What if I told you there was a simple way to become rich? Would you be interested? What if I told you that it would only take you 10 minutes max to do and you would only have to do it one time? (Hint: it does not involve robbing a bank.) Some of you might be getting excited while others now think I am full of it.
But what if I told you that the government, mutual fund companies, the rich and many of the companies you deal with are already using this strategy? Would this make it more believable?
The Simplest Way Ever To Become Rich
So what is this revolutionary way to become rich? Simply put, it is called paying yourself first. I know, it turns out it isn’t revolutionary after all. But many people and businesses do it already which proves it works.
Think about it: when we first started paying taxes to the government, we had to mail in huge checks come April 15th based on our income from the previous year. The government never withheld taxes from our paychecks.
But it found out quickly that most people spend first, save later (or save never) and as a result, could never pay their taxes. The solution: the government takes its money from your paycheck. They pay themselves first. This guarantees they always get paid.
Mutual fund companies do the exact same thing. If you invest in a mutual fund, you pay an annual expense to keep the fund running. What, you never get a bill for it? That’s because the mutual fund takes the money out of the fund first.
If a mutual fund is charging a 1% annual fee and it returned 5% for the year, it really returned closer to 6% for the year. The fund took the fee (the fee you are essentially paying) off the top (paid itself first) and the return that was left is what you earned. If you don’t know how much you are paying in management fees, you may be surprised. You can find out for free with Personal Capital.
How To Become Rich By Paying Yourself First
So how can you take advantage of this concept yourself and become rich? Simple really. Whenever you get paid, just set up a transfer from your checking account to your savings account for a certain dollar amount. Presto, you are done!
Most banks offer this type of service, though I will admit, some are better than others. I use CIT Bank and I can choose the start date, the frequency and the amount all online. Changing it is a breeze too.
If your bank doesn’t offer this, you have two options:
- See if your work will split your paycheck for you. Many will do this. You just have to fill out a form with your savings account information.
- Set a reminder on your phone. You can have this reminder be weekly, monthly or whatever frequency you choose. When you get the alert, this is your reminder to sign into your account and make a transfer.
- Switch banks! Again, look into CIT Bank. Here is a link to sign up!
Now, let’s say you are super lazy (nothing wrong with this) and you don’t want to set up an automatic transfer. Well, you are in luck my friend as you have a couple of options.
The first is Digit. This is a service that will analyze your income and expenses and make transfers to a savings account for you. All you have to do is sign up! It’s free to try and then costs $2.99 a month.
It used to be completely free and I highly recommended it. In fact, I saved over $1,000 easily using their service. But then they started to charge a fee and I wasn’t happy. Why pay for something you can get for free from your bank?
Another option is Qapital. This free app will round up your purchases to the next dollar and transfer that amount to a savings account. I’ve been using them for the over a year and have saved well over $1,200!
What I really like about Qapital is that I can have multiple savings accounts. The rounded up amount gets divided by the number of accounts and each gets funded with a roundup.
For example, if the round up amount is $0.50 and I have 2 savings accounts, then $0.25 goes to each. In the event of an odd amount, like $0.51, then $0.26 goes to one account and $0.25 goes to the other one.
But it gets even better! In addition to rounding up, with Qapital you can do the following:
- choose to round up the next dollar amount. This means instead of rounding up from $12.00 from a purchase of $11.89, you could have the app round up to $13.00 and transfer $1.11.
- participate in savings challenges by having a set amount transferred each week. This is in addition to your round up amounts. There are various savings challenges you can take part in.
Supercharging Your Path To Wealth
I’ll admit that with low interest rates now, it is going to take you a while to become rich on a savings account alone. But here is some good news…you can also pay yourself first when investing too! By setting up an automatic investing plan, you are basically doing the same thing. The only difference is that you are earning more than with a savings account.
There are a ton of automatic investing options for you to choose from.
Your first option is your 401k at work. That money gets taken out of your paycheck first, so you invest and then get a paycheck for what is left over. The great thing about this option is that the money you contribute comes out even before the government hits you up for taxes, meaning you pay less in taxes because your income is lower!
