Becoming Rich: Automate Investments

Almost 2 years ago, when I was figuring out my financial future, I decided to put a 401k in place for our business. I chose this retirement vehicle because it seemed to offer the best tax-advantaged strategies to saving for retirement.

When I set up the 401k, I did not contribute much each pay period, instead opting to save up and then pay myself and my wife a lump sum bonus at the end of the year. I then deferred that bonus into our 401k, making sure to max it out to the yearly limit.

My thinking behind this was that since I am never sure how much I will make from month-to-month, I didn’t want to fall short on the business cash flow just to save for retirement. In theory, this was a solid idea. Protect the cash flow. Rule number one for staying in business. In practice however, it lead me to stash a large amount of cash into a savings account, and then worry for several months about whether or not I would need to dip into it to cover business expenses. Also, I was making zero dollars in interest, while the market steadily made gains.

There had to be a better way.

I had to find a way to worry less and still save for my early retirement goals. At the start of the next year, I decided to divide the max contribution out over 24 pay periods ($18k/24 = $750), and then from my paycheck defer that much towards the 401k. I did the same thing with my wife’s paycheck, and just like that, we were investing $1500 per pay period.

And as far as cash flow goes, I was already putting that money into savings, so it didn’t affect our business one bit. And since we deferred some from each paycheck, we began living on a little less. We had to cut back slightly on some household expenses, which is always a good thing to do.

Now this may not seem like rocket science, and surely it isn’t. But over the past 16 months, automating my investing has eased my worry and unloaded my concern about putting money into the 401k. I have not thought about this retirement vehicle for several months, and have freed my mind to focus on other aspects of my life and finances. And instead of earning 0% interest in a savings account, it has gained a healthy 16% interest since we started the plan.

Automated investments move the money before I even see it, in essence allowing me to recommit myself to my own financial vision every couple weeks. I don’t even think about spending the money because it’s never really in front of me. However, if I ever hit a speed-bump in our practice’s collections, I can easily suspend contributions to the accounts; or if things really go south, the funds in the 401k could act as a last-ditch emergency fund.

Automatic investing has helped me stay focused on my long-term goals, without my short-term self getting in the way.

 

My Neighbor Has a Vacation Home, Jet-Skis, and a Drone…He Must Be Happier Than I

Do you ever buy-in to this line of thought? I know I occasionally do; like a dumb bass I swallow it hook, line, and sinker. When I do, it is extremely damaging to my soul if I let it marinate in my brain for too long.

This thought process is implanted in our subconscious on a daily basis; maybe even an hourly basis. This is the entire premise of the current consumer marketing industry. We are directly and indirectly told that other people are happier than us, and that what we have is not enough. We don’t have enough toys, enough fun vacations, enough beauty, enough friends, enough, enough, enough…you get the point.

The mommy blogs with a spotless home; the exciting YouTube videos detailing products; the targeted ads for the new iProduct while surfing the internet; the social media posts showing a beautiful filtered picture of a moment of perfection in someone else’s lifestyle. These are all tactics used by companies to create discontent with our current life, and encourage us to spend our money in the pursuit of greater happiness. Advertisers and multinational corporations have found the secret path to happiness, and they are so graciously willing to let us join them…for a small fee.

We are told my advertisers that all we have to do is buy that extra toy, this skin care product, that fancy article of clothing, or that new car, and poof…we will be happier. And since the objective in life is to find true happiness, millions of consumers go along with what the advertisers tell us.

The funny thing is, just before we watch an advertisement, or read that mommy-blog, we may have been perfectly content and happy with our lot in life. We may not have known that our phone was outdated, or our clothes were not as stylish as they were just yesterday, or that our comfortable home was actually ridiculously uncomfortable. We were likely oblivious to how terribly unhappy we were until the marketing firm altruistically pointed it out to us. (Is sarcasm shown best in italics?)

Truthfully, if we try to find happiness in the form of an object, the majority of those purchases ultimately let us down.

The fact is, happiness is not dependent on any external factors. Plenty of people throughout the world live below our American poverty-line, and choose to be very happy. And the reverse is also true; plenty of people live extremely luxurious and opulent lifestyles, and are utterly miserable. When people are truly grateful for what they have, they will always be happy. When people only focus on what they do not have, they will always feel discontentment and then miserable.

Happiness is a choice. An internal, daily choice. We are free to choose how we feel about anything in life. Events happen all around us, some ‘good’ and some ‘bad.’ We don’t get to choose what happens in the world or in our lives, but we always get to choose our reaction to those events.

So, my neighbor has a vacation home, jet-skis, a drone, and many other expensive toys. Is he happier than I? Perhaps. But if so, it has nothing to do with his toys.

When I remember to be grateful for what I do have in my life, I can’t imagine anyone in the world being happier than I.