Recently, I just finished reading The Automatic Millionaire by David Bach. It’s been on the best-seller list for many years, but it isn’t until now that it has interested me enough to more than just read the back cover. It’s not that I wasn’t aware of it, I guess you could say I just wasn’t ready for it. Someone once said, “When the student is ready, the master appears.” This has always been the case with my life.
So now that I have a family (a little girl is on the way in about 2 months), having a stable financial future has become much more of a priority. It’s amazing that when your intention and focus shift, just how many things related to your new focus seem to manifest. And for me, ways of becoming wealthy and financially secure have been sprouting up all over the place.
The central theme that runs throughout The Automatic Millionaire is how you can become financially secure by putting your finances on autopilot. And as he explains, with the age of the internet running at full speed, this is now a very simple process.
For example, just yesterday I set up an emergency-savings account through HSBC Direct, and put it on autopilot by having them automatically withdraw
$10 $20 every week (~ $2.85 a day). It took me about 10 min. to set up and will allow me to save $1040.00/year – not much, but it’s a start. And as I make more, I’ll be able to contribute more. But even if I maintain that weekly amount, in 30 years at the current monthly-compounded rate of 5.05%, my emergency fund will be around $77,822.37. Now imagine if I increase it to only $8 a day. With that same rate in 30 years, my emergency fund will be $218,501! Not bad for the cost of a typical lunch out with your co-workers.
HSBC and Emigrant Direct are both excellent online savings accounts. They offer the highest rate (as of the date of this writing) out of all the online savings accounts I researched. They’re simple to set up and at 5.05% they blow most standard banks out of the water. All you need to do is set apart 10 min. of your day to start putting your savings on autopilot. What’s also great about them is that you can start with a deposit as little as $1.00, and you’ll begin earning interest. That’s tons better than sitting in a bank earning the average .54%.
“Now, what about investments Erich? Couldn’t you make more investing it?” Absolutely, and that is where the bulk of my extra money goes to. But if you’ve ever read my post on The Courage to Live Debt Free, then you’d know that one of the principles to economic security is to establish a 3-month salary emergency fund. Since I’m only contributing $20 a week, at that rate it will take around 6 years to come up with that amount. But because it’s on autopilot, I’ll probably not realize how fast it’s growing and the 6 years will be here before I know it.
With investments and retirement accounts, you can use the same easy process of automation. Some of the Vanguard no-load index funds (which are my favorites), have been averaging a return of around 12% since their inception. Using the same $8 a day investment will give you a whopping $963,918.64 return in 30 years! Again, all of this takes about 10 min. to set up online to start automatically creating wealth.
Just setting up these two simple processes will put me over 1 million dollars in 30 years! And what’s great about all these automations is the fact that once they’re put in place, you tend to forget about them, and you adjust your expenses accordingly. It’s as if nothing has changed, but in the background, compound interest is working in your favor to make you automatically wealthy.