The internet has created more opportunities than ever before. One of those is the opportunity to achieve financial independence much more easily. By using these wealth strategies to automate your finances, you can achieve financial success with no work on your part.
Step 1 to Financial Independence: Pay Yourself First.
There is a common phrase among savers that is considered a “rule #1” or sorts. This rule is to always pay yourself first. This means that before you start to pay bills, you put a designated amount of your paycheck into your savings account. The great news is that this can all be done automatically. Most jobs will offer direct deposit; use it. You can usually designate that your paycheck goes into multiple accounts. You can also designate what percentage (or whole dollar number) that you want in each account. I would recommend starting small, say 10%, and increase the percentage as you feel more comfortable.
Make sure that the savings account is very difficult to get into. Throw away the account number so you cant access it without calling the bank’s customer service and filling out some forms. This will discourage you from dipping into your savings. By making it part of direct deposit, you will have no idea that it was taken out in the first place.
Step 2 to Financial Independence: Participate in Any Company IRA.
If your company offers a 401k or an IRA, join it. Contribute as much as you possibly can. In some cases, your employer will match your contributions. This is free money that you wouldn’t normally have! The only catch is that you cant access it until you retire, but the whole point of this savings process is to achieve financial independence so you aren’t reliant on social security.
This is one of the best wealth strategies for this reason: since the money gets taken out before the taxes are deducted, you don’t get taxed on it! This means that your paycheck appears smaller to the IRS, which means you will be getting taxed less on the money you are actually receiving. Unfortunately, some 401k’s don’t allow very much customization. If you would like to tinker with stock choices more, you can instead put this money into your own IRA with companies like TD Ameritrade or Charles Schwab. Do your research to see which would work best for you.
Step 3 to Financial Independence: Automatic Bill Pay.
The invention of the internet has created the opportunity to set your bills to be paid automatically by your bank. There is a way to set this up so you never see the money in your account to begin with. This will further lower your chances of spending that money on accident. Take your monthly payments and divide them by two. This will be the amount you will pay to each bill after each paycheck.
By doing this, you make two “half” payments every month. This will end up being 26 “half” payments in a year, which is one more full payment than you would have normally made. By paying half every 2 weeks instead of once a month, you will be paying off your debt 8% faster, not to mention the savings on interest. No wonder these wealth building strategies work!
Step 4 to Financial Independence: Have Fun!
So after you pay yourself first, invest in your IRA, and automatically pay your bills, whats left? Anything left in your account is yours to spend as you feel fit. This means restaurants, movies, gas money, and everything else you may want in those two weeks. When that money runs out, you won’t have to worry about overspending your budget, because you wont have access to any more (not to mention your bills will already be paid). If you really want a large purchase, such as a new TV, you just have to save a portion of your leftover funds until you can afford it.
With these wealth strategies, it is definitely possible to build a substantial nest egg before retirement. For a person saving 10% of their $40,000 a year salary with a mere 1% interest rate, and adding the max of $4,000 a year to their IRA with a $4,000 company max, that person will have saved $430,013 (assuming a very minimal 7% return on the IRA). If you extend that to 40 years, the total savings comes to $945,023!
My automating your financing and using these wealth building strategies, you can become a millionaire by the time you retire with little effort on your part. That is what I call financial independence!