Steve’s 6 Tips for Financial Freedom

Depending upon your age you may have witnessed a few recent economic disasters. Whether it was the tech bubble of 1999, or the recession of 2008. The last two decades have impacted many investors where it hurts most, their wallets.

Investors speculated that the tech market “would” never stop growing. Every money manager, financial advisor, and talk show pundit were aggressively pushing for a buy all disaster proof atmosphere. Unfortunately, we know the ending of this story; one morning many sat and watched the tech stocks plummet and calculate their losses which for many were in the 50 to 65% valuation.  2008 saw the market decline once again due to the housing bubble and as the markets sold off the Dow Jones hit a low of 6507 the S&P hit 676 and the Nasdaq 1268! Today the Nasdaq stands at 6490, the Dow is at 24,800 and the S&P 500 at 2690. These gains have been enjoyed by many investors but many have sat on the sidelines missing out. The group that seems content to sit this one out is Millennials. In a survey back in 2016 showed that 32% of respondents 35 and under preferred to keep their savings in cash!

Millennials and younger adults cannot afford to sit out of the overall markets. They will be faced with the biggest burden of any generation when it comes to funding their retirements. Currently, cash accounts in banks are offering returns of less than 1% and CD’s are only returning 1.25% and perhaps a little higher depending upon the length of maturity.

What should these young people do to help better prepare themselves for retirement?

Here are some simple ideas to get anyone started in investing for their future.

  1. Start an emergency fund that would cover at least 6 to 8 months of your monthly expenses. This account could be put in a local bank giving you access to your money.

  2. Check with your employer and see if they offer a 401k or similar retirement plan and enrolled immediately if possible. Make sure that you put in enough to get the employers match if they offer a matching plan.

  3. Speak with your Tax planner and see if a Roth 401k plan is better for you or a traditional plan that allows you to deduct your contributions from your taxes in the year that your contributed. The Roth contribution is not tax deductible but grows tax free and the withdrawals are currently not taxed as well.

  4. Once, these steps have been achieved open up an account with any of the major Mutual Fund companies such as Vanguard, Fidelity, Charles Schwab etc. Many will allow you to open up an account and start investing with as little as $50 per month.

  5. Now, I know the next question what do I invest in? The answer is simple start with an index fund such as a fund that invests in the S&P 500 or the Russell 2000, or even the entire Nasdaq. Either way you want to invest some of your monies in the stock market. As you learn more about investing and you should. You can have diversified your investments in different funds that invest in stocks or bonds.

  6. Finally, the true secret to investing success, pay yourself first. Prior to paying any bills each month write out a check to yourself and put it away. This can be put in your emergency fund, though once it is fully funded you would than start funding your investment fund. If in the event that you do not have access to a retirement plan at work you need to open an individual self-directed IRA for yourself. Again, speak with any one of the major Mutual Fund companies and they will assist you in setting one up for you.

Investing for your future can only be done by you. Investment Advisors are good but no one cares more about your money than you do. It’s time to learn more about saving and investing your money and what better time to start than the New Year.

Merry Christmas, and Happy New Year to you and your family.

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