We set up our budget, we find ways and areas to reduce our expenses, we get our spending under control, we live below our means, we find ways to increase our income, we get our debt snowball rolling, we learn to pay ourselves first to save for our emergency fund and of course…..save to invest! The point of paying ourselves first in order to save is not just to hoard our money or stuff it under a mattress, but rather to use that money as a tool and put it to work for us for our long-term future goals. Our emergency funds are separate from our investing funds. Our emergency funds serve us in our short to mid-term future when faced with unexpected expenses, so having those funds in low yielding, liquid accounts is fine since the real return on those investments is peace of mind. But money saved beyond our emergency funds…that money needs to be used for investing!
Investing can be as simple or as complicated as we want it to be, the point is that our money needs to be utilized in a way that will allow it to grow and produce yields faster than inflation. Inflation is the reduced value of the dollar over time, so as the cost of living and prices rise, our money buys us less. Now that’s a crapy deal, but unfortunately, it’s what we’re up against. There are many different ways and strategies when it comes to investing and it all depends on our goals, our risk tolerance and how hands on or passive we want to be in our investing. There are aggressive as well as passive ways to invest, with even the most passive strategies still having a degree of risk. The most common and simplest strategy for investing for our long-term future goals is an employer sponsored 401k or equivalent type of investment vehicles for those of us that are self-employed. As an employee, that type of strategy is the simplest to set up and easiest to stick to with when given the ability of having funds automatically deducted right from our pay checks before we even see them. For the self-employed, it will take a little more discipline to make sure those funds make it that account. That type of strategy is the more passive hands-off approach to investing and the very least we should be doing. Then, there’s the more hands-on approach of trading our own stocks and/or bonds, managing our own funds, investing in real estate, etc. Of course, the more aggressive our strategy the more risk we assume, but also giving us the ability to outpace the inflation game much faster.
Whichever strategy……or strategies we decide to utilize, will (as I’ve stated before) depend on our comfort level of risk and effort (how hands on we care to be). The important thing in all of this is getting all the information and/or help we need to educate ourselves enough to make the best decision based on our own individual desires. The concept of Financeology is that there is not one style, strategy, concept, technique or “way” of doing things when it comes to achieving our financial goals! It comes down to who we are as individuals, what our goals are, what our comfort levels are, what our risk tolerances are, as to how we each approach our financial future. Be curious, seek out professional advice, ask questions, read, study, learn and take action. Our financial future is counting on us!
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