The Rachel Cruze Show - 5 Most Common Questions I Get on Saving and Investing

Starting point is 00:00:05 Hot take, but if everyone actually understood the impact that compound interest could have in their future, I'd probably be out of a job. So today, I'm going to start there, and I'm going to answer the top five questions I get about saving and investing so that you can finally overcome a paycheck to paycheck cycle and start building wealth. So be sure to like, subscribe, and share this episode with a friend. All right, the first question I get a lot is how much should I be saving? So this is one that depending on where you are financially is going to be different. So if you're just starting out, getting a $1,000 emergency fund is your first goal. Now, if you have that, then you're going to work your way out of debt. Then when you're out of debt, then you're going to bump up that savings to three to six months of expenses. So that is one big check of saying,

Starting point is 00:00:52 okay, my emergency fund, which is a big part of your savings, is done. Now that number is going to differ depending on, again, how much your expenses are. But that is a big goal. And once you get there, you guys, like there is a level of peace that happens when you have no debt and you have tons of money saved. It is a great thing. Now, again, that's just an emergency fund. There's other savings that you can do, but that's where we'll start. Number two, where should I keep my savings? So if you do have that emergency fund for a lot of people, I mean, it could be, you know, tens of thousands of dollars. So what I would say is to keep it in a high yield savings account or a money market account, but you want it to be at a place that you can get to easily. That's really important.

Starting point is 00:01:33 And you want to be able to have it where you're not going to just spend it. So if it sits in your checking account, more than likely you're going to spend some of that. So putting it aside in a different account that's labeled just for an emergency fund, then a high-yield savings account is great because, again, you don't want to invest it because you want to get to it quick. But a high-yield savings account is going to give you a little bit better rate of return than if it's sitting in a traditional savings account or checking account. And the best place that I have found to put my savings is in my Fair Winds Smart Checking and Savings bundle. Fairwind is 100% on your side when it comes to handling money, the Ramsey Way. And their smart checking is a simple and straightforward plan

Starting point is 00:02:12 that keeps you on track. And their smart savings celebrates good habits. So it's easy to stay motivated. And don't get me started on the Be Weird debit card. I love it so much. It says, be weird. You know, and every time you see it, you're thinking, I'm doing money differently. Now, having baking tools that align with your values really matters, and so go to fairwinds. org slash Ramsey to check it all out. You will not regret it. The third question that I get a lot when it comes to saving and investing is how much should I be investing? So once you have your fully funded emergency fund, then you want to consistently invest 15% of your income into retirement accounts. So we'll get more specifically.

Starting point is 00:02:54 on those accounts a little bit later. But let's just say you look at your 15% and let's say your employer matches in your 401k program up to 4%. So what you want to do is you want to start with the match first. So you want to invest up to that 4%. That means you have 11% left that you can invest in. So you can actually invest that 11% in other areas, which brings me to question number four. Where should I invest? And so what you can do, is put the rest of that remaining 11% into a Roth IRA, which is a great investment that if you are working and making an income or you can even do a spousal IRA if your spouse is not working, but there is something that that's $7,500 that limit changes every single year. But putting that

Starting point is 00:03:44 in as much as you can, every single year will build compound interest and it is a beautiful thing because it grows tax-free when it's a Roth IRA. So once you get to that point, And if that 7,500 limit, if you still have more 11% left of that 11% to invest, go back to your 401K. So remember this formula. Match beats Roth beats traditional. So always go up to your match if your employer matches. Then go over to a Roth IRA, fund that. And if you have more money, you want to still invest, go back to your 401K.

