Since moving over to my automated paycheck system, I have consistenty hit every single financial goal I have set for myself, while making sure I have enough money to pay my bills every week, and even have some remaining for discretionary spending.

In this blog post, I will show you exactly how I achieved that, with real life examples and instructions.

At the end, I will also leave you with a few bank account and credit card recommendations that you can use to kick start your journey to financial freedom.

Let’s get started.

Pre-Tax Dollars

Retirement Savings or 401K

Before anything else, 10 -15% of my paycheck goes to my retirement savings or 401K account.

This is pre-tax dollars, so not only does it help me save for retirement, but it also reduces my current income tax burden.

I set this contribution limit to ~10% at the beginning of the year, and then forget all about it. They payroll system automatically takes care of it, and I can rest assured that I will never “mistakenly” spend my retirement savings.

When setting my 401K contribution limit, I make sure I am getting the full employer match. If you are lucky enough to work at a company that matches your 401K contribution up to a certain point, take full advantage of it.

It’s literally free money! Don’t leave it on the table.

Health Savings Account or HSA

One type of expense that no one enjoys, but everyone has — health expenses!

The older we get, the more likely this bucket of expense keeps growing.

That’s exactly why I put money in my HSA account. These are pre-tax dollars that are withheld from my paycheck.

So, again, this reduces my current year tax burden, while stockpiling money into an account that I can use for any health expenses.

To make things even better, certain HSA accounts let you invest your money into the stock market. Money in these accounts grow tax-free.

So, it’s almost like getting triple tax advantage:

Does not count towards your income tax. So, no tax-deductible contribution.

Any dividend or stock appreciation is not taxed. So your money can grow freely.

No tax on withdrawal, as long as its for medical purposes.

The cherry on top is HSA employer match.

Many employers will match your HSA contribution up to a certain yearly limit. Make sure you take advantage of that. Similar to 401K matching, this is free money that otherwise you would be giving up on.

Two Bank Accounts

Everything that’s pre-tax — 401K and HSA — I never see a penny from that hitting my bank accounts.

For the remaining, I make sure every dollar is assigned a purpose, whether towards saving, investing or spending.

My payroll provider allows me to add multiple bank accounts for them to deposit my paycheck. I can give them arbitrary number of bank accounts, and set the percentage for each of them.

In my case, I have 2 primary checking accounts:

Wells Fargo — general spending or everyday expenses

SoFi Bank — rent, bills, car payments, investments, savings

Let me elaborate.

SoFi Bank

Every paycheck a strategically fixed amount is routed to this account from my payment provider.

I never touch this account for my general spending.

There’s no debit card for this account, and I never link this account to any of my credit card accounts either.

Every dollar coming into this account has a very specific purposes.

Let’s start with some fixed expenses that I have every month.

Rent Payment

Car Payment

Every month, no matter what happens, I have these fixed expenses.

I get two paychecks every month. So, I divide the monthly cost by 2, and contribute exactly that amount from every paycheck.

Now, moving away from expenses into savings.

High Yield Savings Account or HYSA

No matter what, a very small fixed amount always trickles into my SoFi HYSA every paycheck. Even though I invest consistently (more on this later), I never underestimate the value of cold hard cash. That’s why, I always make sure to add to that bucket.

Lastly, investments into my brokerage account.

Value Investing

General Investing

I have weekly investments set up in my brokerage account that pulls from my SoFi Checkings account. Both the amounts and index funds are fixed.

Every week I split my investment into some value ETFs, some dividend ETFs, and some other broad market ETFs.

By directly routing money from my paycheck into this SoFi Checking account, I make sure my brokerage account can pull money from it every week and invest into the stock market.

So, there you have it for my first bank account.

In short, a part of my paycheck is routed to this account for:

Rent Payment

Car Payment

Emergency Funds HYSA

General Investing

I don’t have easy access to this money.

Because of that arrangement, this account makes sure I have money saved up for my biggest monthly bills and I am both saving and investing for the future.

To make this whole process simple, I use SoFi Vaults and SoFi Automation.

Vaults are like “buckets” for the different categories. Say, I have the following vaults:

Car (for monthly car payment)

House (for monthly rent)

Emergency Fund

These are just “categorical umbrellas” for the same money sitting in my SoFi HYSA. It’s just a logical way to bucket the money so that I know I have enough for each category. At the end of the day, all the money is in the same physical account.

Okay, now you might be wondering: how do I remember to correctly transfer money from my Checkings account in the right amount to the Savings Vaults?

Easy answer: I don’t.

This is where SoFi Automation comes in. SoFi lets me set an automation rule where I can tell it exactly what to do every time a direct deposit hits my account.

Put $X into my Car vault

Put $Y into my House vault

Put the remaining $Z into my Emergency Fund vault.

If you want to automate your financial future, SoFi is one of the best tools out there. Feel free to use my referral link to get started.

Next, let’s discuss my general spending account.

Wells Fargo Checking

The remaining money lands in my oldest account — Wells Fargo Checking.

Money never stays too long in this account. So I could care less about Wells Fargo’s criminally low interest rates.

Why doesn’t money stay long in this account? Simple. It’s their for one and one purpose only: pay my credit card bills.

I have strategically split my paycheck into the SoFi and Wells Fargo accounts in such a way that the amount that lands in my Wells Fargo account is very close to my monthly budget, with some buffer for high spend months.

Because of that, at the end of every month, there’s not a lot of money left in this account.

Benefits of this Approach

Let me wrap up this blog post with 3 of the biggest benefits of such an automated approach:

Pay myself first — investments, savings, 401Ks, etc

Artificial Scarcity — by linking my credit cards to the Wells Fargo account that gets a small % of my biweekly paycheck, I eliminate the likelihood of dipping into my savings and investments

Easy to spot big purchases or irregular spending habits — the Wells Fargo account should have enough buffer to cover my everyday expenses, and then some. If not, something needs to be looked into.

Closing Thoughts

Okay folks, that’s all for today.

If you have read it so far, thank you for your time. I hope you found it valuable.

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