Grant and Theresa's Life Prep

Making Plans and Achieving Goals

Investing is Scary But You Need to Start Now

Stocks, bonds, ETF’s, Mutual Funds, high yield, diversity, portfolio, risk management, bull markets, bear market, management fees, tax loss harvesting, 401k, IRA, Brokerage accounts, and magical unicorns.  Who wouldn’t be freaked out by all that?  Most people grow up knowing about checking and savings accounts.  Then you get a job and people start telling you to be sure you are saving for the future.  Well, what the hell does that mean?  How are you supposed to know what to do with your money when there are so many options and things to consider?  Not like they teach this stuff in school.  Besides, how am I supposed to save for the future when the present is so expensive?

How are you supposed to know what to do with your money when there are so many options and things to consider?  Not like they teach this stuff in school.  Besides, how am I supposed to save for the future when the present is so expensive?  Let us debunk some common excuses/fears.It Is All Too Confusing.  

Yes, investing your money can be quite confusing and time-consuming if you want it to be.  But, it certainly doesn’t have to be.  I think people have this idea that in order to invest money they need to be watching the stock market ticker every hour and be ready to buy and sell at an instant.  This type of investing should be left to the true professionals which isn’t you or me by a long shot.  The truth is saving for retirement can be done in about 10 minutes a year and requires basically zero knowledge.

In my opinion, your best option is to simply setup an IRA with Betterment.  With Betterment you set up an account by answering a few questions, linking your current checking account and they do the rest.  This type of investing is referred to as using a Robo-Advisor.  Basically, it uses an algorithm to determine what you should be buying and selling.  They do all this for a super small fee of 0.25%.  All you need to do is just setup your auto draft so every month more money is getting invested.  You are able to start saving for retirement and earning interest on your investment without having a clue what the hell an ETF is.

What If The Market Crashes.  

I was eating dinner with an older guy recently who told me he lost a lot of money back in the 80’s and has just kept his money in safe stuff like bonds, CDs and cash ever since.  I certainly didn’t say this but I wanted to ask him why he sold when the value had just dropped and if he had any clue what that money would be worth now had he not sold?  Selling during a down market just makes the loss permanent.

Yes the value of your portfolio will go up and down with the market and sometimes it will go way down (2008-2009) but as long as you don’t panic you can just wait for the market to recover.  In fact, when the market dips you need to stay steady and keep buying.  It is like you are buying these stocks while they are on sale.  Think about real estate.  Your home value can go up and down but as a whole, the price of homes go up. You don’t rush to sale in a buyer’s market when prices are low do you?  Over your lifetime the market is going to crash a few times just don’t panic and withdraw the money.  Just keep buying a don’t even worry about.

I Prefer Guaranteed Returns.  

Yes everyone loves a guarantee on things which is why people make so much money on insurance and extended warranties.  The thing is most money that comes with a guarantee is really only guaranteed to lose money.  6-10 year CD’s and bonds are paying about 2.0%.  Savings accounts and money market accounts are around 1.0%.

Yes, you are guaranteed to see the dollar amount go up but over that same time, there will also be inflation which will decrease your buying power.  In fact, since 1990 the average rate of inflation has been about 2.5%.  Which means that you need to earn at least 2.5% just to break even.  Now if you are thinking about retiring in the next few years you will need more guaranteed money.

Money Is Tight And I’m Still Young.  

Guess what, money is always going to be tight.  Humans naturally use up what they are provided.  I have seen couples move from a tiny apartment in New York to 2500 sq ft house in North Carolina and had every room full in a year needing more space if they are going to have a kid.  The same thing happens with our money.  People naturally will spend what they make and usually even a little bit more.

I think back to my lifestyle in college and after my first job out of college.  I was still happy and didn’t feel at all deprived but my monthly expenses were tiny compared to what they are now.  My point is you probably already know how to live off less money so you need to start rolling back your lifestyle and freeing up some room to start investing.  Time is your biggest friend in the investing world so stop procrastinating.

I Will Just Inherit Money.  

Oh boy, do I hate this one.  We live in the greatest, most prosperous country in the world yet we have simultaneously become the most entitled bunch of brats.  Kids aren’t moving out of their parent’s houses till they are 30, they are getting subsidized by their parents after they move out by having them pay for insurance,  cell phone plans, daycare, etc, and now we are expecting our parents to continue to provide for us after they die.

Here is the deal, you need to grow up and take care of yourself.  Your parents could decide that you are a worthless spoiled brat who won’t even appreciate the money.  They figure you will probably blow it all in 5 years and just decide the money could be used by their church better than you.  Or they could get sick and decide that $500,000 is worth the cost of treatment if it means living a year longer.  I don’t care if your dad is Bill Gates you need take of yourself.

What To Do

Start right now!  Don’t worry about getting the “perfect” plan together.  Start off with a very tiny amount just to get something trickling out of your expense column and into the investing column.  If you have a 401K through work speak to HR about how you can start contributing part of your salary.  Start with just 1% if you need to.  If you don’t have a 401k then setup and an IRA with Betterment.  If you aren’t planning on retiring in the next 10 years then be aggressive with your investments (80% + in stocks).

Be on the lookout for ways to increase the amount you are investing every month.  If you get a raise don’t get new golf clubs instead increase how much you are investing by how much your raise was.  If your kid starts public school start using the daycare money for investing.  When you pay off a car keep making your car payment into your retirement account.

I know it can be intimidating and possibly even a little scary when you are first starting out.  I was there myself just a few years ago.  All you gotta do is start now and stay consistent through good times and bad.  Throughout the first few years it might not seem like it is adding up to much but after about 10 years you are going to check your balance and will probably be amazed at how much you have and how much it has grown.

-Grant

Ever used any of these excuses?  What is your starting advice to get people investing?

 

4 Comments

  1. Absolutely agree people need to start “now” if they aren’t already investing. The longer someone waits, the harder it is to build serious wealth. I also love Betterment as an option. It’s the best low-cost and easy-to-use investing option out there for beginners. I recommend it all the time.
    Brad – MaximizeYourMoney.com recently posted…Understanding Investing Risk and Your Risk ToleranceMy Profile

    • I spent months researching funds and trying to pick the perfect few. I finally realized that none of the experts can agree on anything anyway and perfect doesn’t exist.

      Thanks for commenting!

  2. Start small, and it will grow over time…

    To the one guy’s comment, he didn’t lose his money, he just lost some of the gains…
    Erik recently posted…The Windfall Experiment: What Would You Do With $5,000,000?My Profile

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