January 18, 2015
Automatically saving and investing your money as soon as you get paid is a fantastic idea. Why? How?
Automatically saving and investing your money as soon as you get paid is a fantastic idea. Why? How?
The sooner you invest your money, the more interest it will make. If you put your money into investments as soon as you get it, you are much less likely to waist it. You should set up a specific amount of money you will invest each month and put that money away as soon as you get paid.
People call that idea pay yourself first. The reason that it works so well for people is that you always have a amount of money set aside for your savings. Whether it be for an emergency account, retirement account or a general savings. The problem with saving what is left at the end of the month is that there is normally very little money left at the end of the month after you have bought your stuff. If you have set aside an amount of money at the start of the month you will not use that money to go out to eat or other frivolous purchases. You can have a automatic withdrawal set up out of your bank account that invests you money for you. Some business also let you take money directly out of you pay check to invest.
The path of least resistance is always the best idea with just about anything. People can be inherently lazy with certain tasks. Saving money is one of those things. You can choose to save automatically or manually. Automatically having money taken out of your account every pay is definitely the path of least resistance for saving and investing. If you choose to manually move your money many factors come into play that could prevent this from happening. If you have to manually move your money every paycheck it means you must first remember to do this. Then you must deal with the psychology of knowing that you could use that money for other things. It is likely that you may not even put the money away if you have to do it manually.
When you automatically have money taken out you learn to live without the money much sooner and you eventually don;t even think about missing the money. This will allow your portfolio to grow much larger over time.
Bingo! You gentlemen covered the issue wonderfully. I have nothing to add.