The first financial automation everyone should make: set up a password manager

Why doing this makes you more engaged with your finances

written by oz chen

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The first financial automation anyone should make is to set up a password manager.

There are some obvious and not-so-obvious reasons for doing so…

  • Faster login to your accounts (obvious)
  • Less likely to get hacked (less obvious)
  • More likely to engage with your finances (much less obvious)

When I started money coaching, I observed that many clients didn’t use a password manager.

Was it this variation with my first dog’s name, with an exclamation mark? No, I think it’s the one ending with my birth year…

But what if I told you there’s a less obvious benefit of password management? It’s financial engagement.

Less friction, more finance

In user experience design, there’s a concept called cognitive load : the more (brain)work something takes, the less likely a user will be successful in completing that task.

Trying to remember a password every time, typing it in manually, and then messing up the password and potentially getting locked out of your account for too many retries…that’s a lot of friction.

Not using a password manager is like having a safe for your money and not knowing where the key is.

If this friction exists, you’re not only less motivated to engage with your current finances.
You’re also less likely to open new accounts.
(I’m looking at you if you’ve procrastinated on opening a high-yield savings account—the lowest hanging fruit in optimizing your finances).

For all these reasons, using a password manager is one of the first financial automations you should set up.

Considerations before picking a password manager

  • Using a password manager is generally better than not using one; pick the one that’s easiest for you to use across all your devices (phone, computer, etc)
  • Consolidate all passwords using ONE password manager; you don’t want fragmentation and have to keep track which platform (iCloud? Dashlane?) has which password. This is also less of a security risk.
    • As part of this process, you might want to export passwords, import them into the new password manager, then delete them from old password managers.
  • Your master password (for the password manager) should be complicated, and you should write this down on a piece of paper and memorize it.

Specifics of picking a password manager.

I like Bitwarden (no business affiliation), which is used by millions of people. The free version is robust and allows installation on unlimited devices – which is really generous, compared to something like Lastpass, which only includes 1 account for its free version. Bitwarden is open-source, which means its code can be reviewed by the public. One can argue that this incentivizes an enterprise to be more honest about its vulnerabilities—which is important in cybersecurity.

However, I’m of the philosophy that you should use whatever is easiest for you to use and stick to.

For a friend who only wants to stick with Apple, I taught her to set up her password management all via iCloud Keychain. Same approach for someone else who is all in on Google/Android, they can use Google Passwords.

The issue comes up when you have mixed accounts: you use Google Chrome on your laptop, use Safari on your iPhone, and your work computer is a Windows machine. It’s easy to have password sprawl where you have passwords saved across different platforms.

If this sounds like you, then try a third-party password manager like BitWarden, 1 Password or Dashlane.

And if you work with a financial professional…

Your money coach or financial planner will be happy that you set up a password manager. That enables to spend more of the session you pay for – strategy, coaching and implementation – instead of fumbling around for a password.

This is especially true for my style of money coaching, where I help clients “co-pilot” – they log into their accounts and I help teach them exactly what to do with their accounts, which buttons to press, etc.

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