So, you’ve been working so hard at work, coming in early, leaving extra late, carrying your team by doing extra work around the office. All your hard work is now paying off and they decided to make you the “Woman in Charge” over the HR department. That comes with a major pay raise and a hefty bonus. Woot Woot!! Good job girl!! You decided to get your money right and that budget tight. With the increase in pay, now you just need a little guidance on whether you should save or invest your money. Of course saving money is so important because you never know when that rainy day will hit. But at the same time, you want your money to grow and work for you so you’re leaning towards the investing approach. You’re conflicted and you don’t know which one to choose! HELP!!!
To answer this very important question, “to save or to invest” all comes down to your financial goals and what you want to achieve. If you have a goal to save for your very first home, of course saving is your top priority. If you have a goal to retire at the age of 50 and travel the world or send your kiddos to college without having them take on student loan debt, then investing would be your main priority. You may even feel it’s best to invest and save money at the same time right now! It all comes down to what you want and where you want to be 5, 10, or maybe 30 years from now.
Let’s dig a little deeper on the two topics at hand.
Savings vs. Investing
Savings comes down to putting away a certain amount of money that can be accessed quickly by you, if needed. People like to put their money in a savings account at a bank, in a safe, in their mattress, in a shoe box, a jar, you get the idea. The idea to save can be for a short term goal like buying a home, going on a summer vacation with the girls, buying a new car in cash, or just to have money set aside for a rainy day when it decides to hit.
Investing is putting money into something that can increase in value over a period of time. Warren Buffett defines investing as “the process of laying out money now to receive more money in the future”. Investing can be real estate, stocks, bonds, and mutual funds.
The main goal for investing is to make your money work for you in the long run. A great example would be planning for your retirement or your children’s college education. It is NOT a “get rich quick” kind of thing. If that’s what you want, go to Vegas or play the lottery. Now, there are some investment vehicles that allow you to “get rich quick” if you play the market right like investing in Bitcoin or day trading (higher volatility means the higher the risk of losing money!) BUT WE CAUTION YOU, do your research on what your looking to invest in. There are some pretty risky stocks and if you’re not knowledgeable, you can lose money. When it comes to investing, risk is involved but decide what’s smart & best for you.
That’s why it is so important to think logically and not emotionally. There are four types of risks when it comes to investing: Market risk, default risks, inflation risks, & mortality risk. It is so important to consider all of those risks before deciding to invest your money.
The Benefits of Savings
When you have money in the bank, it creates less stress for you and your family. Knowing you have money to cover that leaky roof is reassuring because you didn’t have to use that credit card to pay for it with interest fees attached. Also, did you know that your health and wealth are linked. When you have enough money in the bank to cover an expense, how are you mostly likely to feel? You’re going to feel great and not so stressed and tense about money because you got it covered. Saving money is a sure way to have less stress and it gives you peace of mind!
The Benefits of Investing
One of the top benefits of investing is saving for your retirement. We’re sure you do not want to be working when your 72 years old (unless you absolutely, absolutely enjoy your job and you don’t mind working). You want to be able to enjoy your life. Travel the world with your spouse, or your girlfriends, and enjoy your time on God’s green earth. You deserve it!
It’s important to start investing now, especially while you’re young and take advantage of your employer’s 401k. If your employer matches the contributions, you should really take advantage of this added benefit. Your goal should be to contribute 10%-15% to your retirement plan. If you feel that you cannot do that at this moment, contribute up to what your employer is matching at least. Free money is left on the table from your employer if you don’t! We can’t always rely on the government to take care of us.
How Does Investing Work?
Investing is not scary and it shouldn’t be. My sister and I were both investment bankers at a bank and you’d be so surprised how many people were scared to invest their money. We get it, it’s your money! No one should be more concerned about your money than you. But the #1 reason why people were scared to invest is because they didn’t know how to invest and they didn’t know much about it.
Investing is simple and it shouldn’t be complicated. Think of investing like this. You got a tiny seed that you planted in your garden. Everyday, you water the seed and eventually, over time, that little seed grew into a beautiful, blossoming flower. You’re basically building your wealth over time. You can invest as little as 1% from every paycheck into your 401k. The great thing about this, you’re paying yourself first and you won’t even notice that it is taken out of your paycheck. You can always increases your contributions as time goes by. The key to building wealth is having a mindset to WANT to build wealth.
Where Do I Begin with Investing?
It’s always best to talk to someone who is an expert in their field. Like a Licensed Financial Advisor. Would you take your child to a heart doctor knowing your child has a tooth ache? NO! It’s kind of the same when it comes to your money. You want to go to a professional, and someone you absolutely trust and knows what they are doing. Do your research. Trust is key when deciding on a Financial Advisor that is dealing with your money. You want to make sure they’re looking out for the best interest in you, and not themselves.
Your Financial Advisor should create a financial needs analysis that basically aligns with your visions and financial goals (if they do not take the time to do this, RUN!) For example, you’re a 35 year old who is looking to retire by the age of 65, and your advisor decides to put you in the most conservative portfolio knowing darn well you’re trying to retire in the next 30 years. A better option may be to invest in an aggressive portfolio because you have time to recover if your money takes a dip! Your advisor should be able to tell you what plan you’re intended to be in based off your answers from a financial needs analysis. Also, make sure you’re aware of the fees and how they may apply when it comes to your portfolio.
Can I Save and Invest at the Same Time?
Absolutely, postitutely (is that even a word?) can!!! It’s always best to start while you’re young to invest for retirement and it’s always good to stack your money in a savings just in case you need it. The sooner you start investing, the more your money can start working for you! And the sooner you start saving the quicker it would be to reach your goal!
We encourage you take advantage of your company’s 401k. That’s a good way to start. We can’t stress enough to take advantage of your company’s plan, especially if they match up to a certain percentage. THAT’S FREE MONEY LEFT ON THE TABLE, GRAB IT!!