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Pay Yourself First: Investment Bucket

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The Investment Bucket is a bucket that was always foreign to me.  I never really heard much about investing growing up.  No one in my family spoke of investing.  I didn’t learn about it in school, and none of my friends ever talked about it.  It is no wonder I did not start thinking about this bucket until I was an adult.  But even as as adult, I didn’t know anything about investing.  As I started to work for larger companies, I started to hear about a 401(k) plan.  I figured I needed to try and figure out what that was.

The 401(k) plan was a plan where I could contribute some money, directly from my paycheck, pre-tax, into a fund to start saving for my retirement.  There was also an employer match.  With this in mind, it seemed like a no-brainer, so this was the first time I dipped my toe into investing.  I automated a percentage of each paycheck to be invested into the Investment Bucket.  At the time, I did not realize I was actually practicing Paying Yourself First.  Over the years the money grew and grew and continues to grow today, but that isn’t a thorough plan.  As I started to learn more and build a better plan, I started thinking about how I could grow this investment bucket.  The obvious answer is to put more pre-tax money into the 401(k).  All I had to do was change the percentage of money that went in there, so I doubled the percentage, from 3% (employer match) to 6%.  I knew this would make things a little tighter, but I would have to figure it out. 

Then I started reading about investing in the Stock Market.  I knew nothing about the Stock Market.  All I knew was that it was scary and you could lose a lot of money.  In order to learn about investing, I started watching more YouTube videos about stocks and investing.  I also started reading a few investing books.  The first one I read was Stock Market Investing For Beginners, which is exactly what it says it is.  I followed that up with Jim Cramers’, Get Rich Carefully, which is a bit more detailed and a good progression from the beginners book I just finished reading.  Through these books, and YouTube videos, the name Warren Buffet was coming up.  

Warren Buffet

I had heard the name and knew he was a billionaire, but I did not know much more than that.  So I started to watch more YouTube videos by Warren Buffet who talked about his mentor and his favorite investing book, The Intelligent Investor by Benjamin Graham.  So I bought this behemoth of a book.  It was huge, talked about value investing, and, I have to say, was the toughest book I’ve ever read.  Don’t get me wrong, there was great information in there, but the examples were from ages ago and it was talking about things that my brain was just not ready for.  Well, I finished the book, as I always do, but it was a speed read.  Meaning I read it very fast and only slowed down when something sorta made sense to me.  I plan to go back and read it again, once my brain is ready for that level of investment strategy. 

Vanguard S&P 500 Index Fund

At this point, I started investing into the Stock Market.  I thought I had enough knowledge to dip my toe into the waters to check the temperature.  I then read an article on the Internet asking Warren Buffet what he would tell his family to do with the money he leaves them.  He pretty much said he would take all his money and invest it in the Vanguard S&P 500 Index Fund.  Based upon my investing knowledge at the time and the advice of one of the best investors in the world, I immediately set up a Vanguard account with a regular investment into their S&P 500 Index Fund with automated monthly contributions.  It was actually pretty cool.  I started leveraging two investment terms that I had heard a lot about at this point, DRIP and Dollar Cost Averaging

DRIP

DRIP stands for Dividend Reinvestment Program.  Simply stated, a dividend is paid out for shares of the stock you own.  Instead of taking this money out of the account, the money is automatically re-invested into the index fund to buy more shares.  As you buy more shares, the dividend typically increases, which gets re-invested, which pays more dividends, etc…. This is awesome.  This compounding effect can add up over time and before you know it, you have a big ole nest egg of money.  Albert Einstein stated that “Compound interest is the eighth wonder of the world.”  I heard he was a smart man, so I’ll trust it.  With my automatic monthly investment and DRIP enabled, this account is starting to grow. 

Dollar Cost Averaging

Since my money is automatically invested every month into the S&P 500 Index Fund, this allows me to take advantage of Dollar Cost Averaging.  Dollar Cost Averaging is an investment strategy where you buy the same shares of a stock or fund regularly regardless of the current stock price.  If the stock or fund is more expensive, you will buy less shares with the same money.  If it is cheaper, you automatically buy more shares.  The thought is that it averages out over time.  There are investment strategists out there that think Dollar Cost Averaging is a perfect solution for people who don’t really want to learn about value investing or know when the best time to buy a stock is.  Other strategists claim this is a great approach for people who don’t want to be tied down monitoring the stock market and simply want their money to grow by making a good choice a few times and leveraging Dollar Cost Averaging to grow their money.  Personally, I think Dollar Cost Averaging is a good investment strategy for people who know they need to invest but not really sure how.  Therefore, I made this a part of my long term plan to save money for retirement and build my wealth. 

RobinHood

RobinHood is a stock investing application that will allow you to buy and sell stock with no transaction fees.  Where I was paying $4.95 for every transaction with E-Trade, I can now buy and sell stocks as much as I wish with no transaction costs.  It is free and easy to use.  This is a great platform whether you are a beginner or experienced investor.  Some really experienced investors, who read charts and try to read the market may not like RobinHood much as you can see all the candle charts, etc…, but if you are simply investing in the stock market without trying to time it, RobinHood is great.

Acorns

The last way I practice Pay Yourself First is by investing in the stock market with a tool named Acorns.  It is a really simple concept.  Do you have one of those “old coin jars” at home where you throw all your loose change in at the end of the day?  You let it save up, go through the hassle of counting and wrapping it up, and then take it to the bank for cash.  Before you even realize it, you have saved like four or five hundred dollars.  Then you blow the money, tell your friends of the experience and say, “Do you believe I saved over $500 in loose change?”  Well, Acorns is like that, only the digital version.  You can link it to your credit cards and bank.  For every transaction, it takes the remaining change from the rounded up dollar and invests these “roundups” into a stock portfolio based upon your configured risk profile.  This is awesome.  I have been using it for over a year now and the value of my account is steadily increasing.  It just takes money out of my account and invests it for me.  You can also set up monthly deposits of varying amounts and can 1x, 2x, 3x, etc… the round ups based upon your desire.  I think this is great.  I am investing money and not even missing it. 

Investing In Myself

One general investment I am making is money back into my business.  I have a business venture that is starting to make a little bit of money each month.  Instead of paying that money out to me directly, I am investing it back into the business to grow it.  Eventually I will have this money paid out to me and dispersed into my Pay Yourself First buckets, but until then, it is re-invested back in for more growth. 

I also invest in myself with learning. I buy and read multiple books a month. I average reading about one book a week. This is a great investment in myself to expand my knowledge and grow as an entrepreneur and person. I also take time to watch educations YouTube videos and often buy trainings on Udemy to expand my knowledge. I truly believe that learning is a process, not a destination. When you finish high school or college, the learning doesn’t stop.

Final Thoughts

There are many ways you can invest in the Investment Bucket.  If you are not investing here, then I strongly suggest you start now.  If your employer offers a 401(k) plan, put money in it ASAP!!!  If they provide a match, make sure you put the full amount up to what they match at a minimum.  You definitely want some of their free money.  You could also start something very simple like Acorns which can invest in the stock market for you and put that “left over change” to good use.  Before you start investing in the stock market, in a more active way, I suggest you do a little reading first.  At a minimum, read Stock Market Investing For Beginners from Tycho Press.  This will help you with the basics and get you started. Here are the Amazon links to get the books: 

Good luck with your Investment Bucket!!!

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