Before I joined the military, I learned a decent amount about investing and finances. Mostly things like investing in index funds, and how to actually do it. After my ascension into the military, I realized I can pretty much automate every aspect of my finances.
Why Saving Matters
In finances, the trick to buidling wealth is consistently saving and investing a large percentage of your income.
So if you make $100k a year, and save $10k a year, you’re going to build wealth a lot slower than someone who makes $50k with as yearly savings of $25k. Even more than that, the amount of money you depend on to live directly correlates to how long it’s going to take to maintain your current standard of living and be able to live off your investments.
Not only does that person earning $100k spend $90k, but they only save 10% of their money. Mathematically, it’s going to take over 37 years to retire. The guy making $50k is going to be able to retire in just shy of 14 years. The difference is astronomical, that’s nearly a two decade gap.
So in short, the less money you spend, the more money you save. The more money you save propotional to your income, the faster you no longer are dependent on you job.
Independence from your wagie job means you can spend time doing actually important things that you care about. Waking up and not being forced to go to work to maintain a consoomer lifestyle just to eventually die isn’t something I imagine a lot of people actually want if they put down their phones and thought about it.
Automations Role in Finances
When people think of financial automation, they probably just think about recurring deposits from one account to another at a set day every set amount of time. Or maybe automating their credit card payments.
The automation I use and strong reccomend contains those, but also has a hidden trick that is possible with M1 Finance’s premium ‘M1 Plus’ account. I know, I know, bank account with fees are the bane of a frugal person’s wallet. However, I believe that this feature is well worth the extra ~$10 a month.
M1 has something they advertise as ‘Smart Transfers’. Simply put, it is an ‘if then’ statement that checks an accounts balance. If it’s over $X, then do a transfer. The transfer I absolutely love having set and recommend is to have it monitor the M1 Spend (their checking account), and automatically send the money over a ‘buffer’ to the investment acconts.
A ‘buffer’ in this sense is basically a pile of money where instead of spending money directly from your investments, or taking out of your savings every time an expected expense comes up, it draws from your buffer. The most effecient way to use this, is to set up autopay on all your credit cards and only making purchase with your credit cards. Then, your paychecks go into the buffer and fill it back up.
Since you already are living below your income, this means that you don’t have to transfer any money manually ever again. I have my buffer set to $5,000. Every dollar that goes over that is put into my invesments, first filling my Roth IRA $250 every two weeks and the rest going into my taxable investment account.
Long Term Effects
I think the strongest part of this system is (so long as you still follow a frugal budget) you will spend the same amount every month and literally not notice any extra money you earn or bonuses or payraises.
Your investments also will be dollar cost averaged, leading to safe growth in the market. On top of that, M1’s investment portion of their site is made to automatically divvy up your investments into your selected stocks by percentage, which is perfect for dividend and index fund investing.
Another major perk is the interest rate on the checking acconut is super competetive (1.7% as of Aug 12, 2022), so you will still earn intest on your buffer money.
M1 Without Plus
M1 Plus is free the first year (or at least it was when I got it), so there really is no risk to try it out for a little while. It’s not the site for people who are trying to become professional gamblers– I mean day traders.
The smart transfers are only available if you’re an M1 Plus member. It’s $125 a month, but personally I think it’s well worth it.
What About Post-Wagie Life?
When I get out of the military, my plan is to become as unreliant on money as I can. So, when the time comes that I no longer am receiving direct deposits from a job or making consistent income, I will bump my buffer to around $10,000 and have my invesments set to automatically sell when that value drops below a few thousand dollars.
By this time I hopefully should have a paid for house and car, and be able to live comfortably for very cheap (if not nearly for free). Then, I hopefully will also be able to live off of the appreciation of investments (the goal is to cover at least 70% of all expenses with passive income). The most difficult expenses to get rid of will be food, gasoline and internet. The rest will be somewhat easy to produce myself.
If you do decide to give it a try, feel free to use my referal link: https://m1.finance/CYGf5_FeZbS7. We both get $10 after you fund your pie, and it’s free to invest on normally.