Investing: I Can(t) Right Now?

By Megan Kowalski on December 15, 2021

Welcome back! By now we’ve built a foundation of understanding basic asset classes from previous blogs, leading to the question: “Where and how do I get started?”

There is an abundance of research in circulation regarding what deters individuals from getting started with investing. Among the most popular reasons include:

1. I don’t make enough or have enough to get started.
2. It is too complicated, and I don’t know where to start.
3. It’s too risky.

Do any of these reasons sound familiar? Unfortunately, these reasons led to the following insight gathered by magnifymoney.com. The website surveyed Americans to find out their biggest regret with investing. The results found that 77% of respondents’ largest regret was getting started too late! Many investors wait until they have higher incomes, yet the financial relief we search for may never come. It is well known that a dollar today is worth more than tomorrow. So if we wait until tomorrow to start investing, technically, we will need to invest a little more than we would have yesterday. I often have these conversations with clients or with myself when thinking about my own personal investing goals. It’s easy to kick the can down the road and think you will take care of it later, however, the burden only grows over time. In fact, time is the most powerful investing tool that all of us start within our toolbelt.

One of my favorite quotes is from Guy Kawasaki, which states: “The hardest thing about getting started is getting started.” For investing, this could not be more true. Whether you are just starting out or have inherited assets, the reluctance to get started is the same. Investing is a mindset. It has nothing to do with how much you can put away a month or the size of the account.

The following steps are a great guide to getting started:

1. Build a Budget: This exercise helps you clean up unnecessary expenses and introduce discipline into your life. It is okay to start small and build up as you get more comfortable.
2. Create a Net Worth Statement: This will give you a clear picture of where you stand today with your overall wealth. More importantly, this will highlight what type of accounts (retirement or non-retirement) may need more attention than others. (For more information on creating your NWS check out this blog)
3. When to Start: That answer will vary (multiple incomes, risk of career, renting vs. owning) dependent on your situation but typically, the rule of thumb is to make sure you have 3-6 months of expenses covered in a savings account. The same exercise of saving each month can apply to this period if you need to build up this pool of assets first.
4. Where to Start: The easiest place to start investing is with your 401K since the contributions are deducted directly from your check. In addition, you will want to make sure to build up taxable assets over time in a brokerage account so you have liquidity when life happens. Dependent on the size of your investments, ETFs are generally a good investment to start with. They provide both diversification and generally contain lower expense ratios.

To recap, all you need to remember is to start! If you continue to kick the can down the road, the burden to get started will only get heavier. Investing in your future is the most important lesson, so don’t sleep on this. You do not want to look back one day and become part of that 77%.

I hope that today’s blog has helped sharpe-n your knowledge of the investment landscape. If you have any topic suggestions or have further questions, please reach out to mkowalski@hightoweradvisors.com.

Sources: https://www.magnifymoney.com/blog/investing/investing-regrets/