9. Automatic Investing

9. Automatic Investing

“The poor and the middle-class work for money. The rich have money work for them." Robert Kiyosaki, Rich Dad Poor Dad

Step 17: Figure out your order of investing

While it's important to invest regularly in your investment accounts, the order in which you deposit your money matters as well.

For example, many employees offer "matching" programs for 401(k) accounts where they match yearly contributions to a set amount. This is literally free money. If you are employed, check with your boss about what 401(k) matching programs they offer.

In general, you want to invest in the order below. Note that the order in which the investment accounts are underneath each tier matters as well!

Additionally, the amount you should add to each one before switching to the next tier is noted next to each investment account.

First Tier: Free money

  1. Roth/traditional 401(k): Add to your 401(k) until you meet your employer's match.
  2. Other employer matching accounts: Like your Roth/traditional 401(k), only contribute the amount that your employer matches.
  3. ESPP: If you have an Employee Stock Purchase Plan (ESPP), add however much you want and then continue to the next tier.

Second Tier: Tax efficient accounts

  1. Roth/traditional IRA: Invest the max you can into your IRA. As of @August 20, 2020, the max for your IRA's is $6000 if you're under 50 years old and $7000 if you're older [1].
  2. Roth/traditional 401(k): Contribute the max amount you can add to your 401(K). As of @August 20, 2020, the max is $19,500 if you're under 50 years old and $26,000 if you're older [1].
  3. 529 Education Saving Plan (ESP): Invest the max you want into this account which as of @August 20, 2020, is $475,000 [1].

Third Tier: Taxable/non-IRA investment account(s)

  1. Taxable/non-IRA Investment account(s): This is only if you have fully exhausted all the options in the first two tiers above.

In John's case, his employer matches his Roth 401(k) up to the first $1000. So, he will automatically move his monthly investing amount of $432 to that account until he reaches $1000.

Afterward, he will contribute the rest of his monthly investment amount into his Roth IRA. Your order will probably be the same if you're fully employed!

Step 18: Set up your automatic deposits

First, make sure that you have a bank account linked with M1 Capital. In most cases, you will want to link the account you get paid to and/or put your money in. Since John gets his paychecks to his checking account, he linked that one.

Then, head over to the main page of your M1 Fiance account and click on the "Transfers" tab in the toolbar at the top of the webpage to get here:


Click the "Move Money" button to get this page:


Then click "Recurring Transfer" to see these options:


Enter the amount you are able to invest each month in place of the "$0" at the top of the page. The minimum account balance for IRA's/401(k)/etc is initially $500, but you can automatically invest as much or as little as you would like each day, month, or year afterward.

Under the "From" dropdown, select the account you get paid to under. Under the "To" dropdown menu, select the investing account(s) that you are using the guide's strategy with.

And finally, under "Day of the month" it's recommended you choose the day after you get your paychecks and/or deposit your income. Once you click continue, you'll get to this page:


Click confirm and you're done! M1 Finance will now take your automatic payments every month and put them into your investing account. If you have additional investment accounts besides an IRA, repeat step 18 until they're all set up.

Step 19: Turn on automatic investing

Now that you have started automatically depositing your monthly investment money, let's make sure that M1 Finance is set to automatically invest it into your chosen investing strategy.

Like previously, head back to the main page of your M1 Finance account. On your head IRA page you'll see a small, white box like this one:


That small, blue toggle allows you to invest any money that you put in your bank account over the minimum amount you set it at. Turn it on so that it looks like this:


The number under "Minimum cash balance" is the threshold amount of money you need to be at in your investment account to trigger an automatic purchase of stocks.

As an example, if you set the minimum to $1500, every dollar that you add to your bank account over $1500 will be automatically invested in M1 Finance. If you'd like more details as to how this works, click the 🛈 icon next to "Auto-invest" to read more about it.

For most people in most cases, you can just set "Minimum cash balance" to $0. This makes it so that every time you transfer money, all of it will automatically be invested for you.

If you have additional investment accounts—like a 401(k)—then set up auto-invest for those as well. That's it! You're done and well on your way to retiring comfortably.