One of our favorite wealth-building hacks is automation. We set up a process, put it on autopilot and watch our net worth grow.
There have been a variety of automation strategies we’ve learned over our decade of marriage. Those strategies have helped us to do incredible things like become debt free, mortgage free, and millionaires all in the last 10 years.
I’m an amateur personal finance geek.
Your tools have helped me become a smarter investor.
Personal Capital Dashboard User, February 2021
Yes, our higher-than-average income definitely helped (around $190,000 per year). But it was automation that made the wealth-building process much easier.
My favorite way to track my net worth is with Personal Capital’s free financial dashboard. You can aggregate all of your financial accounts — like your checking and savings, credit, investments, mortgage, and more. With your own data you can make sophisticated projections on how prepared you are for long-term goals.
As we work our way toward those goals, here are five financial milestones we’ve hit as a family by using automation.
1. Eliminating $50,000 of Debt
At the beginning of our marriage, Nicole had a $20,000 car loan and I had $30,000 of student debt. We wanted to clean up all this debt before our daughter was born.
That’s when we put automation to work.
We calculated how much extra we’d need to pay for each debt (starting with my student loans due to the higher interest rate). With that info, we set a recurring extra debt payment. If we had more (or less) to throw at the debts each month, we’d adjust the recurring payment accordingly. We felt comfortable knowing that no matter what, our balances were going down automatically.
After 12 months of living on half of our income, budgeting out each of our months and letting automation do it’s thing, we became debt free.
2. Saving $150k for our Home Down Payment
After living in my bachelor pad for a few years, Nicole was ready to move and get a “real family home.” I thought my beer bottle decor was cool in my bachelor pad, but I suppose it perhaps needed a bit of a refresh.
I had a horrific time with the mortgage process with my first home. After putting less than 20% down on the home, the payments made me feel like the home owned me instead of the other way around. I didn’t want to repeat that.
By setting up a recurring monthly deposit into our high yield savings account, our down payment for our “real family home” grew and grew during the years that followed our initial debt freedom.
Automation helped us save up a huge 45% down payment on our new $350,000 home. This allowed us to only have a $195,000 mortgage and reasonable monthly payments. I enjoyed this version of homeownership more than my first round (even without the beer bottle decor).
3. Paying Off Our $200k Mortgage
Since living on half our income and automating the wealth building process was working so well for us, we decided to keep it going.
Our next big (and crazy) goal was to pay off our mortgage early. With no mortgage, we’d have more money to invest, give and spend on vacations!
Each month, we’d pay our regular mortgage payments automatically and we’d add a set amount of additional principal payments as well. This automatic habit helped to chip away at our mortgage month after month.
Eventually, our mortgage balance hit $0! We became mortgage free at 35 years old and were ready for our next big challenge.
Becoming Millionaires Before 40
During the time when we were working on our first three financial milestones, we were also investing for our retirement in the stock market. Our 401ks and IRAs helped us build up a comfortable nest egg and save on taxes.
We discovered the power of index funds with their low costs, broad diversification and self-cleansing ability that weeds out the poor performing companies.
Once we picked our funds and a proper asset allocation, we set up our automation, maxed out our contributions and let them ride. During the period of time from 2013 through 2020, my 401k balance grew from $0 to almost $200,000! That’s the power of automation, compound interest and patience.
Between our paid off home, our savings and investments, we achieved a million dollar net worth by age 38.
Achieving Coast FIRE Status
Recently, I discovered a term called “Coast FIRE.” Essentially, it refers to the point when you can stop investing for your retirement because time and compound interest can get you to your desired nest egg without any more contributions.
Read More: The FIRE Movement Explained
When I discovered this incredible concept, I decided to calculate if automation, time and compound interest had helped us achieve Coast FIRE already.
Our current retirement investment balance is $500,000. If we let that ride in the stock market making a conservative 7% interest until we reach 65 years old, we’ll have around $2.9 million.
Using a 4% safe withdrawal rate, we should be able to live on around $116,000 per year. Given that we currently live on $60k-$70k per year comfortably, this should be plenty.
If you’re interested in doing this calculation for yourself, try this compound interest calculator and see what your nest egg will look like by the time you retire.
You can see how you compare to others your age with this retirement calculator.
Other Ways Automation Can Help Build and Protect Your Wealth
Automation doesn’t only help you build wealth, it can also protect your wealth. If we’re not careful with our money, life may just happen to our money.
Here are more ways automation can do wonders for your everyday financial life:
When you create a budget, you’re telling your money what to do. If you use a free automated financial tool like Personal Capital, you can sync up your bank account so you don’t have to manually enter your financial information.
Read More: How to Master a Household Budget
Monitoring Your Credit
I like to set an annual calendar reminder in my phone that tells me to review my credit report on AnnualCreditReport.com. This ensures there are no fraudulent accounts on my credit report and the debts I’ve paid off show that they are paid in full.
Automatic Bill Payment
Setting your credit card bills, utility bills and really any other recurring monthly bills to auto pay is a smart way to avoid late payments and fees.
We all have to make so many decisions in the day. Ensuring your bills are paid on time and in full can be something we don’t even have to think about if we use a little automation.
Be sure to keep tabs on all of your financial accounts. Personal Capital’s free, professional-grade dashboard gives you a full picture of your net worth — your assets and liabilities — while also providing tools to plan for long-term goals like retirement.
Personal Capital compensates Andy Hill (“Author”) for providing the content contained in this blog post. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.