Investing during difficult financial times
Retirement (Photo credit: Tax Credits)
Now more than ever it is important to invest in your future. Yes, it’s easy to blame difficult times on your lack of responsibility, but it’s also wiser to take care of your needs. Financial success can occur one dollar at a time.
The secret to investing is to create a habit by changing your behavior.
As we know once habits are formed it’s complex to change. Let’s take the nasty habit of smoking as an example. As many ailments are listed that are affiliated with nicotine one would think many people would cease smoking. However, when it comes to the addiction, the gesture of lighting the cigarette and habit forming conditions it’s merely impossible to change your ways.
As an investor, you can use a habit forming behavior (by engaging in a routine) when it comes to investing. It’s time to get addicted to taking care of yourself and securing your future. Again, once the habit is formed it’s virtually impossible to diminish.
Begin investing in you by paying yourself, first. Treat your investments as an important expense. If you didn’t pay your mortgage you would go into foreclosure. If you didn’t pay your utilities you would sit in the dark. Now, if you don’t contribute toward your retirement fund you will semi-retire and possibly move in with your children. That’s reason enough to begin one dollar at a time.
For those who are novice to investing or skeptical you can begin by depositing monies into a high interest savings account. Of course, we realize that savings accounts aren’t paying much lately, but remember we are coaching you to form positive, lasting habits to begin the process.
Once your monthly budget is created you can adjust to either deposit $25 per pay into a savings or implement a strategy that Fabulous & Money Savvy™ loves when developing a new saving’s habit.
Here is an example of our strategic plan:
When forming a behavior to save toward retirement or an emergency fund you will engage yourself weekly. Each Friday will consist of a deposit according to the number of week in the year.
There are 52 weeks in one year; therefore, there will be 52 deposits. You can always put the money into a container to visit the bank monthly.
Example:
Week 1= $1 Week 10=$10
Week 2=$2 Week 11=$11
Week 3=$3… Week 12=$12…
You will perform the task until the 52 weeks have ended. Once you have completed the plan you would have saved $1378 from $0. That’s a mighty difference! Again, this plan is to get you to change your behavior and begin paying yourself first.
Step up your retirement
401K
If someone were to tell you that if you put $50 in an account they would match your $50, what would you do? You would probably be excited about free money. Well, why aren’t you taking advantage your 401K? Many companies have eliminated pension funds, but are matching a specific percentage of what you are investing. The deposits into your 401K not only get you closer to a secure retirement but it also saves the money you owe Uncle Sam. Why? Uncle Sam can’t tax what you don’t use. If you gross $50,000 per year and choose to invest 10% (5,000) you are only taxed on $45,000. What a win-win situation!
As an investor in your 401K the monies are automatically withdrawn from your paycheck before you see it. Now that you are the master of savings there’s another concern that’s easy to address. How do you invest? Many retirement plans now have tools that ask questions to offer a recommendation that will suit your needs. You aren’t required to choose individual stocks instead there are asset allocation accounts that are divided amongst stocks and bonds according to your age, suitability and target retirement date.
IRA
This is where your practice of saving comes into action. An IRA is an Individual Retirement Account for working individuals who want to contribute with after-tax dollars. Although is it encouraged to NEVER touch your retirement accounts you can do so if needed with an IRA and not have a visit from Uncle Sam (as long as you withdraw what was deposited). Uncle Sam will only tax on capital gains in an IRA. Again, your initial deposits have already been taxed.
For those of you who have or will receive a large tax refund from the IRS this is where you want to deposit the funds instead of spending the monies on items that will depreciate the same day. Just a suggestion…
As you can see you really can’t blame the economy for your lack of retirement. You have the wisdom and opportunity to control your financial future. Will you become the millionaire you desire? If you don’t invest you will never know. If you can only afford $5 per month it is $60 that you didn’t have last year, which is a start. It’s time to change your habits.
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“Love yourself enough to support yourself.” BL Shabazz
© SMG, LLC
Related articles
- IRA Basics (ally.com)
- Strategies for Retirement Saving (apartmentguide.com)
- The 10 Pros and Cons of Roth IRAs (wealthwire.com)
- Break bad habits: Save small rather than not at all (gystventures.wordpress.com)
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