We want to help people obtain the financial independence that they desire, and we have found that often, it’s hard to get started. Besides procrastination, other misconceptions people have about investing and saving for the future are:
- It is too risky
- It is too complicated
- It is too time consuming
HCM works with our clients to help them understand the basics of investing and planning for their future.
We look at it this way:
- Using The HCM Investment Policy BuilderTM and HCM The Risk Tolerance AnalyzerTM, we help build a portfolio that will meet your long term needs, and we help you understand the extent of possible short term volatility.
- Using our Portfolio Planning and Implementation ProcessTM, we coordinate your portfolio with your Wealth Plan.
- We know you are busy living your life. As your job, family and other interests fill up your weeks, HCM acts as your partner, doing the heavy lifting.
Working together, the investment process is less complicated, less time consuming and more focused on achieving your goals.
Saving versus investing
Both saving and investing have a place in your finances. However, don't confuse the two.
Saving is the process of setting aside money to fund a goal with your own dollars. Often, “saving” refers to short term, and is done with checking or money market accounts.
Investing is the process of setting aside money to fund a longer term goals through the use of both your own money, as well as capital appreciation and income generated from your investments.
Can you imagine saving without investing?
This may be the best question to ask yourself. If you just continue to save without investing, you lose out on the impact of time and the power of compounding. Compounding is the earning of interest on interest, or the reinvestment of income and gains. And it is quite powerful. You’ll likely be able to save for a smaller goal, like a new car, but for a huge goal, like funding your retirement, you’ll need to invest.
What is the best way to invest?
- Pay yourself first. Set aside a portion of your income regularly and automate that process before you have a chance to spend it.
- Invest so that your money at least keeps pace with inflation over time.
- Limit your risk in any particular company or asset class through diversification. One of HCM’s strategies for a lifetime of income is building diversification into your portfolio.
- Focus on long-term potential rather than short-term price fluctuations.
Before you start
- Create a monthly cash flow worksheet showing all income and expenses. Be clear on what you are spending each month. This exercise will reveal if you are spending more than you make. A problem you need to tackle in order to start saving.
- Do you have a lot of credit card debt? If so, pay it off as quickly as possible before you start investing. Every dollar that you save in interest charges is one more dollar that you can invest for your future.
- Establish a solid financial base. Make sure you have an adequate emergency fund and sufficient insurance coverage.
If you need help getting started, give us a call. We have some great tools to help you get organized, set up a budget, forecast your savings goals and visually see your savings plan come to life.
Build a Financial Plan…and Work the Plan
The difference between success and failure may lie with the decision to create a financial plan that integrates long-term financial goals such as retirement with other, more short-term needs.
At HCM, we believe that financial independence in retirement doesn’t just happen. It takes planning and executing. We are dedicated to developing the skills and expertise to excel and to share this knowledge with our clients to help them achieve their goals. However, be aware that all investment involves risk, including the potential loss of principal, and there can be no guarantee that any investment strategy will be successful.
Date Posted: 07/28/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Wealth Accumulation or Retirement Income Plan with an HCM Wealth Advisor, please give us a call – 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 28 states, and we’d love to help.