Bellmore Group Management Services, Tokyo Japan

Investing is anyone’s game. And putting money in the stock market while you’re young is one of the best — and easiest — ways you can set yourself up for a comfortable retirement.

But the reality is many people don’t invest — especially younger Americans, who keep as much as 70% of their portfolio in cash, according to a recent BlackRock survey.

In a recent blog post, ESI Money, a blogger who retired at 52 with a $3 million net worth, said “waiting to invest” is one of the “worst money moves anyone can make.”

After all, investing your savings in the stock market, rather than stashing it in a traditional savings account, could amount to a difference of up to $3.3 million over 4o years.

Luckily, investing isn’t as complicated as it seems. According to ESI Money, there are three factors that determine how well your investments will perform:

1. Your timeline

ESI Money crunched the numbers and found that time is the most important factor in how well your investments perform. “[T]he longer you wait to save and invest, the more you’re costing yourself,” he said.

In other words, it’s all about maximizing the benefit of compound interest.

Take a look at the chart below, which illustrates the difference in savings for a 15-year-old who puts $1,000 of their summer job earnings into a Roth IRA — a retirement account where your savings grow tax-free — for four years and then stops, and a 25-year-old who puts away $1,000 until age 28 and stops.

Assuming a 7% annual rate of return, the early saver will have nearly twice as much money saved by age 65 as the late saver, with no extra effort whatsoever. Even if the late saver continued putting away that same amount until age 30, they’d still come up short.

The best way to maximize earnings is to keep saving and investing consistently, but the idea remains: The more time your money has to grow, the more you’ll end up with.

2. How much you invest

How much money you earn will be based partially on how much you invest. The good news is that you don’t have to invest a ton of money to earn a lot over time. You can easily start by contributing 15%, 10%, or even 5% of your pre-tax income to a retirement account, like a 401(k) or IRA.

If you’re worried about investing too much money for fear of losing it, don’t be. Stock market investors had over a 99% chance of maintaining at least their initial investment — the same as a traditional savings account, according to a recent NerdWallet analysis of 40-years of historical returns.

3. The return rate

The NerdWallet analysis also found that investors had a 95% chance of earning nearly three times their initial investment, while traditional savers had less than a 3% chance of tripling their investment.

Still, the rate at which your money grows is completely out of your control. That’s the nature of the stock market — not even legendary investor Warren Buffett can guarantee big returns.

Ultimately, you’re doing well if your investment outpaces inflation, which won’t happen if your money is shored up in a bank account with super low interest rates. To minimize risk, diversifying your investments across different types of companies, industries and countries is key.

You can start by investing in a low-cost index fund that does the diversification for you — like the Vanguard Total Stock Market Index Fund. Another increasingly popular tool for novice investors are robo-advisors, which use an algorithm to build and manage your portfolio for a small annual fee. Or, you can follow Buffett’s advice to stick with a simple S&P 500 index fund, which invests in the 500 largest US companies.

These are commonly called “set it and forget it” investments that grow over time, regardless of short-term performance. Just make sure you’re not paying annual fees higher than 0.5% or it’ll eat into your returns.

ESI Money sums up the winning formula best: “Save early, save often, and save more as time goes by.”

Inclement weather has the surprising advantage of giving us time to spend quality time indoors and deal with our finances. Even the most innocent questions from a nervous friend, if she is doing the right thing or not or where to check her credit score eventually, turned into the issue of what to do next.

Everyone going through the “growing-up blues” needs the assurance that the things she was doing and bringing her anxiety made her a better person every step of the way.

The key is finding out how to begin effective financial planning. Here are some helpful steps to follow:

Do not be anxious

Although you might not end up choosing the most beneficial funds for your retirement plan or you end up paying for a credit score instead of getting it for free or you paid a slightly higher interest rate on your loan than you wanted, you will still be way ahead by a long stretch compared to having done no planning at all.

Granted, everyone wants to have the best choices for optimizing benefits and savings; however, fretting over how to chase the “highest and best” and ending up being paralyzed is counterproductive. The better goal to aim for is TIME. It is a commodity you cannot renegotiate or purchase back.

Do with what you already have

Determine where you are exactly before making a plan for your future by calculating the figures that that tell you what you have and what you need to have.

Do a financial inventory first – net worth, account balances, credit score, liabilities and assets. Consolidate all your finances using Personal Capital’s free tracking application in order to obtain a complete perspective of your financial status at any time.

Direct your course 

Look at your finances as a road map, telling you where to put location markers along the way as you travel and to direct your destination. Only by marking your origin and staking out your destination will you be able to determine the most efficient route from one point to the other – and that is how finances work as well. Set your goals, your time frame and the cost for every step of the journey and order them according to their urgency.

Get educated on how you can effectively set and achieve goals through online aids that help you how to remain organized and to monitor your progress.

Marking your direction

Your present financial assessment marks your starting point and your goals as your destination, while your budget is your direction on the map. And before you can even begin to take the trip on that map, you must draw your direction – that is, make a budget.