A second option is called Acorns. It is basically the same as Qapital but instead of your rounded up amounts going towards a savings account, they get invested in the stock market. It’s a great way to get started investing.
I’ve been using them for 3 months so far and already have over $200 saved. What I really like about Acorns is their Found Money feature. This has various brands give you extra money in your account.
For example, Walmart will give you 1% of your purchase in your Acorns account. So If I spend $100.25 at Walmart, Acorns will round up and invest $0.75 for me. In addition to this, Walmart will put $1 into my Acorns account.
There are limits to the amount of Found Money you can earn each month and you have to use the link found in your Acorns account.
Lastly, Acorns does cost money, which they take from your investments. The current fee is $1 per month when you have a balance under $5,000. Once you pass this account balance, the fee is 0.25% annually.
One other option is to invest with Betterment if you want the simplest way to invest outside of your 401k. Or, you could choose just about any mutual fund provider out there as most offer automatic investing plans. There are a bunch of brokers that offer automatic investing too. Check out my online broker comparison chart to find one the fits your needs best.
I have had an automatic investing plan set up since I got a job back in the early 2000’s. Every month, I have a small amount of money (just $100) transferred into my investment accounts. Over this time, I have a return of over 12%. While I will never become rich overnight, in the past 15 years, I have moved much closer to becoming rich than I would be if I never automated my savings.
Here is what I saved, not including gains or interest in those 15 years versus what I would have saved without it.
In just 15 years I’ve saved $18,000. And this doesn’t take into account dividends, capital gains, and appreciation. When you take all of this into account I have close to $50,000! If I didn’t do this I would be in the exact same financial shape I was 15 years ago. How sad is that? By just taking 15 minutes to set up an account and a monthly transfer, I have over $50,000 to do whatever I want with.
I could use it for retirement. I could buy a car. I could take a couple killer vacations. All because I took advantage of the simplest way ever to become rich.
Why Automating Works
It’s no surprise that we are all busy creatures. We forget to do things all of the time. We intend to invest some money this month but then a text comes in or it’s our turn to play Words With Friends and we forget to make the investment. By automating, you never have to remember. It is already taken care of for you. You are guaranteed to save or invest.
Better yet, it works because we never think to cancel or stop the transfer. Think about your expenses. I bet you have a handful of expenses where you are automatically charged for a service every month.
Companies are basically using automated savings in reverse to get you to pay for their service. They know that if they can sign you up for automatic payments, odds are you will always pay. The only way you wouldn’t pay is if you canceled the auto pay feature or you didn’t have enough money in your checking account.
And if you don’t have enough money, chances are they will just charge you with an additional fee so that they make even more money off of you.
In fact, I am guilty of this! I bought a couple magazine subscriptions from a company online to save money. They told me that my subscriptions will automatically renew. I made a note to cancel the auto-renewal feature about a year ago. Have I canceled? Nope. I just got an email letting me know my subscription renewed!
If companies, the government, mutual funds, and the rich are all using this strategy, there has to be a good reason behind it. After all, they all rake in millions, even billions every year. The reason they use this is because it works.
I’ve had it work for me. I’ve had it work for friends of mine who I have helped with their finances. I am sure it will work for you.
All you have to do is take 10 minutes right now and set up the transfer and never do anything again in order to become rich. (OK, you might want to go in there every so often and increase the amount you are saving, but you don’t have to.)
How easy is that? The key though is to do it before your friend plays their turn in Words With Friends so you don’t forget!
So log into your bank account and set up an automatic transfer to your savings account. Do it when you get paid or just pick a day of the month. Don’t get caught up thinking about how much to save either. Set it up for $50. Just do it.
If you would feel more comfortable having a tiny amount taken out at random times throughout the month, here is the link to sign up for Qapital.
And if you want to start an automatic investment account, here is the link to Betterment so you can take action now. Ten minutes is all you need and you will be so glad you started saving for your future.
The simplest ways ever to become rich is paying yourself first. Make this effortless by using automation to your advantage. You can spend time with your family, working on hobbies or even sleeping and you will be saving money. Set it and forget it. It doesn’t get easier than this.