The Smart Money 01-14-HNS

Posted January 12, 2018 6:10 p.m. EST

By Michael Taylor

The Smart Money

I'm so, so sorry to learn your 2018 New Year's resolutions about eating clean, exercising more and paying closer attention to family members aren't working anymore. Same here.

If only I were a robot, I think, I would fulfill my resolutions so much better. Robot-Mike would never miss leg day at the gym. Robot-Mike would never eat those doughnuts. Robot-Mike would pay close attention to his beautiful children, instead of reading Twitter on his phone.

If saving more was one of your New Year's resolutions and you don't want to participate in "Ditch New Year's Resolutions Day," which is actually a thing and falls on Jan. 17, then you need to save more like a robot.

What I meant by that, is that savings is best done through computer automation rather than personal determination and resolution.

The beautiful thing about automation is that it brings that steely robotic resolve to solving the squishy human problem of savings and investment.

It takes about 10 minutes (maximum!) to set up an automated savings plan of any kind. Then the automated process just hums in the background of your life. Human weakness regarding sugar, carbs, exercise-laziness and Twitter-distraction can't knock these financial bots off track.

In the beginning of June 2017, I signed up for an automated savings program offered by my bank called "Tracker." This is a goofy and effective savings scheme in which my bank slips a varying amount, between $1 and $9, out of my checking account and into my savings account, every Monday, Wednesday and Friday. The amount varies according to the bank's own proprietary system, although it will not transfer any money if my checking balance drops below $100.

The "Tracker" app, which is branded with a picture of a dog, then sends me an encouraging text message to my phone every day about how much I have in my checking account, or how much I've saved, or some dumb factoid about either dogs, or money. This is silly except that I saved $504 over the course of 6 months without even noticing how. (Well, I noticed the text messages.)

And I know, $504 is not life-changing, but it's also much better than not having that extra $504 in my savings account, without even trying. My bank built the Tracker app but I'm pretty sure any bank you may use in 2018 will let you set up an automatic transfer program to slip small amounts out of your spending account and into a harder-to-spend-from savings account.

In May 2017, I wrote about a funny savings app called Qapital (which I enjoy pronouncing incorrectly as Kwapital).

Qapital, like Tracker, slips small bits of money -- you determine the amount and timing -- out of your checking account and into a Wells Fargo account you access through the app. Qapital encourages you to set final goals for your savings (I chose to save $500 in order to purchase shares of stock for my daughters) and to pick the triggers for transferring.

My trigger was a "52-week rule," which started with $1 in the first week, and increased by $1 each week that followed. By November 2017, right on schedule, my Qapital savings account reached $500. The beautiful thing about Qapital, like the Tracker app, is that the tiny amounts of weekly money never pinched. I never missed the money removed from my checking account.

In May 2016, I downloaded and started investing through the Acorns app. Like Qapital, Acorns lets you determine an amount you'd like to automatically transfer from your checking account on a daily, weekly, or monthly basis. After a bit of prodding from the app, I settled on a plan to transfer $5 per day to Acorns according to their "Aggressive" (aka risky) portfolio of ETFs. Why $5?

Like many caffeine addicts, I can easily spend $5 or more on coffee and other nonessentials per day, so I decided $5 was the right "punishment" amount to contribute to Acorns. Twenty-one months later, I have $5,875 in my Acorns account. Most important, I've never missed the daily $5 hit to my checking account.

Maybe you're thinking that $500 of savings ($1,000 if you count both Qapital and Tracker!) or $5,875 of investments doesn't make a whole lot of difference in one's life. You're not impressed.

"Big deal, finance columnist," you're thinking, "what about the real money?"

"OK, Big Shot," I'd respond, "fine." All of these automated processes work at a larger scale as well. Crank it up to $11. Make my day. Go for the real money. That would really show me up.

But also, the Acorns app has a neat little projection graph that shows my dumb $5 per day building up to a $100,000 portfolio by age 65 and a $400,000 portfolio by age 85. Which could matter some day.

The point here isn't that your favorite finance columnist is really good at savings and investments. Rather, the opposite. The point is that anyone not very good at savings and investment could produce similar (or far better!) results while hardly trying.

Automation of savings and investments means you don't have to be disciplined throughout the year. You don't have to stick to any resolutions. You make the robot do the thing for you.

After the initial 10-minute set-up of automated transfers, just literally do nothing the rest of the year. Heck, the rest of your life. Doing nothing becomes, in fact, the key to your success. "Doing nothing" feels like a New Year's resolution we can stick to, long past Jan. 17.