It’s nearing the end of January. Earlier this month, we put out a video about a financial New Year’s resolution. This topic is important enough that we felt it should be our first blog post ever.
So, if you want to skip the rest – here it is: In our opinion, you should increase the amount you are automatically investing right now. Don’t think about it. Don’t resolve to do it at a future time. Just do it now.
This thought comes from a simple place. Some of the people we see may be headed towards disappointment and all seem to have one thing in common. They have not set enough aside for their future.
On the other hand, if I were to make a generalization about the people who have bright financial futures ahead of them: they are prodigious savers and investors. For the most part, they have set up their wealth accumulation plan to be automatic, via either large 401(k) contributions, large contributions into other investment accounts, or, in many cases, both.
The fact that the accumulation is automatic is important. If you have to remember to write a check every now and then, it probably won’t happen. Compare that to the one-time effort to increase your 401(k) contributions by 1% or 2%, or the time it takes to set up or increase the automatic draft into an investment account. It’s one and done, and then it actually happens.
Beyond actually happening, let’s talk about a couple of finer points. First of all, if you have an Employee Retirement account such as a 401(k), and there is an employer match, be sure to contribute enough to earn all potential matching dollars. That is free money. Don’t let it slip away.
Next, what I have observed is that most people can almost always invest more than they are right now. I challenge you to increase your automatic investment right now. Even if the change is only $50 or $100 per month, commit to starting now, and continue for six months at least. It has to be automatic. If you are like most people, you will find out that you barely notice that the money is not in your checking account. Then, in six months, if it has not hurt, do it again. And again.
Using this method, I have observed people more than double their monthly investments. And that alone can make a significant impact on their long-term accumulation.
Patrick Stoa
For questions, comments, and conversation, call us at 920-617-6830.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Patrick Stoa and not necessarily those of Raymond James.