You're young, you have a family... so why on earth are you wasting your time worrying about what the stock marketing is doing? After all, who KNOWS what it'll be doing 30 years out, when it's actually going to matter for you.
I see this all too often: investors get carried away watching Bloomberg TV or CNBC, riding the emotional ups and downs of monthly, weekly (and even daily) fluctuations in the stock market. If I don't know these people, I can only hope they're not risking their savings on short-term investments and hoping for fast payouts.
If you were my client, I would tell you to stop worrying about what the stock market is doing. Instead focus on things you can control, like saving, spending in line with your goals and values, insurance, and estate planning. If you're in your 30's with a young family, I definitely put emphasis on the saving part.
Saving: The Best Thing You Can Do For a Young Family
When you have a young family, there's an awful lot that's vying for your wallet's attention, but saving is among the top concerns you should have right now.
One of the great things about being so young is that you have time on your side when it comes to saving. It's just the way the stock market works: invest for the long term and statistically, you're likely to see far greater returns. Besides, when you plow your dividends back into your investments, your savings grow even faster... exponentially, even, since you'll be increasing the pot in more ways than one.
Of course one of the ways investing for the long term makes total sense is for your retirement. And no, it's not too early to start saving. In fact, I'd advise any client not to follow the herd when it comes to retirement savings...
Be Different From Other Americans: Save for Retirement
Right now, only 21% of American workers think they'll have enough money for a comfortable retirement (and that's up from 13% just three years ago).
That stands to reason, since the average American household has only $36,250 saved for retirement. 40% of American families aren't saving for retirement at all! Please don't be like them.
Instead, save for retirement. Better yet, automate your saving behavior so that you don’t even have to think about it. You can set up automatic deposits into your retirement account from each paycheck. This system ensures that you’re always saving and it’s money that you never see in your checking account and therefore never miss. You can always adjust the amount of your deposit if necessary, but the point is that you prioritize saving by having it handled automatically.
Invest in the Market for the Long Term
Whether you're saving for your child's college education in a 529 Savings Plan or putting away money for retirement, you should be thinking in terms of decades, not years. Trying to make money with short-term investments is risky, to say the least.
If you're investing with an eye towards using the money in 5 or 10 years, that's not long-term investing. You need to really consider how a bad stretch of market returns (think 2000-2010) will affect the chances of achieving your goals.
So, don't waste your time listening to the noise. Instead, invest in balanced, low-cost funds that will stay with you for the long haul.
Planning for the future requires a ton of self-knowledge, a clear vision of your options, and a firm resolution to stick to a plan. Need help with that? Lake Road Advisors would be happy to explore your financial questions, contact us here.