How to Stop Thinking About Money and Credit Card Debt

Did you read that title twice? Did you wonder, “What are they thinking? This is a personal finance blog; of course I want to think about money!”

Of course, budgeting, saving, and a careful financial plan, as well as topics like how to leverage those credit card rewards programs, should always have a place at front-of-mind. But when saving money and practicing goo finance becomes habitual or automatic, we’re bound to get out of debt faster and save even more.

By now, you may have broken all your New Year’s resolutions, including paying down credit card debt or saving more. That’s okay… many people do. Psychology experts, life coaches, and other change agents have said it takes 21 days to instill a new habit. But recent research shows it could take much longer — two months or more. The good news there is that, if you haven’t broken your New Year’s resolution, it could be close to becoming a habit.

What’s even better than building strong saving habits and always paying your bills on time? Establishing the infrastructure so you can do it automatically — no tricky habit-forming required. It’s really not hard. In fact, it’s easier than getting your butt to the gym in sub-zero temperatures. I promise.

Here are five ways to automate your finances so you never miss a payment and don’t have to remember to save money… and you’ll even discover a few bonuses along the way.

1. Set Up Automatic Bill Payments

The credit card companies will love you for this one. You can set up credit card payments to be deducted automatically from your checking account, or, in some cases, bank debit card or a pre-paid spending card like your Paypal debit card. Most credit card companies offer this option online, but then you can’t take advantage of perks you may get by doing so. I’ve had late fees waived, late payments forgiven, and interest rates lowered just by signing up for automatic bill pay. You usually have to ask for a supervisor to get this kind of VIP treatment, but it’s worth it. Some utility companies and other businesses also offer this convenience.

2. Track Your Credit Score

It’s a good idea to check your credit score at least quarterly, and request your free credit report periodically, too. But I use Credit Karma to alert me when my credit score has changed. This is a free service, and the credit scores they use are the TransUnion TransRisk score and the VantageScore. Neither is your actual FICO score. But if one credit score changed drastically, there’s a good chance your FICO score did, as well. I wouldn’t pay for my FICO score if my TransRisk or VantageScore showed just a small change, or if I can account for the reason, but if your score drops or rises drastically, you may want to pay for your FICO score or even obtain your free credit reports from Annual Credit Report website, especially if you intend to apply for a loan, mortgage or revolving credit account soon.

3. Set Up Automatic Transfers

If you use online checking, and you select “transfer money,” there’s an option to select the frequency of the transfer. It takes just a few clicks to set up automatic transfers to savings account. Aim for five to 10 percent of your take-home pay if you already have a pre-tax savings account, and more if you don’t have a 401K or other pre-tax retirement savings plan.

4. Max Your 401K

Max out your 401K or other pre-tax retirement savings account. The government raised the contribution limits for 401K retirement plans by $500, to $17,500. Employers are also permitted to contribute matching funds up to a certain percentage or dollar amount (depending on company policy), and this is on top of the $17,500 maximum contribution from employees. Look to contribute at least 10% of your pre-tax income, if possible.

5. Use Budgeting Software

Use Mint or another online budgeting software to track and remind you of any payments you can’t automate. It may not be possible to automate every payment; budgeting software like Mint makes it easy to set up notifications seven days before you have a bill due. (More than enough time to pay online or even to get a check in the mail. A word of warning: If you carry a balance on your credit card, the Mint software may notify you that the entire amount is due. While it would be nice to pay it off in full, of course, check the actual minimum payment on your statement. And here’s another good financial habit – always pay more than the minimum amount due, even if you can only round up to the nearest $10 increment.