How to Build Wealth – $1,000,000 – with Automatic Investing (Part 4)

Nov 1

Image sourced by Jakub Żerdzicki @jakubzerdzicki

Welcome Back!

Continuing our blog post series about automatic investing, we’ll share still more ways to create your own system to build wealth of $1,000,000:

Step 4: Track Your Progress with the B.A.S.E. Method

I use the B.A.S.E. method to track my savings and ensure that I’m sticking to my plan. B.A.S.E. stands for:

Beginning Balance: Your starting balance.
Additions: Any savings or deposits.
Subtractions: Withdrawals or investments.
Ending Balance: Your final balance at the end of the period, for example day, month or year.

One of the most effective systems for ensuring that you meet your savings and investment goals and tracking your money is the B.A.S.E. method which we explained in a recent Budget and Grow Rich® blog post – click here.

B.A.S.E. is a very useful way to track your money and reconcile your checking account balance, savings account balance and any other account activity and account balance.

I also use B.A.S.E. to keep track of the money I plan to deposit into my investment account as we’ve been discussing in this Budget and Grow Rich® blog post series.

Using the B.A.S.E. method, I keep a running balance of my accounts, Adding the semi-monthly investment amount from each paycheck to the balance; and Subtracting the amounts I deposit into my investment account.

Given my savings plan and investment plan, the ending balance is the amount I have accumulated – my investable money (investable dollars) – and have committed to deposit into my investment account for long-term wealth accumulation – wealth-building.

For example, suppose:

On March 1, the opening balance or starting balance of your investable dollars or investment amount – the amount of money you plan to invest – equals $23.
Then, when you receive your March 15th paycheck, You add $500 to your balance.
Now your balance for saving and investing – your investable dollars – equals $523 ($23 plus $500).
On March 16th, you transfer (deposit) $500 to your investment account or savings account.
On March 16th, your new ending balance equals $23 ($523 minus $500).
And so on. . .

The key is to set up this system and continue the practice every month, year in, year out!

If you follow this wealth-building technique, at some point, you would send the $23 (or whatever the total balance is) to your investment account.

You could round up the amount of the transfer (savings amount or investment amount) to $525.

I round up or round down the amount I transfer into my investment account to the nearest $25.

If you were following this system to the penny (which I do by the way), your ending balance on March 16 would equal $23.

I find that by ‘synthetically’ reducing my checking account balance by the amount I want to deposit (send or transfer out) to my investment account (we covered creating a pro forma payment in Part 3 of this series), I know Exactly how much money I have available to spend on my living expenses and discretionary expenses. And whether I’m on track, ahead of plan or behind plan. In other words, continuously monitor your spending and account balances.

In my experience, these days, many people just don’t pay attention to their checking account let alone formally maintain a checkbook. A decent percentage of people rarely if ever analyze their transaction activity in their checking account online.

Personally, I don’t think that’s a good idea. Because every once in a while I have found an error or discovered a fraudulent transaction. Approximately 15 years ago, I was the victim of Identity Theft. . .

Monitoring your checking account and reconciling your accounts helps you control your money, protect your money, achieve your financial plan (achieve your goals and objectives) and accumulate wealth.

But that’s me. I have an accounting background and am a CPA and my Dad was a CPA. . . After decades, I know that this system works. I’ve saved over $1,000,000, way more.

On the other hand, if you don’t develop a mathematical or formal system for implementing this technique, in my experience, is that it’s Difficult to remember how much you intended to save and invest.

And some expense or other or some toy or dinner at a restaurant always seems to pop up. And derail your financial plan.

Be on guard. Without a detailed financial plan, your savings and investments are likely to be random. It’s likely you’ll miss some transfers here and there. And the likelihood that you will follow through and achieve your financial goals and objectives is Much Lower. Then, it’s Less Likely that you will accumulate the wealth you desire.

Make sure you transfer the designated investment amount or savings amount to your designated account every week, every month, and so on. Like Clockwork!

The key to building wealth is to create your own system that works for you; put it to work; be disciplined; and follow it month in, month out, religiously.

This system works for me.

It can work for you!

Take a test drive. And as always, let us know how it goes.

To Create More Free Cash, click here.

See you next week.

Arthur V.

Disclaimer: OH and Please Remember, we are Not financial advisors, financial planners, attorneys or accountants and are Not providing any specific financial, tax or legal advice here. Be sure to conduct your own due diligence and consult your own professional advisors to get sound professional advice that’s specific to your financial and personal circumstances, risk tolerance, time horizon and investment goals and objectives among other key factors!