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Compound What You Control
Week 11: Save More, Tactic 3
What can you do this week?
Look at one or more of the below savings tactics to compound your savings efforts that you control.
When these are pursued in addition to the compounding of investment returns that happen over time, you can make building wealth more predictably.
Dollar Cost Averaging
Beyond your 401k, can you automate regular contributions into the stock market through a taxable brokerage account, Roth IRA, HSA, or other account.
You can learn more here
Money Mondays
A technique I’m a fan of personally is having “Money Mondays” or similar designated day of the week when either you manually transfer or have an automated withdrawal from savings to investments.
I like Mondays for the automated transfers so I feel like the new work week starts with new money working for me.
I also like the Thursday before the new paycheck hits to transfer as much as I can from checking to savings or investments.
Rounded Up Savings
Platforms like Acorns gained fame with this technique and now even my own bank offers a feature for this.
Essentially rounding up each transaction to the nearest dollar and then transferring that difference to savings adds up over time.
Reinvestment Tactics
Some investments really distribute income like dividend paying stocks, bond etfs, REITs, covered call etfs, etc.
When these investments distribute income, you can direct those payments be reinvested into more aggressive investments.
The distribution amounts are smaller compared to the principal amount and can be invested more aggressively to get those dollars compounding faster potentially.
Auto-Increasing
I’ve covered this one here regarding 401ks but you can do this in brokerage accounts as well.
Simply set a reminder on your calendar at given interval (annually in the above example) to increase your contributions so you don’t let your lifestyle creep eat into your ability to save.
To learn more about comprehensive planning or coaching engagements available, checkout my website and schedule a call.
“Getting 1% better” is often heard in today’s culture because of the wide impact made by the book Atomic Habits.
A core concept conveyed is that positive habits practiced repeatedly compound to your advantage.
If you’re looking to catch-up or get further ahead in reaching your financial goals, the power of compounding is going to be critical to your success.
Many are aware of the power of compound interest because we have the investment industrial complex, Wall Street, and more providing that steady drumbeat in various forms of media.
But how much of what actually happens in the financial markets do you have direct control over?
That’s no message to not trust or to not invest in the markets.
But how often do we instead hear about the compounding effect of our own savings tactics and disciplines?
The power of small savings efforts made repeatedly compound on your behalf too.
What other financial topics do you want covered here?
I’d love feedback and questions anytime. Feel free to contact me!
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