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Resolved: Automate

Mike Zaccardi, 1:02 am ET

WHEN I WAS WORKING fulltime, my 401(k) and health savings account contributions were automatically pulled from my biweekly paycheck and dumped into the respective accounts. But when I left the nine-to-five world a year ago, the onus fell on me to invest the profits from my small business. I sent off money to some low-cost funds a few times during 2021, but it wasn’t as regular as it should have been.

My resolution: Make my taxable account investing more automated this year. I know I’m a poor market-timer, so I don’t want to even think about buying the dips or jumping on a momentum trade. I’d rather just spread out my contributions over the course of the year.

I suspect many other folks could also benefit from putting their investment plan on autopilot. For retirees, automating distributions can take the mental anxiety out of the sell decision. Meanwhile, those in the workforce might automate their IRA contributions. It’s a whole lot easier to hit the $6,000 maximum contribution if you do it in automatic $500 monthly increments. For those age 50 and older, the 2022 max is $7,000, or just over $580 a month.

In 2021, I didn’t have the tax losses needed to max out the $3,000 offset against ordinary income. If I’d put money to work each month last year, surely there would have been at least a couple of lousy taxable-account purchases on which I could have booked losses and thereby captured that $3,000 tax benefit. Another of my 2022 resolutions: Harvest tax losses during this year’s market pullbacks.

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Ginger Williams
Ginger Williams
10 days ago

Automation is great for budgeting as well as investing. My credit union offers Christmas Club savings accounts, which automatically transfer balance to checking account in late October. My automatic transfers to Christmas Club account are calculated to cover the insurance and property tax bills that arrive in early November, as well as buying holiday gifts and travel.

William Perry
William Perry
10 days ago

Thanks Mike. I also have set up automatic drafts and established financial rituals for retirement contributions and other purposes with a small twist. I base certain funding goals on 10 months instead of 12 months allowing me money in my November & December spending budget for year end charity, Christmas gifts and holiday travel, when travel is possible.
I was also inspired by Dr. Lim’s Humble Dollar writings about i-bonds to establish a monthly i-bond purchase and by Mr. Quinn’s writing about 529 plans for his grandchildren and now make a modest 529 contribution monthly for a grandson. I was even able to get my son-in-law to be the 529 account owner for my grandson the 529 beneficiary and now do not worry about if I will be around when my grandson starts college to deal with the 529 administrative issues.

Mike Zaccardi
Mike Zaccardi
10 days ago
Reply to  William Perry

Great plan! Thank you for sharing. I made my 2022 Series I bond purchase as soon as I could. I imagine that’ll be the last one I do since the inflation rate should come down a lot later this year. And we might start earning something in savings accounts before long. BofA thinks the Fed will raise rates 1/4 of a point at each of the next 8 meetings!

Rick Connor
Rick Connor
10 days ago

Mike, this is a very smart move. When I stopped working full time, I continued my monthly auto-transfer to a taxable investment account. And just as you suggest, I just set up a monthly automatic distribution from my Vanguard IRA to our online checking account. I’m also automating some of our bills.

Knowing myself I’m sure I’ll still check each account regularly. I just want have to take many actions.

Mike Zaccardi
Mike Zaccardi
10 days ago
Reply to  Rick Connor

The power of auto investments and auto distributions is so powerful to combat our biases! Thanks, Rick!

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