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Matt and Joel always recommend investing on their podcast How To Money as the best way to prepare for retirement and grow our personal wealth, but there are some things we have to have in place before we jump into the market. So in this episode, they talk about some of the things we should think about before we begin investing. First and foremost: Timing is everything. If you’re still dealing with a lot of high-interest credit card debt or personal loans, it’s more important to pay those off first than to start funding an investment account. It’s also important to make sure you have enough liquid funds saved in case you experience losses in the market.
Which you will – the market experiences constant fluctuation, so it’s best to start investing with a long-term mindset. The market has almost always recovered from recessions or dips within a 15-year period; the only time it didn’t was during the Great Depression, when the start of World War II prevented an economic recovery from the stock market crash of 1929. That’s why Matt and Joel are so fond of accounts like Roth IRAs and 401Ks. The tax advantages are important, and they put your money into the entire stock market, so your losses are minimal and gains are maximized. Just be sure to take careful note of the taxes, penalties for withdrawals, and fees that each investment firm offers before picking the right one for you. Some firms charge a high fee for maintaining accounts other firms do for free, which could lead to as much as a 25% reduction in earnings over your lifetime.
That’s certainly the way to go to fund your life after working. But if you have a shorter-term financial goal to meet within five or ten years – for example a child’s college fund – you won’t want to pull money out of your retirement for it. Instead, they recommend looking at a target-date fund that automatically becomes more conservative as it reaches its target date. That way losses are kept at a minimum in case you end up pulling your money out during an economic slump. Investing is a great way to build wealth and take care of your future self and your family, but like many things, a little preparation goes a long way. Get all this great advice and more on this episode of How To Money.
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