Would you attempt to fly solo on auto pilot if you were just learning to fly? Of course not. That’s a silly question. This post was inspired by a conversation I had in small group at FPU class this week. The group conversation got started on budgeting and “you need to set up an automatic savings plan to get started on your emergency fund – that’s what my financial advisor told me to do……” That sparked a rather interesting conversation where I disagreed with conventional wisdom given out today by the financial services community.
“Pay Yourself First” has become a sound-bite cliche in personal finance. We’ve been told this by people selling some type of savings product. The sales person sees this as a win-win. They win commission. The client wins by actually doing savings. (Yes the research is extremely clear – people who do automatic investing and payments pay on time more often than those who do not). However, I want to go deeper than a comparison to average. I coach my clients to swing for the fence. Better than average simply is not good enough.
Automatic Savings Plans: Normally, “Pay Yourself First” is used in conjunction with some form of automatic savings plan. While, I’m not necessarily against automatic savings plans. I’m going to make the case that they are settling for “good” when there is a “best” case scenario out there. The reason is simple. At Penny Coach, we teach proactive budgeting. We teach people to write a spending plan for their money called a “budget” on-purpose, on-paper before the month begins. This is being pro-active and intentional with your money.
What I see most often is 401(k) savings on an “automatic” “pay yourself first” type mentality. People will then treat the rest of their income like it is meant to be blown. After all, I did my good deed for the pay check. “I paid myself first.” Another shortcoming is the mindset that I adjusted my lifestyle and spending “like I never received the money.” I contend that people who do this, will never receive the emotional, spiritual or psychological blessings of having managed that money well. There are only three things you can do with money: Give, Save and Spend and in that priority. When do you these three things with a focused intensity, you will experience this amazing thing called “Financial Peace.”
As a Christian, our priority is never to pay ourselves first. We’re told in scripture many times and in many ways that giving is our first priority. Hover over these scriptures to read them. Exodus 34:19, Exodus 34:26, Leviticus 2:12, Numbers 18:12, Numbers 28:26, Deuteronomy 26:1-2, Proverbs 3:9, 2 Chronicles 31:5, Ezek 44:30.
Some churches have an automatic deduction plan for giving where they deduct money from a bank account. In what has now become a classic of the Christian faith, Anne Ortland’s Up with Worship: How to Quit Playing Church, 
makes the case that Christian giving is an act of worship. Ortland draws a graphic picture of sacrificing livestock in the old testament as an act of worship. She makes the case that we discount the blessings of sacrifical giving when it becomes a thoughtless process we do on Sunday mornings. If 20 years ago, Ortland’s classic claimed simply writing a check and actively putting it in the offering plate each week diminished worship, how much more do we diminish it today by automating the process so we’re not even physically writing a check any more?
Saving is incredibly wise. Proverbs 21:20, Ecclesiastes 11:2, Proverbs 21:5, The magic formula for wealth building is live on less than you make and do something smart with the difference. The challenge of this post is to take money management to a higher level. Automatic savings is good; however, proactive management of all of the resources you have been given is a higher standard. That is good stewardship. One must also realize the best way to build wealth is to do it slowly over time. Proverbs 13:11
Government Knows the Value of Being Paid First: Another part of “Pay Yourself First” that makes me chuckle is that for everybody who is an employee, the government makes it impossible to pay yourself first because they put themselves first. How can you pay yourself first, or even tithe first when our Government is calling “Dibs” on your money before you even get it?
To become a better steward, here are some excellent pointers:
- Be intentional with: Giving, Saving and Spending. Always use a written game plan. You should be cognitively aware of your finances at any given time. Proverbs 27:23-24
- Automate the physical tasks of the transaction but not the intentionality. If you lose intentionality, you may be short changing yourself the cognitive, emotional, and spiritual blessings that result from being a good steward of those resources. David supports intentional sacrificial giving (Read 1 Chronicles 21:22-24 and 2 Samuel 24:21-24).
- Consider automating with a Push process instead of a Pull process. A manual Bill Pay service is the perfect example of a push process. You log on to the banking web site and proactively push money to its destination. When you have direct drafts set up against your checking account, you are rely on the other end to pull money out of your account. When you push a car, you stay in control of where it goes. When a tow truck driver pulls your car with a wrecker, the truck driver is in control of what happens to your car. This sense of control is essential to a healthy proactive management of money.
- Use manual processes to help change yourself first. It takes 3 months to really form a new habit. You are your own secret weapon with the battle of the budget. Become a saver by intentionally writing out a budget and intentionally moving the money yourself. Developing this discipline is essential to your long term financial health.
To summarize my thoughts I will leave you with this thought. Automatic savings plans are great for people who already have developed the budgeting skills and financial discipline. It makes things easier. However, I do not suggest automatic savings plans for people learning to write a zero based budget and learning how to be proactive money managers. I’m making the argument that using automatic savings plans before you develop the budgeting skills and knowledge is like a new student flying a plane on autopilot. Yeah, if everything works, it will get you to your financial destinations. When something goes wrong, you can expect to crash.
What are your thoughts and experiences?
