We’re going to look at AI’s predecessor.
The things that got civilization to 2024, literally.
And why leveraging it is one of the smartest financial moves we can make.
Let’s dive in.
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Everyone is losing their minds about AI.
Y Combinator’s current class is filled up with AI startups, Morgan Stanley is putting ChatGPT into their entire wealth business, and thousands of small companies like mine are figuring out how best to leverage the tech.
There is AI for everything.
AI has changed the world already and it’s just getting started.
But before AI, there was automation.
When people figured out how to grow more food than what their family could eat, the cascading effect was large-scale economic, social, religious, and political progress.
People had more time to build stuff and in doing so, discovered the wonders of automation.
Human life changed forever.
And while the world wonders about the possibilities of AI, its predecessor is still massively underutilized in the financial life of many Americans.
Automation in our Everyday Lives
Before we get into why this mathematically works so well as we invest, let’s look at where our money is already automated – because you’ll notice an interesting trend.
First – our paychecks – it’s not even a question anymore about when we are going to get paid – we know a year in advance, easily, when the cash will hit our checking accounts. If you are retired and receiving Social Security – you know when for the rest of your life.
It’s automated.
Second – mortgage payments – banks make us set up ACH mortgage payments in return for the money to buy homes. Why? Because it ensures they get paid and we don’t fall behind on payments.
It’s automated.
Third – health insurance – we automatically pay our health insurance every month. Why? Because the risk of not paying, lapsing and getting into an accident that ends up costing $200k is not worth it.
It’s automated.
Fourth – taxes – buy a Snickers bar, sales tax is automatically taken out. Make W2 income – taxes come out automatically – before it’s even due. Stay at a hotel in Florida – sales tax is automatically taken out.
Again, automated.
The trend here is that the really important things in our lives are already automated, and most of it is from people who take our money.
Our income, housing, and insurance.
Coincidence?
No.
The Exponential Impact of Automation on Investing
Automating your financial life is one of the easiest, fastest ways to ensure success.
When we decrease the time between earning money (job income, dividend income, etc) and investing, we exponentially increase your net worth in the years to come.
Let that sink in for a second.
When people don’t automate everything – they either spend all their money, (this is what most people do, check out any large data set), or they miss market gains by not investing.
Both bad.
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“Automating your financial life is one of the easiest, fastest ways to ensure success.”
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Here’s an example to reinforce this point – You save $1,000 per month into a savings account, and have done so for 3 years, you are sitting on $36k in cash earning 2%. Over this time, the market has averaged 8% per year returns. You’d have $3,466 more had you invested. Not that much honestly. Let’s go further. You leave the strategy as is and 5 more years go by, the spread grows to $10,432, still not huge. But when we zoom out farther, compound interest starts to take over, 15 years at the spread is $136,383.
The longer you go, the exponentially bigger the spread becomes.
Moral of this story?
Automate, ruthlessly – in your favor.
Ensure you have automated every single investment account you have to fully utilize the time you have.
We can’t manufacture more time in our lives; rather, we need to use what we already have better.
I can’t wait for what the future brings with AI but what is more amazing is the magic of compound interest and what that does to our money over the long-term.
In summary.
- Automate your money.
