Key Takeaways

Have you ever written a list of everything you need to get done, but you don’t know what to tackle first? It’s all things you know you need to get done, but you just don’t know how to do it or when to do them. So, you start getting things done in no particular order, only to find out weeks or months later that you should’ve done one thing first, or another thing second, but you just didn’t know any better.

This happens a lot when it comes to investing money.

I have younger clients who will call me the first time they have an extra $5,000 or $10,000 and ask me, “Where do I invest this money?” The first thing I will ask them is, “Do you have any money set aside for an emergency?” If they don’t, then I advise them to consider putting away at least three months’ worth of expenses for emergencies. This way, they are covered should anything pop up that takes them out for a bit, and they don’t have to pile on any bad debt.

If they say, “Yes, I have an emergency fund covered, I just want to invest $10,000,” then I ask them what they plan on using that money for, what’s the goal. “Oh, I’d like to buy a house in the next year, so I want to make money off of my $10,000.” Well, another basic here, is that $10,000, if you were to put it in any of the risk markets, in a year, it’s like gambling at a casino. You never know what the results are going to be, because it’s just too short of a time period. So they really couldn’t accomplish that goal in a year.

“Well now I’m frustrated, so what should I do with that money?” If you have an employer, chances are they have a 401(k) program, possibly even a matching program, so you can save more money long term that way. But it really depends on your short-term versus long-term goals. If your goal is to buy a house five to ten years from now, then you could start saving for that now, or you could invest in the markets, but it all depends on your goals timeline.

So, there are a couple of things to consider step-by-step as you build your money timeline:

1. Is your emergency fund set up and topped off?

2. Save money before you spend money.

3. Ask yourself, “Is this money I’m wanting to invest for a short-term or long-term goal?”

a. Short-term: The money should stay in a cash-type of asset like a money market account or checking or savings account.

b. Long-term: You can look in to stocks and bonds.

There’s a lot more to this, but the idea is that you need to get educated, to understand how all these things line up structurally. You have to know what you want to accomplish in the short, intermediate, and long-term with your goals, so you don’t put money someplace that you end up losing out instead of making money for when you need it.

Until next time, enjoy!

Gary

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