From a Dollar a Day to Retirement Savings
Whether you’re on the cusp of leaving the workforce after many successful years or a young adult just starting a professional career, saving for retirement and creating a safety net can be daunting. Investment money market accounts are often seen as a low risk option for investing in a strong financial future.
What is your recommended starting point for someone planning for a healthy financial future and saving for retirement?
I always recommend that someone starts by saving and building a strong base before moving on to investing. It doesn’t matter if it’s $10 a week or $1,000, just get into the habit of saving a set amount each and every month. Have it automatically deducted and transferred into an account that you will not be able to touch. Once you get into the habit of saving, it becomes so much easier to increase that amount as you make more as you advance in your career.
When is a good time for someone to start saving for retirement and when is a money market most beneficial?
A good time to start planning for retirement was yesterday. It’s never too early to get started. Over the past 13 years, I’ve helped several clients retire successfully. Not a single one of them has told me that they saved too much. A money market account is great for stashing your emergency fund. Essentially this is where you want to keep three to six months of expenses so it’s at least earning some interest. Although in this low interest rate environment, you still don’t have to worry about losing any money and that’s worth its weight in gold.
What are a few unexpected uses for a money market? Is the low risk association usually the main reason for investing?
Many people view money market accounts as being solely for emergency purposes. That is the main focus, but one unexpected use could be helping with a career transition. For example, let’s say that you’re stuck in a job that you absolutely hate, but you’re having difficulty trying to find a replacement. A sustained flow money market account might give you the freedom to quit your job and spend three months holding out for a position that best fits your needs because you can live off the cash that you’ve saved.
When it comes to misperceptions about money markets, what is your advice—or what should people be aware of?
I’m often asked if I think someone will make substantial returns in a money market account and my advice is that it should be treated the same way as a savings account at your local bank. If you have a stable job, plenty of investible assets, and more than nine to 12 months of emergency funds tied up in cash, then any more than that in a money market account might be better served invested elsewhere that can make you more return.
What is your favorite way to monitor success?
My favorite way to monitor success is to do a positive focus every three months. A positive focus is a reflection on all the good things that have happened over the past 90 days. By simply writing those successes down and acknowledging that you had them is a huge win for many. Most of us get so caught up in life that we forget about all the little wins that happen each and every day. Taking time out of your busy day, focusing and having a positive reflection on the good things that happen in your life, will give you a new sense of appreciation and help you look forward to future successes.
Many worry they will miss out by living a frugal life. In your experience, what’s the payoff for being more mindful with money?
One of the most exciting things about living frugally is that it allows you to spend your money on the things that are most important to you. So many of us waste money on “stuff” that we don’t need and after we buy it we don’t care about anymore. By being conscious with our spending and allocating all our resources toward the things that matter the most, we’ll enjoy life that much more.
Jeff Rose is a certified financial planner, U.S. combat veteran and author of “Soldier of Finance.” He is the founder of GoodFinancialCents.com. Jeff Rose is not affiliated with CUSO Financial Services, L.P. and/ or Amplify Credit Union.
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