As a financial advisor and tax preparer, I have had numerous clients tell me how hard it is to invest money. As soon as they invest, something comes up and they need access to it. There are some steps to put into place to help with this dilemma.
First is savings. Set aside money in a safe place, like a bank account, to cover short-term goals and needs—perhaps buying a car in a few years, saving to put money down on a house, taking a vacation, or covering holiday expenses. Because the money is kept safe and easily accessible, there is little risk, but the tradeoff is that there is no potential for substantial growth.
Next, think about an emergency fund. This is cash that is set aside to specifically handle life’s surprises. Perhaps your A/C breaks down in the summer, or you have unexpected medical bills, job loss, or any other big surprises that we deal with. Having 2-3 months of living expenses tucked away can help you face these challenges without going into debt or having to tap into your long-term investments.
Finally, with the savings and emergency funds in place, it is time to start your long-term investments. Investing is about putting your money away to work for long-term goals, such as retirement. Investments, such as stocks, bonds, exchange traded funds, or mutual funds, have greater potential to grow over time, but they come with the ups and downs of the market. That’s why investing is better suited for long-term goals, to help the investor ride out those short-term fluctuations.
Once everything is in place, if you need to dip into your savings, replace it before continuing to invest. And do the same with your emergency fund. Make sure they are at the level that you or you and your spouse established as comfortable. Then continue investing with confidence in your financial plan.
I hope you find this useful. If you have questions, please reach out to Bruce Eisenhauer, I’m a Managing Partner and Financial Advisor at Meikle Financial Group.
8949437.1-0726-C
