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From the tiny acorn, the mighty oak grows.

How to Automate and Enhance Your Earnings from The Rounded Budget Method

Three Improvements to the Rounded Budget Method

If you are reading this article, this hopefully means that you’ve read, understood, and are fully on board with the Rounded Budget Method. If not, I strongly recommend going back to that article and making sure you have fully comprehended all the steps of the method before reading any further. It is always important to learn how to walk before you run!

If you just learned about the Rounded Budget Method and are excited to try it, I’m glad you are here. You are about to witness your savings grow faster than you’ve ever been able to do in the past – and with very little effort! On the other hand, for those of you who were already using my rounding method (or something similar) for a while now, you may already be in a similar place as I am about to describe next. Either way, I would like to help you skip over the learning curve that I experienced when I first started using the method and help you move directly into the version of the Rounded Budget Method that I am using now. The current version of the Rounded Budget Method that I use improves upon the 3 step process I described in the last article in three key ways:

  1. It makes the whole rounding process automatic (so you don’t have to do any calculations of how much rounding you did, and you won’t have any months where you miss moving the rounded amounts into your savings account).
  2. You can consolidate the rounding method from as many (or few) of your banking accounts as you like into one place (again, automatically).
  3. It gives you the opportunity to leverage the money that you are stashing away from the rounding method and use it to invest and earn significantly more than what you would earn inside of a traditional savings account.  

So if you like making things easier, and earning more with your money (I’m pretty confident that will be most of you…) please continue reading and follow the next steps I suggest.

The Limitations of the “Old Way” of Rounding

After I started dialing in the Rounded Budget Method into the steps that I outlined in my earlier article, I found that it helped me successfully grow my savings balances up to bigger, and bigger numbers. That’s definitely a good thing, right? This meant that I now had a nice cushion for emergencies and unexpected bills, and I could sometimes use some of that money to splurge a bit – vacations, and niceties that didn’t normally fit into the monthly budget.

But even with a fairly large sum of money in my savings account, I noticed that I started hitting a wall: The money in my savings account wasn’t working very hard for me. In fact, it was barely working at all. What do I mean by that? In a traditional bank, if you have a few hundred, or even a few thousand dollars in a savings account, do you know how much that money earns for you in interest?

Well, if you don’t know, let me tell you: IT’S NOT A LOT! In fact, I’d like to share with you that while I had an average of several thousand dollars in a savings account during the year 2021, the interest from my savings account earned me a total of $0.41 for the year. Forty-one cents??? For several thousand dollars in savings?

So, while I was certainly enjoying the added security and flexibility of having a cushion from a larger savings account than I ever had, I also started to realize that if I kept too much of my money in a savings account, I was missing out on opportunities to have that money earn more and work harder for me elsewhere.

Admittedly, the savings account rates have increased a bit since I last ran this experiment in 2021. In case you are wondering, at the time of this writing (January 2023), the average interest rate for savings accounts in the United States is now 0.22 percent APY (according to bankrate.com). This means that if you have $10,000 in your savings account, you will earn a whopping $22 after a year. So I guess I could be making a bit more with my savings than I did in 2021. But I encourage you to ask yourself this question: Do the (admittedly improved) current interest rates found within savings accounts allow you to keep up with the increased cost of living? Especially now, during this period of high inflation? (The correct answer is NO, it does not, BTW.)

For Those Who are Concerned about the Risks of Investing

As soon as I used the phrase above where I mentioned having your money “work harder for you,” I know that there are probably many of you who might fear what comes next: A discussion about investing.

I understand that there are some people out there who are extremely risk-averse and who are intimidated (or even a bit scared) by the thought of investing money. Why? Because when you step into the world of investing (and unlike the secure world of FDIC-backed bank accounts), there is a potential risk of loss on your investments. This potential risk scares away many people – and for good reason. Many people feel like they do not know enough about how investing works and they are worried that if they invest in a bad investment they could lose some (or in extreme cases all) of their invested money. And if this is the case, they would’ve been better off just sticking with the account that earned them forty-one cents instead!

I can also tell you (from personal experience!) that the year 2022 was a particularly challenging year for convincing anyone new to investing that it is a good idea to put your money in investments instead of savings. Why? Because the Dow Jones Industrial Average returned -8.74% in 2022 (according to dqydg.com), meaning that the stock market lost money over the period of that year. But I can also tell you this: A year like 2022 (when stocks and other investments are all LOW) presents a tremendous opportunity to BUY LOW, just like the age-old adage tells us to.

So let me spin this situation a different way: How much did you invest during the downturn that we saw in 2022? Nothing? Shame on you! I can tell you that I invested ALL the money I would have otherwise placed in my savings account using the Rounded Budget Method into investments during this year – and it amounted to several hundred dollars over the course of the 2022 year!

