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Here’s What You Need to Do to Attain Financial Independence as an Investor

Advice

Across media outlets, investing has long been touted as being an incredible way for individuals to grow their wealth and set themselves up for life with at least a $1 million retirement savings goal. Most experts advise that having such sums of money as a retirement package is the ideal way for people to live into their sunset years.

According to Nick Holeman, a certified financial planner at Betterment, many people tend to overlook one particular critical component of investing. Through his years in the finance sector, he mentions that he’s come to learn that it’s quite important for individuals to keep in mind that investment is not a means to an end. He believes that investments can’t do everything.

Importantly, picking stocks can be a risky affair. This is because there are quite a number of low-risk ways for individuals to penetrate the market, including funding a 401 (k), Rora IRA or other retirement accounts, or making investments in the Warren Buffet recommended index funds

Speaking to the media, he shared that historically, investing in the stock market has been seen as the best way for individuals to build wealth. However, he notes that what most people fail to realize is that it’s not just about picking the right investments. Instead, people need to learn how to save sufficient funds while they are making investments in order to sustain themselves in the long run.

Holeman believes that people who want their money to work for them need to place emphasis on funding those particular accounts. Ideally, this means that individuals need to start as early as they can and keep making regular contributions. While the onus is on individuals to pick the right investments, they should never forget to keep saving all through.

Logic

Nick Holeman quipped that even if one had access to Warren Buffet as their portfolio manager, the only way one could retire a millionaire is if they saved more than $10 a year

His school of thought is that investments can only garner returns when there are sufficient funds to begin with. Holeman shared that while investments themselves are incredible, one must never forget to keep doing the work and save. He mentioned that a 10 percent return on a dollar is still only 10 cents.

Holeman believes that people can make things easier for themselves by automating some investments and having specific figures transferred over on a monthly basis. The logic here is that if one can’t see the money, then, they are less likely to fall into the temptation of spending it.

Experts recommend that prior to making investment decisions, people need to be smart about how they do their homework. Reading up some handy tips on diversification and the best way to pick a good account matching up one’s lifestyle can be quite helpful. Alternatively, one can opt to collaborate with a financial professional (fiduciary) to come up with great investment plans that make sense to one’s particular situation.

Saving

Finance experts recommend saving because there’s no way to predict the future. With savings, people can achieve a sense of financial security and have a safety net in place to handle emergency situations

During the initial stages of saving, one needs to ensure that their monies are stashed somewhere safe. This means that the funds can easily be accessed for unforeseen expenses. Online savings accounts are ideal because they allow about 1% interest in earnings annually, without having to keep up with inflation. Typically, inflation tends to run around 2%-3% per annum. Notably, even with the diminutive 1% earnings, individuals still have to pay taxes.

Still, anything is better than earning 0% all through. There are far worse situations like not having savings and getting into credit card debt. Individuals who find themselves in credit card debt usually accrue 10%-30% interest per year.

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