus your time on other aspects of your life.

Why Should You Automate Your Finances?

One great thing about automating your finances might be the chance to truly live the “pay yourself first” principle. Whether through contributions directly into your 401(k) that never even make it to your checking account, or a $5-per-paycheck automatic transfer to your automated investing account, it’s unlikely you’ll have the chance to forget—or forgo—that deposit.

Also, emotions can play a big role in our money management. It’s not ideal and leaving feelings out of it isn’t as easy as it sounds. Anyone can claim financial self-discipline and willpower, but how strong is that resolve when you get an unexpected bill or are invited on a summer getaway? If your finances are automated, you might be able to take away some of that temptation.

There’s also the confidence that comes with knowing you may never miss a bill. This is huge, especially if you’re using a 0% APR credit card. If you’re late on a payment during that promotional period, you might incur heavy fees and a huge jump in interest rate. And that, in turn, could hurt your credit.

Is Automated Financial Planning Right for You?

Automated financial planning isn’t a cure-all for money management. You may encounter unusual details, nuances, or circumstances that require a human touch. Estate planning, owning a small business, or prioritizing among multiple goals, for example, can get complicated quickly.

And although you can still automate some parts of the process, a human advisor can help you ensure that you aren’t missing anything.

It’s also not an excuse to completely lose track of your budget. You’ll still need to keep enough money in your account to cover all of those automatic withdrawals, and that can be a challenge, especially if you aren’t paid consistently.

One smart strategy is to set reminders that the withdrawals are on the way so that you can check your balance. If you set up automatic payments for each individual bill through its website, you may have the ability to opt-in for email reminders and alerts.

You can even automate your bank account alerts to let you know when your account falls below a certain balance or when a direct deposit has posted. A quick confirmation that your account is in the black can go a long way to avoiding extra management.

How to Get Started

If every good robot is engineered by a human, automated financial planning is no different. To start, you’ll need to put all the pieces in place to ensure a smooth-running machine.

One strategy is to start with a checking account to serve as your “headquarters.” Most of your money will come and go through this location.

Remember the pay-yourself-first philosophy? Here’s where you can put it into practice. Whether it’s automated transfers into your emergency fund, 401(k) contributions, or automated investments, the key for this approach is to ensure the money comes out on the same day you get your paycheck.

It doesn’t have to be a big portion of your income, but think about making it consistent. And, as you start to pay down debts or reduce spending, you can increase those amounts.

Next, go through your bills and set as many of them to auto-draft as possible, including recurring monthly fees like membership dues, kids’ classes, and daycare tuition, on top of your utility bills and car payments.

If you’re concerned about having enough cash in your account to cover all your bills—especially if your due dates don’t always coincide with your pay dates—consider setting up every bill due within one pay period to be withdrawn the day after your check is deposited. It could give you additional peace of mind that you’ve already taken care of the bills.

Automated Investing

One of the best things about automated financial planning is that you’re in control. You can be as hands-off (or hands-on) as you choose.

With SoFi’s automated investing platform, we will build and manage a portfolio for you without charging a management fee. Whether you’re saving for retirement, a down payment, or just investing for later, we’ll help you make a plan to tackle multiple goals.

Ready to start automating your finances? Get started with SoFi Invest®.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“SoFi Securities”).


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