Think about the things in your life that are either partially or fully automated...
- Washer & Dryer - toss your dirty clothes into a couple of magic boxes and 2 hours later they're fresh and clean
- Dishwasher - another magic box!!! Insert your dirty dishes along with some soap, hit a button and an hour later you have sparkling dishes
- Food Delivery - a couple clicks of a mouse and 20 minutes later a fresh pizza magically appears at your door
- Bill Pay - set it once and forget it; late payments are a thing of the past
- House Cleaning Service - every Tuesday afternoon magically transform the house from disaster zone into a sparkling clean museum
- Car Washes - drive your dirty ride through a magic tunnel and emerge from the other end with a "brand new" car
- Sprinkler System - set the schedule once and you'll magically become the envy of the neighborhood
- Subscribe & Save - razors on a schedule???? Yes, please
- Breaking News Alerts - always in the loop when something major happens in the world
- Smart Home Thermostat - set the schedule once and your home is always the perfect temperature. Oh yeah...your heating and cooling bill goes down too! No brainer.
and on and on!!!
Once you've enjoyed any one of these luxuries, you question how you ever got by without them.
How would you feel about going back to washing your clothes by hand, and air drying them? Or, writing and mailing a check for every single bill? Or, driving to the store only to find that the item you want is out of stock? Hell no! Never. Not in a million years.
Automation Makes Life Awesome
Ignore the plethora of negative news headlines. We should all feel lucky and blessed to be alive in such amazing time. Life has never been better for the majority of earth's inhabitants.
We as humans love automation. Automation frees up our time to spend on activities that are more important, more enjoyable, and more productive!
But there is one automation that trumps them all. Automated Investing, and paying yourself first.
Automating Your Investments Is The #1 Path To Financial Independence
If the automation examples above prove anything, it's that humans are lazy. We'll happily take the path of least resistance to the same outcome, so why not do the same with your investments?
The path of least resistance
Automating your investments is the simplest way to millionaire status and financial independence. It's not a get rich quick scheme, but a process that happens over time with little risk of failure.
What Is Automated Investing?
Automated investing is like bill pay in reverse. It's boring, but if your goal is to make money, it is effective. It takes an hour at most to setup. It's as simple as selecting your brokerage, selecting the low cost index or mutual funds to invest in, determining the amount to invest.
It is setting up your investments once, and then forgetting about them. Following the initial setup, a pre-defined amount of money is invested on your behalf. You don't have to lift a finger. It happens like clockwork on a pre-defined schedule. There is no analysis, contemplation, emotions or manual pull of a trigger to make the investments. It's all automatic.
Yes, you'll have less disposable income, but you won't know the difference. It's money that never made it to your primary checking account so you won't know what you're missing. You will adapt and learn to live within your means, while the invested money works for you behind the scenes, setting you up for a very bright future.
Benefits of Automated Investing
- You won't be tempted to time the market. Trying to time the market is a loser's game with 99.99% of people failing. If history shows us anything, it is that the market always goes up over time. Automation ensures that we're investing when the market is low, AND when the market is high. It's called Dollar Cost Averaging. Keep in mind that in 10-20 years, today's all-time high will be in the rearview mirror, never seen again.
- You won't let fear scare you out of the market. In 2008, out of fear of losing their nest egg, many people cashed out their investments at the bottom of a market crash. The goverment stepped in, bailed out Wall Street, and the market went gangbusters. Those that cashed out their investments lost out on massive gains. Automation stops us from making decisions based on emotion (fear).
- Lifestyle creep is held in check. As you make more money the temptation to upgrade your life with more and better stuff is real. Bigger homes, newer vehicles, nicer clothing, international vacations, fancy restaurants, etc. This is all ok, but only after you've first paid yourself first. Automating your investments ensures that your investments increase in proportion to your income. For example, if you get a 10% raise, the amount you invest will also increase by 10%.
The Automated Investing Blueprint Contains 5 Simple Steps
- Get Your Employer's 401k Match - Contribute up to your employer's 401k (or 403b) match. It's free money with a guaranteed return. If your employer matches 4% of your salary, invest 4% of your salary. If they match 8%, bump your contribution to 8% of your salary. Talk to your HR department if you need help setting up your 401k. They are paid to help you so don't be shy.
- Pay Off Your Bad Debt - Any debt that isn't mortgage or business related needs to go. For example, credit card debt, car loans, personal loans, and student loans. Attack them. Crush them. Kill them. Do what it takes to eliminate your bad debt and then never touch it again. Your net worth will sky rocket as soon as you are debt free, enriching yourself instead of the fat cat bankers.
- Hit Your 401k Max - You've already hit the match (step 1 above). Now, max out the rest of your 401k (or 403b). In 2018, 401k contribution limits are $18,500.
- Max Out Your IRA - In 2018, IRA contribution limits are $5,500.
- Taxable Investments - Open a taxable brokerage account and invest any excess funds.
Whenever investing, whether 401k, IRA or a taxable account, make sure you're investing in low-cost index funds. Expensive investment funds will eat your returns alive, and they are completely unnecessary. We recommend Vanguard for their low-cost index funds.