Of course, if you are someone who already has investments during a downturn as we saw in 2022, AND if you pulled out your money during this time, this meant you just locked in those losses. And pulling your money out of your investments when things are low (which many people do because they are scared to lose more) IS BAD – because this goes against the adage of SELLING HIGH. So you should keep in mind this one rule: If you have your money invested, you should NOT treat it like a savings account where you can pull money out at any time with no penalty and with very minor tax consequences. Investing requires a different mindset and means you should follow different rules. This also means that you should still keep a SEPARATE emergency savings account that you can use for those other purposes.

In sum, if you follow the time-tested and simple rules of investing and make sure that you treat your investments as LONG-TERM tools for gain, you can eliminate many of the risks that come with investing.

The Recommendation for Earning More: Acorns

So what is the tool that I use to make all of this happen? A smartphone app available on iOS and Android devices called Acorns. (You can also use Acorns’ website – a smartphone or tablet is not required, but I recommend it.)

Note: If you are already interested in this tool, please consider using the above link (or the other links on this page) to get started using it – because doing so helps me offer more content like this by providing me with a small commission – and there are no extra costs imposed on you for doing so. But I also encourage you to keep reading and make sure that you understand the details of this service. 

What have I learned about Acorns since I started using it back in 2021? Well in that first year, I netted nearly $70 with the few hundred dollars that I grew inside of the account, as compared to the $0.41 I earned in my savings account with several thousand dollars in it. Of course, I cannot promise that this type of earnings is typical, but it certainly was eye-opening!

On the flip side – in 2022 (as I mentioned above) my Acorns account did have a negative return for the year (as did all of the rest of my investment accounts), but I just made sure not to withdraw any funds from the account while it was down. AND, as I mentioned above, I was able to keep adding to the account regularly throughout the year which meant that Acorns was helping me follow the rule of BUYING LOW. Of course, everyone (myself included) is hoping that if the market sees a better year in 2023 (or 2024), we will ALL start seeing positive yearly returns again.

As I alluded to above, another thing that I learned is how FAST the rounded budget adds up when you let Acorns automatically do all the rounding for you (on as many other accounts as you care to link to the service). Since I was already committed to using a rounded budget method, this was a very easy transition for me – and it saved me the hassle of having to calculate what my rounding added up to each month.

And as for the investment options within Acorns, I can tell you this: It is very BEGINNER friendly, which is very good for those of you who might be risk averse – but it may be a bit too simple for those of you who have more experience with investments. Here’s why: Acorns only lets you invest in a generic investment fund based on your risk tolerance of low/medium/high and it does not let you pick individual investments such as stocks or funds. Again, this can be either a PRO or a CON depending on your investment experience and your risk tolerance.

But I will also say this – especially for those who are very wary of investing: Acorns will be a very good place to learn and gain experience and confidence with investing, so while I recommend this tool for everyone, I especially recommend it for those of you who are the wariest. Keep in mind, the money you are investing is the “FREE” money that you found in your budget from the rounding method – so if you consider that idea, you may be more comfortable taking this first step toward the greater earning potential that investments can offer.

Final Thoughts on the New-and-Improved Rounding Method?

So how do you feel about the idea of making your rounding method automatic? Are you excited? Perhaps nervous about the investment aspect? If so, remember, Acorns offers a “LOW” risk tolerance portfolio which means that you will see smaller ups and downs, and this might help you decide if you are still on the fence.

Another insight that I can offer here as someone who has been using this service for several years now, is the fact that inside the Acorns app (or on the website) there are a lot of good learning tools such as articles and FAQs to guide you along as you use the tool. And they offer a very simple and user-friendly experience that will guide you toward connecting your bank accounts and setting everything up just by following their prompts.

One more final detail you should know: Acorns has a monthly charge of $3 per month – but if you use the tool as I do, you will find that the convenience of doing all of the roundings, consolidating, and investing automatically makes it well worth it for me – and my net earnings so far using the tool has outweighed all of the fees by far (but again, this may not be typical and will depend on the market performance).

Remember: If you decide to try out Acorns, you can also use ME as a resource – feel free to reach out to me if you have questions about using the app or if you have questions about any part of the process and the tools I am recommending. To get started, just click on the ad below.

As a reminder, if the content of my article helped you with your decision to try out Acorns, I would appreciate your patronage by using the affiliate links or ads I’ve placed on this page. If you sign up for the service I may receive a commission. Thank you!

Happy saving (and earning)!

-Benett

Credit for the image in this article: https://www.pexels.com/photo/acorn-hanging-on-tree-near-green-leaf-4136921/


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One response to “How to Automate and Enhance Your Earnings from The Rounded Budget Method”

  1. Scott Avatar
    Scott

    A well-researched and easy to understand budgeting method. Acorn has a good reputation and look forward to learning more. It’s a great time for investments longterm (retirement etc ) as well. The DJIA has returned 26.78% over the last 5 years. That includes the past year of -1.61%. Corrections are part of the markets. It seems obvious, but always contribute the maximum percentage that your emloyer will match for your 401k or the like.

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