On Saving and Investing
Updated: Mar 2
Do you want to work for the rest of your life?
I am a huge fan of saving and investing. Being a math person, I love to crunch the numbers and see just how big of a difference compound interest can make. It’s like your money is creating more money! This is a wonderful way to create and grow your nest egg as you plan for retirement or your other financial goals.
Tracking your net worth
Before you do anything, if you don’t know your net worth, I want you to figure it out! There is an amazing, free resource, called Personal Capital, that I would highly recommend. I look at it on a near daily basis. It tracks my net worth, including investments, cash, and assets, so that I can keep track of how I am doing in achieving my wealth-building goals.
Make sure you’re debt free (except for your house) before you start saving and investing
I am a Dave Ramsey follower, so I believe in his seven baby steps. The order is very important, because if you have an 18% APR on your credit card and are investing at 9%, you are definitely not coming out ahead in the money game. After you start your $1000 emergency fund, knock that debt out, using the Debt Snowball, and then we’ll talk.
Once you’re debt free (besides the mortgage), build an emergency fund
Financial advisors generally suggest saving 3-6 months worth of expenses. I’m not here to tell you what you should and shouldn’t do, but I’ll tell you about what I do. I have a very detailed budget, so I have 3 months of expenses in my “Emergency Fund” and I also have a few months of expenses in each category, because I like to play it safely.
I save my emergency fund, car fund, and house fund in a Discover Savings Account. This is a liquid, high interest account. It doesn’t beat inflation, but it’s better than a regular savings account’s nonexistent interest rate. I don’t even have a savings account at my regular bank because 0.01% interest is a joke.
Finance Books I recommend
This book was a large study on millionaires done in the 90s (since then, Chris Hogan has done a larger study, which is discussed in his book Everyday Millionaire; I haven't read this book yet, but I hear it is amazing!). Basically it busts a bunch of myths about millionaires and shows how these seemingly ordinary people grew extraordinary wealth.
The Richest Man in Babylon - Post coming soon!
This is a fictional book that talks about a guy in ancient Babylon and how he was able to become rich using his 7 cures for a lean purse and 5 laws of gold.
The Total Money Makeover - Post coming soon!
This is Dave Ramsey giving his famous 7 baby steps and explaining how to fix your finances.
My investment brokers
Here comes the fun part. Once you have that emergency fund saved, you can start investing. For sure, my best investment account is my Vanguard Roth 401K, so an account like that is going to get you farther than any of these ideas. I really enjoy getting involved with my investments though, diversifying, and playing with various options. I am also interested in non-retirement accounts for income in case I retire early.
I have tried a bunch of brokers; here are all the ones I’ve tried in the past for you to check out:
Fundrise (This is a hands-off investment that utilizes crowdfunding in real estate.)
Robinhood (This is a hands-on, free, single stock investment platform.)
M1 Finance (This is a hands-off, free, stock investment platform.)
Rich Uncles (This is a hands-off, free, rent based, real estate crowdfunding platform.)
Worthy Bonds (This is a hands-off, free, high yield bond platform.)
Stockpile (This is a hands-on, child friendly, single stock investment platform.)
Groundfloor (This is a hands-on real estate crowdfunding platform.)
Lending Club (This is a crowdfunding platform for loaning money to other people.) - Post coming soon!
Stash (This is a hands-on, overpriced, micro investment platform.)
Acorns (This is a hands-off, overpriced, micro investment platform.)
Precious Metals (This isn't a broker, but it is an interesting diversification.) - Post coming soon!
Please note, I am not a financial advisor; I am merely sharing the experiences I've had with different brokers. I’m not going to tell you what to do with your money, but I highly advise that you know your net worth, have a written budget, get out of debt (besides your house), and have an emergency fund before you pursue any of these options.
Also, some of the links above are referral links, so you and I both may receive a small bonus investment if you sign up, if such a promotion is offered. However, I will not use a referral on anything that I don't recommend, such as Stash, Acorns, or Lending Club.
My challenge for you is to figure out your net worth. I recommend using Personal Capital (it’s free!). After that, look at where you are, set a goal for where you would like to be, and make a plan with your spouse (if you have one) to achieve that goal.