I remember waiting in my boss’s office a few years ago. I believe he had a copy of “The Automatic Millionaire” on his desk. I couldn’t resist flipping through a few pages. I never found myself a copy to finish. But I remember some quick tidbits.
One thing it mentioned was focusing on setting up things on auto-pilot. I don’t know if this book talks about paying down your home mortgage with extra automated payments. I would never do that. But the fundamental concept of automating things as much as possible is still valuable.
First of all, I have automated payments on all my mortgages. This ensures I stay current on everything. The first step of building wealth is not getting behind on anything. It puts your credit at risk and can also damage wealth building opportunities. When extra cash starts rolling in on your rentals (like getting a 12-month lease), you can call up your bank and increase you payments to build the equity in your rentals faster. Instead of remembering to do this every month, making it automatic helps.
Dividend payments coming from stock investments are a source of automatic cash flow. It’s not guaranteed, but if you pick solid blue chips, you’re odds are pretty good. One automatic option is picking “DRIP” and being paid in more stock. There are tradeoffs with automatically reinvesting dividends. One pro is that it avoids broker fees, but a con is that it forces you to reinvest in the same stocks. Maybe this is alright while your portfolio is small, but when it gets big enough, it might be better to collect cash, and then gather all your dividends, and invest in the best valued ones in your portfolio (discount price/strong dividend yield).
Building your cash reserves automatically is good too. That’s why my $2000 cash flow positive rentals is being split into two things. Half is going towards the smallest rental mortgage, while the other half is going straight into my cash reserves. The first step towards building wealth is to build liquidity. I can grab some cash on a minute’s notice if I need to, but in the long run, I need more cash on hand.
Automating your strategies makes it easier to stay the course, but none of this is a substitute for actively managing everything. And don’t forget to log your holdings and liabilities monthly in a spreadsheet so you can keep a pulse on everything.