#saving #investing #stocks #mutual funds #bond funds #equity funds #FeedThePig
A man rides on the step of an ice cream truck.
He spots another man, dressed as a piggy bank, walking down the street.
He jumps off the ice cream truck, tackles the pig-man, and drops some cash in the slot on the pig-man’s head.
“Same time next week?” the man asks.
“Well, of course,” says the pig-man.
This TV ad from feedthepig.org is meant to encourage people to save a little regularly, preferably every week.
The ad is supposed to alert savers that it takes effort and discipline to be a good saver. You have to commit to it every week – or however often you get a paycheck. You have to make sacrifices and take risks, like riding on the step of a moving truck and tackling the pig-man.
In this economy, however, trying to save can be difficult. Gasoline prices are high, as are food prices, rent and other living expenses.
To be able to save, however little you can, from each paycheck requires intentionality.
The pig-man, too, is symbolic. If you really want to save, you should put the money into a savings account, rather than a piggy bank or under a mattress.
As the savings account grows, you may want to graduate to a certificate of deposit (CD), which generally pays a bit higher interest than the savings account. But, you have to tie up your money for the period of the CD, lest you pay a penalty.
Given that you must tie up your cash, the difference in interest rates between the accessible savings account and the CD has to be worth it. You should discuss this with your banker before making that commitment.
As your CDs grow in value, you can then think about other investments that require small risk, but much better return. Mutual funds fit this category, as do bond funds, equity funds etc.
You may need better advice than your banker can give you for these vehicles. That advice often comes at a cost so, again, make sure the cost is worth it before embarking on that journey.
Your financial adviser may encourage you, as your account grows, to invest in individual stocks. Make sure the money you put into those is money you can afford to lose. If you go this route, you may have a mix of losses and gains. Some losses can be deducted from your income tax return.
If you go this route, resist the temptation to invest in “the next big thing.” These are shiny objects that don’t always materialize as promised. If your adviser comes off as an aggressive salesperson trying to get you into “the next big thing,” find a different adviser.
Building wealth is not easy. It takes effort. It takes sacrifice. But, if you do it successfully, managing risk along the way, it will pay off over time.
Also, as you make the difficult wealth journey, make sure your big purchases, like a home, are worth your effort.
And, it’s OK to enjoy some ice cream or other pleasures along the way, providing that you spend with care.
Peter