There's a lot in life that can scare us. I vividly remember our frantic neighborhood search years ago after my toddler son wandered away from the babysitter. And I can still recall my dry mouth and desperate heart as my wife and I sat in the hospital waiting room while our daughter was undergoing surgery. You've no doubt had your own scary encounters as well. You know, the ones that bring an empty feeling, even pain, to the pit of your stomach.
There's another less serious issue out there that also strikes fear into the hearts of many: investing. Though it shouldn't be a fear generator, I regularly see and hear from folks who are filled with trepidation at the thought of it. So, in a financial planner's attempt to be a healer, I recommend one way to ease those fears: Do it systematically. Here's how systematic saving and investing can help:
- It's easy. Whether you're signing up to contribute to a 401(k) plan, signing up for the TSP in the military, or setting up automatic investments into an IRA, it's typically a few keystrokes or a simple form or two to get the ball rolling. Our legal team doesn't let me make a lot guarantees, but I'd bet you're less than 15 minutes from getting started. Now that's not very scary.
- It's all-purpose. Sure, I love the idea of building your retirement nest egg or funding the kids' college through systematic investing. But there's also systematic saving, and it can be a great way to accumulate cash for your emergency fund, holiday shopping or next year's vacation. Whether it's long-term investing or short-term saving, doing it systematically is truly all-purpose and getting the job done will leave you with a warm and fuzzy feeling.
- It takes timing out of the equation. "Is now a good time to invest?" I hear that frequently from those looking for an insight gleaned from the crystal ball I don't have. What I do know is that investing a little chunk each paycheck or month and not letting what's happening (or not happening) in the market dictate your behavior can be a calming approach to investing.
- It can leverage time. The time value of money is a complicated way to say that earning interest on your interest or compounding interest is a powerful ally to have on your side. But that's only the case if you get started sooner rather than later. And now for the requisite "oooh-aaah" moment: $100 per bi-weekly paycheck growing at a hypothetical 6% will be $431,476 in 40 years. That could put a smile on your face.
Of course, the best thing about systematic saving or investing is that it puts you on a path towards meeting your goals, whatever they may be. As to my son, yes, we found him safely ensconced in a neighbor's house, and my daughter is beautiful, healthy and happy. Our fears passed, we moved forward and you can do the same with your plans to build for the future.