Starting point is 00:04:15 And that's all just for retirement, right? So we're not even covering things like index funds or mutual funds. Some of these things can be invested within your 401K or Roth IRA. but the retirement accounts are great because especially if it's Roth, you guys, the growth is tax-free, which the amount of money you actually put in if you start young, the principle that you actually just put in, it's going to be about this much and then the rest that you're going to cash out at $59.5. It's going to be like all growth. And when you don't have to pay taxes on that growth, that is more money back in your pocket, which is a wonderful thing. Now, before we

Starting point is 00:04:47 cover the fifth and final question that I get, let's talk about a tool that actually can help protect not only your financial security, but also your internet security. And that is delete me. So you may not realize that, but scammers and spammers are constantly buying and selling your data online. And the last thing you want is for your name, address, and other important information to be left exposed, just waiting for internet creeps to find it and use it without your knowledge. So delete me, steps in and wipes those sites clean so you don't have to. And that brings peace of mind. So you can get 20% off an annual plan at Join DeleteMe.com slash Rachel. All right, back to investing.

Starting point is 00:05:25 So when you use Ramsey's investment calculator, it is so amazing because you start to see the baby steps actually start to work its way out and you start to see your money grow, which is what I love. So let's use this example. Let's say that you start investing 15% of your income at age 25. And say you make $60,000 a year. Well, that's about $750 a month. Now, if you invested that from 25 to 65, with a rate of return of 12%, which is the historic average,

Starting point is 00:05:56 you would have more than $8.8 million in retirement. Is that not crazy? I mean, millions of dollars by just investing consistently. And that doesn't even account for your salary increases. I'd be like if you made $60,000 over the course of your old life. It is wild what can happen. So if you start investing that same amount at age 35, you would have $2.6 million. I mean, that's still amazing, right?

Starting point is 00:06:23 It's not $8 million, but that's okay. That means start where you are. And what's wild, if you're young out there, just think that 10 years just cost you more than $6 million in compound growth, while only costing you about $90,000 in additional money that you've invested over that decade. Like, that is wild to me. Now, this is also why we say to invest more than your company match. So for a lot of people, they'll just invest up to their company match and then be done with it. But that may only be 4 to 6% of their income.

Starting point is 00:06:56 That's why that 15% is so powerful because it's not too much. It still gives you room to do other things with your money, but it ensures that you are investing a lot for retirements. Now, you can kind of play around with that investment calculator because, again, I think it proves not only the power of investing. and compound interest, but you can actually put in your data, mess around with the numbers, but remember, it is never too late. All right, number five is, if I am scared to put my money in the market, what do I do? So I've been hearing this more and more. People are gun-shyed to put their money into the stock market because it feels scary,

Starting point is 00:07:33 it feels intimidating, it feels risky. So here's the thing. Investing is really important because it is a long-term play. Okay, if you wanted to put your money in and then you're going to, you're going to just take it out a few months later or something, and you're just trying to play a game, that is scary to me and that is risky. But when you put your money in something and you know it has a long track record, like you can look back decades and see what the American economy has done, then you can have more confidence to say, okay,

Starting point is 00:08:01 I can put my money in because, again, it is for the long term. And that's what's important is when you put that money in or the way I look at it, once it's in, I'm not touching it for a long time because I want to see it grow and you want to be able to go through the ups and downs because there will be ups and downs. But don't freak out. People, if it goes down, I was like, oh my gosh, a majority of the time two weeks later, it's back up. Okay, so just stay consistent. Don't freak out. Don't pull your money out. But I would get in. I would not keep a ton of money just sitting in a high yield savings account and that be it because that'll get you two to three percent versus what you could be getting on average 12. So again, it is a roller coaster, but hang on for the long run because it is worth it. Your money is working for you. All right, now that you kind of have a high level understanding of saving and investing, I would recommend reaching out to a SmartVister pro who can help you actually lay out your plan when it comes to investing because it can be an intimidating topic, but the more you understand,

Starting point is 00:09:00 the more you learn, the more confident you're going to be. I'll leave a link down below so you can get connected to someone in your area. Now, investing in the wrong places can be a very slippery slope. So be sure to check out my episode, the worst ways to invest your money. You can click right here, or if you're listening on podcasts, I'll leave a link below. All right, you guys, remember to take control of your money and create a life you love.

The Rachel Cruze Show - 5 Most Common Questions I Get on Saving and Investing

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