Create a budget that best suits your situation — a percentage budget, a zero sum budget or a cash- only budget – making sure that you stay above your make-or-break level, meaning your minimum cost of living, including savings.

By diligently minimizing your spending to essential expenses and/or maximizing your income in order to reach and go above the essential level, you will begin making headway. Read on the article “How to make a budget without a budget”.

What now?

Having done your inventory and determined your minimum financial level, you can have a better idea of your leftover money in order list your prioritized objectives. Where do you start? Should you pay off your loan? Or save into a retirement account? Open a savings account for a down payment for a home? Increase your emergency fund? With so many needs and not enough money, what is one to do?

At this point, the “growing-up blues” set in. Relax and be not anxious – no matter what happens, as long as you make reasonable choices, the road will lead you home.

Categorizing Financial Goals

There are four major categories of financial goals:

• Emergency savings
• Loan payment
• Short/Medium-term savings
• Long-term/Retirement savings

Most experts recommend funding all of these goal categories, aside from covering your monthly costs, and assigning bigger income portions to your highly-favored goals. However, rarely do things work your way and your limited income may require you to choose one or two financial goal categories above the rest.

Oftentimes, the two most crucial are emergency savings and loan payment. Providing yourself a safety net at a minimum of $1,000 is the first on your list (although the target amount should be enough to cover your living expenses for about 6 months). With your 1k emergency fund, proceed by distributing your money accordingly for emergency savings contributions and loan payment. You may also want to insert a tiny amount for your retirement savings into the picture — this could be as small as $50 monthly – which is good enough for a low-interest debt.

Also, remember to contribute to short and medium-term fund savings. For young professionals, you have enough time before you reach 59½ to set aside some money for your lifelong dreams, whether a dream house, raising a family, travel, etc. That refers to money apart from your retirement nest egg or emergencies funds.

However, if your budget will not allow you to contribute to all savings categories, your best solution is to seek ways to increase your income. Saving money and reducing your daily expenses can only do so much. Your ability to earn more has practically no limit whatsoever; and having the flexibility and freedom that greater earnings provide will further enhance your financial and life aspirations. Financial experts will attest to this fact.

Financial Planning for Novices Review

• Assess your financial situation
• Set your goals
• Make a budget and surpass your minimum cost of living
• Prioritize your objectives and set aside surplus money from your living cost
• Enhance your income generation for funding higher targets
• Relax and enjoy your accomplishments

Breaking it down to the barest components, novices can do effective financial planning using a few essential, practical steps, namely: earn more money, reduce expenses and set aside extra money consistent with your highest goals.

Following these vital tips is your best weapon against the onset of “growing-up blues”.

Were you a victim of the holiday spending spree this past season or a winner? Many of us lost; and the New Year gives us pause to evaluate our personal financial habits once more and, hopefully, initiate some positive and lasting changes for the future.

Consider these valuable saving and spending hacks you can implement.

Go long-term

Think ahead into the future. Whatever your age is, save now for your retirement. The earlier you do, the better. Apply for an employer-sponsored plan, if possible. Or if you can, opt for IRAs which help you build wealth in bounds.

Build categorized funds

Think of this as a challenge: Do the 52-week savings procedure. Set aside $1 on the first week, then $2 the second week, until you finish the 52^nd week, when you are supposed to add $52 to your pot. Hacking this process gives you $1,378 in savings in the next year, plus interests earned.

As long as you set for yourself a specific goal, starting a savings account can bring great benefits. Go for banks that offer fee-friendly services, such as Ally Bank Member FDIC, ally.com, which enables you to open an Online Savings or Money Market account without minimum savings requirement or monthly service charges. It is quite convenient to deposit money through an e-check deposit, direct deposit and you gain compounded-daily interests on your savings. Moreover, keeping this money in a separate account lets you monitor your spending habit versus the remaining balance.

Utilize shopping apps

It has become quite easy to save money using online apps. Do some research and find discount codes, loyalty plans or cash-back providers that allow you to monitor your expenses and reward you for the use of their shopping portal instead of going directly to the big name retailers’ homepage.

Gain rewards

Although it is downright risky and even foolhardy to run up credit-card bills one cannot pay back, many expert consumers have the ability to exploit credit card reward plans for airline mileage, hotel points or hard cash on-hand.

“Utilize credit cards that offer reward for things you often purchase,” says Diane Morais, chief executive officer and president of Ally Bank, subsidiary of Ally Financial Inc.

Open a new credit card which provides a minimum buying limit, such as the Ally CashBack Credit Card, which offers a $100 bonus when you spend $500 in eligible purchases within the first three billing cycles, and gives 2% cash-back at gas stations and grocery stores, as well as a 1% cash-back on all other purchases – including 10% bonus on rewards which you deposit into a qualified Ally Bank account.

It is not necessary to open a new account if your present credit cards to avoid fraud and also offer promos or cash-back schemes, allowing you to earn substantially on daily purchases.

Consider the above tips and aim to become a strategic consumer – one who spends wisely and saves productively.