In part 1 of this series, we covered the reasons that the overwhelming majority of millennials aren’t investing their money. Folks, the reality is that we can’t afford not to invest our money. Among other reasons, there’s a solid chance that many of us will live to be at least 100 years old. According to the U.S. Census Bureau, the average retirement age in the United States in 2017 is about 63. Simple math says that if our generation is living into our 100’s, we will need to have 40+ years of income saved up, and that’s assuming you run the balance to zero just before heading to the great beyond.
If you’re living on $50k per year (which will be peanuts in 40 years when you add inflation to the mix) you’ll spend about $2 million doll-hairs in retirement. That’s no small pile of cash my friends, and the 0.01% interest rate the bank is paying on your savings account aint going to cut it. Not investing, is not an option.
“Okay, we get it: We need to start investing. How do we get started?” said the award-winning listeners.
Step one is giving your money a purpose. Simply saving or investing your money will get you nowhere if those dollars don’t have a purpose. If the goal is saving $40,000 for a house down payment in 5 years, awesome. We can plan for that! If we want to save $100,000 for our kid’s college tuition by the year 2030, sweet. We can totally plan for that! If we just want to invest our money because we think that’s what we should be doing, ehhhh. We can’t really plan for that. See what I’m saying? If there’s no end game, we have no time frame to design a winning strategy around. This is where the process begins.
So, what does this entire process look like?
- Assign a purpose to our money by setting goals
- Associate a time frame with the goals we set
- Use these time frames to determine how much risk we’re willing to take
- Select investments that match our values, goals, and level of risk we’re willing to take
Once we have all this information, we can make an educated decision on which vehicles should be used to hold our investments (investment account, 401(k), Roth IRA, 529, HAS, etc.).
This is just a high-level overview of what it looks like to start designing your investment strategy. In the third article of this series, we will discuss the importance of evaluating risk as you design your ideal investment strategy. Until then, check out the first article in this series and be on the lookout for number three!
Oh, and if you don’t hate the things we write about here, make sure to subscribe to the blog!
If you’re looking for some help, or want someone to confirm that you’re 100% on the right track, then check us out at TruWealth Planning and schedule a free intro consultation.