Benefits Of Investing In Auto Mode

Benefits Of Investing In Auto Mode: Today we will discuss which option is better than others and what are the benefits of choosing the auto investment mode at the start of the month

While investing at the end of the month manually is very intuitive and sounds comfortable to most of the investors, we think that investing in the auto mode at the start of the month is much better and beneficial for an average investor.

Most people adopt the “Save whatever money is left at the end of the month” approach in their financial life, but there is enough research and proof that it does not work for the larger masses. The best option is to put your investments in auto mode and let it happen automatically each month.

Benefit 1 – You can manage your lack of discipline

Can you trust yourself in investing each month manually for the next 5-10 yrs?

If you decide to invest Rs 10,000 on the 25th of every month for the next 10 yrs, will you be able to do it consistently for the next 120 months (10 yrs X 12 months)?

Trust me, it’s a lot of work and very hard to act in a robotic fashion.

  • Sometimes, you will postpone it
  • Sometimes, you will feel – “Let’s do it next week”
  • Sometimes, you will skip it for the sake of other expenses
  • Sometimes, you will just be involved in some other tasks
  • Sometimes, you will actually follow it
  • And most of the times, you will just forget it

Compare this will an auto mode, where you have set up your SIP (automatic monthly deduction in mutual funds) or a recurring deposit (for those who don’t think mutual funds are their cup of tea), and the money automatically gets deducted from your bank account (considering you have the balance) and then gets invested without your intervention.

Which one of these options do you feel will be in your interest?

Most people think that each month of a certain date they will invest some X amount on a regular basis, but they are not able to do it on a consistent basis. They either lack in discipline or they are so consumed in other areas of life, that they are not able to follow what they promised themselves.

Due to this, their financial life suffers. The money does not get transferred from the bank to the investments and eventually gets spent.

Trust me, even if you are the KING of indiscipline, the auto investing will create wealth for you!

Benefit 2 – You avoid unwanted expenses

“Supply creates its own demand” – a classic principle of economics. If you have money lying available in your bank account, you will find enough reasons for spending that money.

Hence, if you think – “Let me first spend, if anything is left, I can always save/invest it at the end of the month” , it’s almost guaranteed that you will not find any money at the end (unless your income is very high compared to your expenses).

This is the reason why you should create a structure that takes away some part of your salary from your savings bank account to somewhere else which is not easily visible to you (like PPF, RD, or mutual funds).

I have devised something called a “10% margin system”, which can truly transform the way you manage your cash flow. It’s one trick that will help you save more money each month.

Under this system, you only keep your monthly expenses + 10% more in your bank account and invest everything else at the start of each month.

So if you invest at the start of this month, you will shop only limited to your needs, you will not overeat outside, and to a great extent, you save on the unwanted expenses.

The whole idea is to “cut” the excess supply of money to yourself by investing it at the start of the month itself.

Benefit 3 – Guilt-free Spending

This is one benefit that is often not appreciated enough.

When you save your money at the start of the month, then the rest of the money is available for your expenses. Now you can spend it freely, without any guilt.

Most of the people who do not save enough or save at the end of the month, keep worrying and thinking while spending their money. They keep feeling “Bahut Kharcha ho Gaya is Baar” while going for outings or movies etc. This is because they have not allocated money for the future.

So you should start your auto investing (SIP is one of the best way of doing that) and once you have done that, I suggest you adopt the envelope style of expenses where you create few envelopes for each expenses category and put the cash in the envelope and use only that till the end of the month.

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