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Automate Your Wealth Building

19 September 2010 One Comment

You generate and build wealth by taking the money you don’t spend and allocating it towards investments that will either increase in value or cash flow.  Either way, your investments give you a return.  That return can be then reinvested and the cycle continues building more and more wealth.  This is the power of compounding interest.  You can grow your money big time if you embrace this philosophy now, early in your life.

In order to force yourself into embracing this philosophy, you can automate many of the steps.  Most people, if they participate in a 401(k) plan automate contributions into the plan.  Others do an auto-draft from checking account into savings account – a way to do “forced” savings.

These are great ways to automate saving and investing, but what else?

Well, I automate investing into my DRIP plans.  The fees are the lowest when you do automated investing into a DRIP.  I think the Wal-Mart (WMT) DRIP plan is $1 fee every time you put money into it if its due to an auto-draft setup ($1 is definitely lower than commissions at any brokerage).

DRIP plans represent one of the greatest vehicles of compounding interest.  Instead of interest, your dividends are compounded.  DRIP = Dividend ReInvestment Plan.  The fees are low and you can automatically compound your dividends, building massive positions in quality stocks over time.  Years later, these positions can be paying out giant amounts of dividends – maybe, even enough to fund your entire lifestyle.  DRIPs are one of my favorite investment vehicles especially for young people.

Consider setting up multiple savings accounts (I call them savings buckets) and auto-transfer money into each of these buckets depending on your various goals.  Consider a savings bucket for the following:

  1. General savings
  2. Emergency fund
  3. Vacation or “big purchase” saving
  4. Saving for alternative investments like precious metals

Another excellent way of automating wealth building is through my online income streams.  I have a number of advertisers and clients setup that automatically transfer me payments every single month via PayPal.  Setting up subscription payments via PayPal is a hands free way to generate income.  I get an email notification each time it happens, and an email notification if somebody misses a payment.  I don’t have to do anything at all, unless I see somebody missed a payment and then I just go find out why.  The beauty of online income is that it can become increasingly passive.

I then link my PayPal account with my checking account.  I can transfer money into my checking account and then into whatever savings bucket or investment I wish.

Moving money around has never been easier than in the 21st century.  Are you taking advantage of the tools and resources to make investing and wealth generation automatic?

One Comment »

  • Davis said:

    I have one savings account. Everything I earn goes into it, but I'm not big on saving money away, hiding it from myself.