Between juggling my family’s daily needs, budgeting for our normal monthly bills, and the pressure of building up our everyday savings account, the thought of long-term saving is overwhelming.
My husband is a risk-taker. He’s comfortable with investing and sees the advantages of long-term saving. I, on the other hand, am not. I want my money in a low-risk savings account that I can get my hands on 24/7… just in case. Having said that, I realize that if we’re too conservative over the next 20 years, we’ll be faced with not having enough money for retirement.
Long-term saving and investing is one of the best ways to grow wealth over time. Instead of being fearful, we worked with an investment advisor to make a plan that will help us grow our retirement funds over time. Here are a few of the tips that they shared with us when we got started.
First, you need to have an emergency fund. If you don’t have one, get one. This is your cash pile. Most advisors recommend having at least six months of expenses saved. I think for the majority of us, that’s a stretch, shoot for having at least three months worth of expenses saved. So if your expenses are $2,000 a month, we’re talking about putting $6,000 into an emergency savings account. Set your emergency funds to the side in a secondary savings account so that you won’t be tempted to dip into it for your everyday needs.
Next, you need to take advantage of free money. This means maximizing any 401k matches that your employer offers. If you qualify for a 401k at work, you must do it. No exceptions. In this account, you’ll invest in the stock market where it can grow over time. Yes, it’ll fluctuate, but don’t panic the stock market will recover.
Finally, you need to invest yourself. This means investing in an IRA or traditional brokerage account. You need to invest – even if it’s only $100 per month. The sooner you start, the less time it takes and the easier it is. The power of compounding interest will help you grow your money over time. What is compounding interest? Check out how Dave Ramsey explains it in this video. Want to see how much your money could be worth by your retirement? Look it up on our online calculators.
Want to learn more about long-term saving? We’d love to help you get started.
Now it’s your turn – what’s holding you back from long-term saving? Or if you already are a long-term saver, what was your biggest hurdle to overcome when you got started?
Until the next time,
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