When I first started working after getting out of school, I read many books about investing. But I had little to no extra funds to invest. All my meager income at the time went to housing, food, transportation. There was nothing extra.
So where to get the money to invest?
Of course there are normally two ways to get the funds. First, lower expenses. Second, increase income.
Both of these two methods are written and talked about endlessly. Because they are true.
But here is another way I stumbled on to.
Why We Automate
We hear much advice in the financial world, but one important piece of advice is to pay oneself first. This refers to setting up automatic savings. This can be things like automatic 401k/403b/IRA contributions, setting up automatic transfer of money to savings, and so on.
After some time, these funds can amount to a nice nest egg. So wherever possible, I have used these funds for further investing.
In The Beginning
When first starting with a 401k for example, one must invest only in the choices available through the custodian. Frequently only a select number of mutual funds are available. So one’s options can be limited.
When changing jobs, I always rolled over my 401k into an IRA. With an IRA, one has the choice to invest as one sees fit.
Any savings accumulated by automatic transfers are available.
Over Time
Over time, this changes, We increase our income and accumulate savings. Money comes to us by interest or dividends or profit. But from my experience, the larger piles of money come from automating savings and investment.
Findings
While this method of using automated contributions as investment capital is simple and seemingly easy, the reality is that it takes time to accumulate funds. Since the earlier one starts the more time one has to grow one’s investments, therein lies the dilemma of investing. One wants to start early, but funds to invest take time to be available.
This dilemma perfectly underscores one’s path towards financial freedom: hard choices at every step of the way. There is no easy path with no trade-offs to be made. Everyone would like a full plate so they could invest substantial sums, everyone would like a fatter wallet to afford comfort. But the hard truth is there are trade-offs, and will there will be forever trade-offs.
So, what are your trade-offs? Let me know here.
The illustration is from the surrealist book of poetry and engravings “Les Malheurs des immortels” (“The Misfortunes of the Immortals”), 1922, by Paul Éluard and Max Ernst. Courtesy Internet Archive.
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