Why You Need to Automate Your Finances to Become Wealthy

And How You Can Set Yourself Up For Financial Success

Have you ever wanted to do something and then just forgot? If you’re like me, this probably happens to you on a daily basis. I sometimes walk into another room to get something only to forget what I was doing and walk right back to where I was. When it comes to finances, people can be pretty forgetful. It’s just one of the reasons why it is so important to automate your finances if you want to become wealthy.

Humans aren’t capable of remembering everything. I sometimes think of the Disney movie, Inside Out, when thinking about how memory works. We have long-term and short-term memory and they both play important roles in our lives and in our finances. I can’t tell you how many names I’ve forgotten shortly after meeting people – a common short-term memory issue. Our memory also tends to rank items based on importance – which is why some memories will stick with us forever.

When it comes to money (and how our brains interact with it) most people set themselves up for failure. Why? Because they are humans and are going to forget things. People put the burden of investing on their own shoulders each month and then act surprised when it doesn’t happen. Either it is a short-term memory issue and they get distracted, or it is a long-term memory issue and they don’t place a high level of importance on investing instead of simply consuming. Either way, lots of people fall short of their financial goals because they forget to be consistent along the way.

Enter automation. No, I’m not talking about some crazy AI that’s going to take over your finances forever. However, I am talking about setting yourself up for success unlike the people who will just forget.

Did you know that you could use a platform like TD Ameritrade and have money automatically invested from your bank account every month without you having to do anything? By doing this, you remove any likelihood that you will forget to invest each month.

Why Is Automating Your Finances So Important When It Comes to Your Money?

 

If you are 25 years old and you contribute $500 per month into a Roth IRA account, by the age of 65 you will have a whopping $1.2 million in your account (this is assuming a 7% rate of growth). How’s that for a nice retirement? This is exactly why you need to automate your finances to become wealthy.

If you start this same investing plan 10 years later at the age of 35, you will have around $600,000 by the age of 65. That’s $600,000 less than in the first example, and by the way, you’d be missing out on this huge sum (over half a million dollars) even though you would only invest $60,000 less because you started later ($500 less per month for 10 years). The value of time cannot be overstated when it comes to investing.

The more you consistently invest over time, the more your money has a chance to grow. If you skip months or just forget because it isn’t automated, your money isn’t going to experience the amazing benefits of compound interest. This simply means that as your money grows in your account, it starts to grow on itself which speeds up the growth. Click here to learn more about how compound interest works.

It is important to not forget to invest. This is why automating the process can be your best friend.

What Does It Mean to Pay Yourself First?

Automating your finances means you’ve committed to “paying yourself first.” This simply means that you’ve committed to investing before you start spending money on luxuries. When you automate your finances and set an amount to be invested from every paycheck, you don’t allow your investment money to hit your checking account. If the money is never visible to you in your checking account, you are much less likely to try to spend it on things you don’t need. Pay yourself first. Get your money invested before it ever hits your checking account. You’ll be much less likely to spend money on things you don’t need, and your invested money will start experiencing compounding interest every year.

Where Should You Invest Money When You Automate Your Finances to Become Wealthy?

I wrote a blog about 6 tools to easily invest your money. These tools work perfectly if you want to automate your finances to become wealthy. I am not a financial advisor so this is not legal advice. With that said, I’d recommend you invest in items like the ones I’ve listed below. I’ve also put them in the order of importance from my perspective.

You can fully automate all of the investments above. Do yourself a favor and go set it up now. Choose a dollar amount you want going to each of these investments and put it on auto-pilot. You can always change the amount you’re investing each month, but at least you won’t be forgetting or neglecting your investments like so many people do.

So the next time you walk into a room, forget what you were looking for, and start to question your sanity, you can at least feel confident that you haven’t forgotten about your future wealth. Automate it, pay yourself first, and know that your future self will thank you.