#67 Automating Your Path to Financial Freedom

Not everyone enjoys dedicating substantial time to thinking about investing. This is perfectly understandable. Your professional responsibilities, family obligations, and everyday necessities create constant demands on your limited time and mental energy. When precious free moments arise, you want to relax and enjoy them—not analyze financial documents, evaluate investment opportunities, or study investment principles.

The bad news is that in order to become financially free, you need to spend time to understand how to invest, be clear on what your goals are, and find investments that work for you. The good news is that once you complete that foundational work, you can establish efficient systems that dramatically reduce the ongoing time and attention required to build wealth.

Create a Solid Foundation

Despite what popular media might suggest, successful investing requires more than simply setting up automatic contributions to a retirement account. Before automating your investment process, you must develop your personal investment thesis [1, 2, 3]. Developing this framework does not demand months of intensive study, but it does require thoughtful consideration and deliberate effort. More importantly, this crucial work cannot be entirely outsourced.

The financial services industry includes many advisors who suggest they can create a comprehensive financial roadmap for your future after just a brief consultation. I recommend approaching such promises with healthy skepticism. While partnering with a trusted advisor to help achieve your financial goals can provide significant value, selecting that person demands careful consideration. Pay particular attention to:

Their underlying motivations and incentives
Their genuine expertise and track record

Many financial advisors are affiliated with specific companies and are compensated when people invest with them. That means that they have an underlying bias towards recommending specific financial products. Someone employed at a brokerage house will always recommend stocks and bonds, and someone at a real estate investment company will recommend the real estate deals that they provide. There is nothing wrong with this advice, as long as you recognize the inherent bias that you are getting. To minimize potential bias, seek advice from either a fiduciary professional legally obligated to prioritize your interests or someone you trust who demonstrably values your financial wellbeing above their own gain. Alternatively, gather perspectives from multiple qualified sources and formulate your own an approach based on your specific situation.

Most importantly, avoid taking financial guidance from anyone who has not already achieved the financial objectives you aspire to reach. Success manifests differently for each individual, and your personal goals and optimal path depend on your unique circumstances. Many well-intentioned but inadequately informed friends and relatives simply recycle advice they have received without critical evaluation.

Even legitimate experts may offer guidance that works effectively for their situation but proves unsuitable for yours. You would not learn to play the piano by taking advice from a guitar player, you want to find someone who plays the piano at the level (or above) that you want to play and find out how they got there. The same holds true for investing. By understanding your investment thesis, you can identify people who have accomplished what you are trying to do, and learn what they did to achieve that.

Creating Automated Systems

Once you have a very clear idea of where you want to go and the steps required to get there, the hard work is done. Your next priority becomes implementing systems that ensure consistent execution of these steps

I use two types of systems to keep me on track.

First, I automate as much of the process as possible – particularly the regular movement of money. I have separate accounts for my emergency fund, investments, specific major expenses (such as insurance, taxes, and vacations), and general spending. I know how much I want to go towards each of those activities in a given month and have automatic transfers set up to move that money. I also have all of my bills set up on autopay –typically to my credit cards (which are automatically paid in full every month). As a result, I only spend an hour or two each month tracking all of my expenses as I balance my checkbooks and review my credit card expenses. I never worry about ensuring the payments are made on time. As part of my monthly review, I identify whether there are any additional transfers that are required – for example, if my credit card was charged for an insurance bill this month, I move money from the insurance account to cover it. This system minimizes the ongoing time and energy I need to spend on managing expenses.

Second, I dedicate time to reviewing my processes once a year. While personal circumstances and goals naturally evolve over time, these changes typically occur gradually. I find that reviewing my financial philosophy and strategy every 9-15 months allows me to make targeted adjustments that accommodate these changes. This comprehensive review typically requires just 2-4 hours annually.

Putting This Into Practice

A couple of weeks ago, I worked with friends of mine to take the first steps to automating their financial future.

This couple – both doctors, making a good annual salary – are not interested in financial planning, but recognize that they need to do something to be able to meet their goals. Specifically, they want to:

Transition to part time work in about 10 years
Complete multiple major house renovations before reducing their work schedule

They had diligently followed conventional financial advice: eliminating student loan debt, making additional mortgage payments on their 25-year fixed-rate loan (3% interest), maximizing 401(k) contributions, and saving monthly for their renovation projects. None of this is inherently bad, but a few small tweaks can dramatically improve their overall financial position.

My recommendations to them were to:

Move the money they are saving for renovations from their bank account to a money market account. This changes the interest they are paid from 0.05% to 4.2% – generating thousands of extra dollars while still maintaining access to the money and having very low risk.
Instead of paying off their mortgage, invest that money in an index fund. Given the low rate on their mortgage, and the fact that they can deduct the interest on their taxes, they are much better off investing that money. In addition to increased growth, they retain access to that money if they need it instead of it being locked in their house.
Change their 401(k) investment from a target date fund to index funds. They are paying high fees for their current investment and, since they are over 20 years from retirement, are not getting a lot of benefit. Switching to low cost index funds instead will reduce the drag on their returns.

It took under 2 hours to make these changes. Now they are set up with the ongoing work automated. There is nothing to think about on a month-to-month basis as the money will move on schedule.

The projected benefit of these changes, when taken over the next 20 years, is expected to be over $2M.

As their situation evolves over the next few years, we will have a few more conversations – for example about potentially moving some money from index funds to real estate – but there is no ongoing time commitment required.

Pulling It All Together

The approach outlined above demonstrates how strategic planning combined with automation creates a powerful foundation for financial independence. By investing a few focused hours now to establish appropriate systems, you better position yourself for substantial long-term benefits without sacrificing your precious time to constant financial management.

This exemplifies the core principle of breaking your paycheck dependency: building wealth should enhance your freedom rather than consuming your life. With the right knowledge and systems, you can create abundant passive income streams that gradually replace your reliance on active income—allowing you to determine how you spend your time based on passion and purpose rather than financial necessity.

For additional reading:

This article is my opinion only, it is not legal, tax, or financial advice. Always do your own research and due diligence. Always consult your lawyer for legal advice, CPA for tax advice, and financial advisor for financial advice.