Europe can’t decide whether to deal with its debt bomb now or later. The U.S. government does the same. The stock market goes up and down in a manic fashion. The tepid weekly jobs report comes out only to be revised downward the next week. Our economy sputters along in tubercular fashion. You look at this mess and wonder how to get ahead; how do you make your money work for you instead of you working for it. The answer is so simple it’s boring. Just keep saving and investing. No one wants to hear it, few like the process and yes [if you do now or have ever been a jogger you know] there are days when you just don’t want to be out there dealing with the pain. Success is found in the consistency. The slow, every day, minor improvements that in the end mount up.
So, if you have the opportunity to open a 401k or a 403b if you work in the public sector, make certain you save as much as you can and contribute the maximum if possible. The government cap on these accounts this year is $17,000 if you are under 50 years old. If you are over 50 you are allowed another $5500 as a “catch up” provision. For most people this is a high bar and yet it is a great way to save for retirement considering these accounts grow tax deferred. You only pay the tax on the earnings when you withdraw your money. These plans are very good for most everyone, but they are especially important to young workers. Time is on your side. Save as much as you can and your returns over 30 or 40 years can be staggering.
There is another important consideration here. It is not enough to save and invest. You must spend time managing your account. This is where we hear the oft mentioned asset allocation and diversification. These are two concepts that fall into that boring category as well. Yet, consistent effort with small daily gains will mean great returns though there will be days you don’t want to be out there. Asset allocation and diversification are all about not putting your eggs in one or two baskets. You should spread your money around in different asset classes like stocks, bonds, and precious metals. You should put a little in a lot of places rather than the other way around. You should read up and get guidance with this process. There are ways to do this inexpensively. But, I recommend getting professional help with this process with a fee only financial planner. I also recommend going with a financial planner who carries the Certified Financial Planner® trademark. They all aren’t perfect, but they have demonstrated superior skills in thought process, learning and have impressive training. This I know because I am the only journalist/CFP® in the nation and attaining this level of expertise was by far the most difficult professional undertaking of my life. An authority no less than Forbes Magazine recently wrote about CFP®’s and why you should consider one. Here is the link:
A fee only CFP® can help you with asset allocation and diversification and you do not have to hand over the management of a portfolio. You can find fee only planners at The Paladin Registry: http://www.paladinregistry.com/
Good luck with your savings and investing and above all stay the course.