Previously, I’ve talked in depth about the importance of the Emergency Fund. With the Investing Order complete and Basic investing covered, such as broad based Index Funds, I think it’s a good time to focus on some more budget adjacent ideas that will hopefully flow into more basics of investing.

Now I want to be very clear, anything that you invest has the ability to decrease in value. What people fail to also realize is that their cash decreases in value every year anyway due to inflation. The average is 3%. That means $10,000 emergency fund will have the spending power of $9,700 in 1 year. After 20 it’s around $5,000 in spending power, but $10,000 visually.

This is why the internet pushes keeping your emergency fund in a HYSA. Mine is at Robinhood Banking getting 4.25% interest. The rest of my money, the pay myself money, goes straight into my brokerage. Obviously I still have to pay bills, but I don’t leave more than $100 sitting in my checking account after that. It all heads to investment.

The key is to invest in things you feel are reputable, like Dividend Aristocrats, or the S&P 500 Index. You have to be able to stomach and hold through down turns. This year for example had the markets in a panic during March. My Robinhood Year-to-date is still up 1% overall and that’s with too many things invested in garbage that I was testing with my dividend experiment. My IRA at Robinhood, which is all in the Vanguard International Index, is up 14%. My Vanguard IRA most in Vanguard Total US Index is at 8.5% YTD.

Imagine making 8% more on your tax home pay every year simply because you took your extra and invested it? 8% on $50,000 would be $4,000. If you compound that it escalates even more over time. Even something as simple as $20 a week, less than most people spend on Starbucks would produce this over a 30 year working career:

$30,000 in contributions over 30 years, and you end up with triple the gains. This is what builds wealth, and Rich habits. Even if you took half those gains each year to buy something nice. A 4% return would still beat inflation and allow your money to compound.

Even when money is tight and the budget is already low, financial security can be found. Just $86 a month can gow to well over $100,000 by retirement. Next time I want to talk about the Rule of 72 and the magic numbers of Mr. Money Mustache. Then I hope to add in some Tax conversations with Investments.

~~Miniwing~~
Stoic, Investor, Parent