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Save, Don’t Spend…

As the stock market continues to break records and my own personal stocks held in my 401k and my sharebuilder.com account continue to grow, it reminds me of the importance of putting money away now, so you have it later on in life. It’s something that a lot of our parents never thought about, but something our generation needs to keep on top of.

With my sharebuilder.com account, it’s easy. I have around $100 a month automatically taken out of my checking account and then automatically invested in the stocks of my choice. The scariest part for most people is trying to decide on which stocks to choose, because they don’t want to lose any money. My advice is two-part: Stick with companies you know and use and only invest what you can afford to lose. Obviously, I’m not doing any major investing in this account. It’s a small potatoes account that I drop money into every month and leave alone.

With my 401k, I play it less safe and it shows. Typically, if your company does a match, you want to investment the maximum you can to get that match. It’s free money from your company based on your own investment. So if they match the first 6%, then you should be investing 6%—at the least. If your partner also has a matching program, invest in theirs as well. More free money.

Now 401ks and other retirement plans can be challenging to say the least. There’s a lot to read and choose from. Most Americans just sign up and then leave it alone, which can be a big mistake because you could be missing out on making a lot of money. Personally, I visit my plan page every couple of months to make sure it’s in line with my retirement goals. If you’re in your 30’s, typically you want to be as aggressive as possible with your investments. You have over 30 years before you retire and can afford to take the risks, so do it. As you reach your 40’s, you want to think about being less aggressive, and as you reach your 50’s, you want to protect that nest egg you’ve been building up by getting into the safer types of funds. At retirement, you should have a healthy pile of money that’s generating income for you to travel and live off of.

My advice for most people my age is to be aggressive and put at least 10% into your plan per paycheck. The money is automatically taken out and you really do begin to forget about it. And don’t we all want to retire with a couple million in the bank.

Of course, you shouldn’t take my advice without talking to a professional.

Tags: 401k, retirement, sharebuilder, mutual+funds

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