Do you struggle with follow through? 

Maybe you’ve made several financial promises to yourself, but you just don’t keep up with the details. 

If you’ve ever done anything consistently, then I’m guessing it’s your 401(k) retirement plan at work, and that’s because it happens automatically. You just never have to think about it. 

So, what can you do to improve your financial follow through?

Well, make it automatic. Just like that 401(k) of yours. 

We tend to overestimate the value of the big commitments that we make in a rush of conviction and enthusiasm. Conversely, we tend to underestimate the value of small but growing habits that we practice over time.

Try this simple idea: use something called a wealth coordination account (WCA). 

A WCA is just a checking account that’s dedicated to your wealth building efforts. It acts as the Grand Central Station of all the flows of money that are now coming into and going out of your financial life – you just don’t have an effortless way to keep track of them all. 

But now you do.

Your WCA is not your household checking account. It isn’t your savings account for vacations or tax payments or that cosmetic surgery you want. 

It’s for long-term wealth building. So, keep everything else out of it. 

Since most people are plagued by debt and have no plan to extricate themselves from its slavery, let’s deal with that first.

But didn’t I just say to keep everything out of the WCA that isn’t long-term wealth building? Well, that’s actually the point. The monthly cash flow that you are now sending to the credit card company needs to eventually be re-routed back to you. The way to make that happen sooner is to start running that cash flow now through the WCA. 

Here’s an example. Let’s say that you owe $1,000 on a credit card and you’re paying $100 every month to the credit card company. With the WCA strategy, you’re going to have your bank automatically transfer $100 every month from your household checking account to your WCA. And then, you’re going to set up an automatic payment from the WCA to the credit card company. In about eleven months the credit card company will be paid off, but you will continue those automatic transfers from your household account into your WCA – very much like you do with your 401(k) every pay period. 

It’s automatic and you hardly (ever) think about it.

Without the WCA, that cash flow now going to the credit card company, it’s going to wind up staying in your household account and (in all likelihood) being spent. In fact, you’re going to wonder how you ever got by without it.

Do you save money systematically now? Great – put that in the WCA first. 

Do you invest in mutual funds on a regular (monthly) basis? Fantastic, well set up an automatic draft from your household account, to the WCA and then to the mutual fund. That way you can keep track of what you’ve done.

Do you have rental property? Well great. Rents in excess of your operating expenses can be deposited into your WCA.

Do you get an annual bonus at your work? Are you expecting a tax refund? Don’t deposit it into your household checking account – that’s like putting a post-it-note on a dollar that says, “spend me!” Deposit those bonuses and those tax refunds into your WCA.

Do you earn dividends and interest off taxable stock and bond portfolios, or mutual funds of the same kind? Well, consider the interest and dividends to be paid to your WCA. That way you can decide if re-investing back in the same portfolio makes sense or doing some other wealth building activity instead.

Over time, deposits will tend to continue going into the WCA, while some withdrawals will cease (like debt payments). As these automatic financial snowballs keep rolling, it will gain size and speed. But rather than simply letting it accumulate inside your WCA, on a regular basis, perhaps annually, you’ll want to redeploy that capital in a balanced, diversified way throughout your total financial plan. It may be used to shore up your protection, rebuild savings or invest to grow.

Don’t leave your financial success to chance or even to good intentions. 

Automate the process, starting now with a wealth coordination account.

Offering you Wisdom on Wealth, I’m Byron Moore.

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