Automating Investments

Post date: August 4, 2023 8:30 AM

Automating Investments for Long-Term Wealth Building

Welcome to the digital age of finance, where automation has become a powerful tool for building long-term wealth and securing a prosperous future. My last couple of posts discussed the general idea of automating finances, bill payments, debt repayments, and banking. In this blog post, I will explore how automated savings and investments can pave the way to financial freedom, starting from building an emergency fund to utilizing retirement accounts like 401k, Roth IRA, and traditional IRA to maximize your wealth-building potential.

1. Automating Savings: Building the Foundation

Before diving into investments, it is essential to create a solid financial foundation, and that begins with building an emergency fund. An emergency fund acts as a safety net during unforeseen circumstances, such as medical emergencies, unexpected job loss, or car repairs. By automating your savings, you can make the process effortless and ensure consistent contributions to your emergency fund.

Start by setting up an automatic transfer of a fixed amount from your checking account to a separate savings account every month. This way, you won't be tempted to spend the money earmarked for emergencies, and you'll gradually build a safety net that can cover three to six months' worth of living expenses.

2. Understanding the Power of Compound Interest

Once you have your emergency fund in place, it's time to explore the world of investments. One of the most critical concepts to understand is the power of compound interest. Compound interest allows your investments to grow exponentially over time. The earlier you start, the longer your money has to compound, resulting in substantial gains.

3. Automating Investments: The 401k Advantage

One of the most effective ways to automate your investments is through a 401k plan. If your employer offers a 401k, take advantage of it as soon as possible. A 401k is a retirement account that allows you to contribute a portion of your pre-tax income, reducing your taxable income for the current year. Many employers also offer a matching contribution, which is essentially free money. Aim to contribute at least enough to get the full employer match – it's an immediate return on your investment.

Additionally, 401k contributions are automatically deducted from your paycheck, making it a hassle-free and automated way to save for retirement. Over the long term, your contributions, combined with compound interest, can grow into a substantial nest egg for your golden years.

4. Roth IRA: Tax-Free Growth

A Roth IRA is another valuable tool for long-term wealth building. Unlike a traditional IRA, contributions to a Roth IRA are made with after-tax dollars, meaning you won't get a tax deduction for your contributions in the current year. However, the real magic happens when you withdraw the money during retirement.

All the growth and earnings in a Roth IRA are tax-free, provided you meet certain conditions. This makes Roth IRA an excellent complement to your 401k, as it offers tax diversification in retirement. Automate your Roth IRA contributions by setting up automatic transfers from your bank account, ensuring consistent and disciplined savings.

5. Traditional IRA: The Tax-Deferred Approach

If you prefer a tax break in the current year, a traditional IRA might be the better option for you. Similar to a 401k, contributions to a traditional IRA are tax-deductible, reducing your taxable income for the year in which you contribute. The money in a traditional IRA grows tax-deferred until you start withdrawing during retirement, at which point it is subject to income tax.

Automate your traditional IRA contributions just like your Roth IRA, ensuring that you consistently invest in your future.

6. Diversify and Rebalance

As you continue to automate your investments through various retirement accounts, it's essential to diversify your portfolio. Diversification spreads your risk across different asset classes, reducing the impact of a potential downturn in a single investment. Consider investing in a mix of stocks, bonds, and other assets based on your risk tolerance and investment goals.

Periodically review and rebalance your portfolio to ensure it aligns with your long-term objectives and risk tolerance. Automation can also help with rebalancing by using robo-advisors or target-date funds that automatically adjust your asset allocation based on your retirement timeline.


Automating your savings and investments is a powerful strategy for long-term wealth building. Start by building an emergency fund through automated savings, and then take advantage of retirement accounts like 401k, Roth IRA, and traditional IRA to maximize your wealth-building potential. With consistency, discipline, and a long-term perspective, you can pave the way to financial freedom and a prosperous future for yourself and your loved ones. Start automating your path to financial success today!

I automate my investing with regular deposits to my Wealthfront IRA.  Use my referral link to get your first $5,000 managed free!

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After watching his Netflix series, I read I Will Teach You to B Rich by Ramit Sethi and learned that I already implemented his automation techniques in my money management. Personal finance works best when it's automated and boring. Setting up automation may not be enough. You might need coaching to stay on track or to get out of a bad financial situation. Contact me to set up a free coaching evaluation. How can I help you?

Coach Jeff Wagner has been a licensed mortgage loan originator, a personal banker, and a certified tax preparer. Call or text Jeff at 805-874-2829.

His opinions are not to be taken as health, financial, or investment advice but as motivation to start or continue your path toward success.