‘How Much Should I Invest?’ is a common question that we hear at Tranel Financial Group. We have a lot to say about this topic, and we can certainly share the information that will specifically apply to your current situation, not to mention giving you the right investment tools for the future you envision!
Not every investment tool or amount is right for every customer. We have aggressive, higher-risk options for investors looking for big returns and for customers who started investing at a later age and want to do some catching up. Likewise, slow and steady investing with strategies can benefit many of our customers.
We can offer all of the following investment options:
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Stocks
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Bonds
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Investment funds
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Annuities
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Retirement funds
…and these are just the ones you have probably heard of! Our investment services go far beyond the norm, so if nothing you have seen before fits your exact needs, it’s definitely worth your time to talk with us.
Our short answer for how much customers should invest is between 5 and 10% of their net income. That answer, of course, comes with its own set of conditions. You may not be able to start out at 10%, which most people aren’t. Getting started with as little as 2 or 3% is still investing, so don’t let that limited number deter you…you’ve made the decision to invest and are putting money toward your future, and that’s something to be proud of!
How much you ‘should’ invest depends on a lot of factors. We’ll cover a lot of general information here so that when you come in for a complimentary consultation with a Tranel Financial Group investing professionals, you can have some preliminary answers to the questions we’ll surely ask.
If you don’t really know what your investing goals are, take some time to think about the future and make a few of those decisions. This is a time to get excited about what’s to come, and getting to help customers plan for those days is one of the highlights of our job!
Let’s cut right to the chase….
The first thing we recommend to customers before they begin investing is that they pay off debt. The money that you’re paying in interest isn’t benefiting you at all! You’ll be able to invest more, without exception, if you pay off high interest debt so that you can start making more of your money work for you. The more of a nest egg you can build for a down payment on a home, car, or other large purchase, the less interest you’ll pay for the life of the loan. That’s basic banking, but many customers fail to see the connection between their current debt and investing for the future.
Once Tranel Financial Group shows customers how to pay off debt, making it even easier to invest more of your current income so that you can enjoy more financial freedom in the future, whether your plan is to retire early, work part time long past retirement age, or leave money to your children or grandchildren.
So, with all this in mind, how much do YOU need to invest?
Several factors need to be considered to answer this question:
1. The amount of passive income you expect from your investments annually
Passive income includes Interest and dividends from investments. To find this figure, calculate the amount you will draw from Social Security and any salary that you plan to draw from a part time job after retirement. If you don’t plan to have either of these sources of income, the amount of passive income need will be higher, and that’s ok.
Tranel Financial Group can help you determine the amount of money it will take for you to live the lifestyle you want in the future. Nearly everyone wants to have enough passive income to live on in retirement without having to have other income, but the reality is that failure to plan may make that dream impossible. Get the advice you need early enough to invest for the long run.
2. How much fluctuation you’re willing to risk in your investment accounts
Stock volatility is a weighted risk. If you are willing to invest in something as notoriously volatile as stocks, your return could be well worth it. We can help you choose stocks from companies that are showing positive growth and/or paying high dividends.
There are several other types of volatility involved in investing, and each comes with calculated risk. A Tranel Financial Group professional can explain these factors to you in a way that makes sense. If you have longer to ride out waves in the market, you can absorb more highs and lows that someone who is investing for a shorter-term gain.
3. The age you will be when you want to access the money from investments
Tranel Financial Group likes to suggest an 8% earning for investment returns as an average, but you must surely know that your investments will be as unique as your retirement needs. Therefore, sitting down with one of our investment advisors is the only way to get a tailor-made strategy.
If you start investing between 18 and 25, it makes sense that you can tolerate more market fluctuation and that you can invest less for the same or a higher return. With less than $200 per month, you will have well over $65,000 of passive income each year!
Those starting to invest later, say around the age of 35 or 40, will have to invest significantly more per month – $700 or more – to see the same returns. We can’t stress the importance of starting early to maximize your savings and investments!
4. If and how much you are willing to sacrifice now for investment returns later
You know the old saying, “You can’t take it with you.” We’ll throw out another one here that proves to be true: “Money is made to be spent.” Ok, so maybe that one isn’t quite as well-known, but it’s certainly true!
If it’s your goal to leave a large inheritance for your children or endow funds to a cherished foundation, then, yes, scrimp away. But if you want to enjoy life along the way without constantly having savings and investments on your mind, that’s ok, too! Tranel Financial Group has many tools to help you invest as much or as little as you like!
The consideration of how much to save really should start with how much extra income you have to spend after your bills are paid each month and you have the amount of spending money set aside for food, gas, emergencies, and so forth.
A person making $50,000 a year who is expected to gain 4% of their salary per year should realistically plan to have $1 million in capital by the time they are 65 if that is their planned retirement age. This isn’t impossible, but it will take some prioritizing and budgeting. If this person started saving $500 a month at the age of 30, their $1 million goal is absolutely attainable!
With proper investing advice, you can start making your money grow at a much earlier or later age. We know every situation is different, so don’t get discouraged or give up hope of having a large investment portfolio just because you didn’t start when you were 18 years old.
Your goal can be achieved if you are willing to commit to it 100%!
Our Bucket Strategy
We use a method for planning customers’ investments. Tranel Financial Group’s Bucket Strategy is comprised of two major components that allow customers to have a comfortable lifestyle in later years, but they will also have savings and investments that perpetually grow and work for the customer with little attention or stress.
The Basics of the Bucket Strategy
When an investor decides how much they are willing to invest, we will use these categories to give them guidance for the present and future.
1. Income Bucket – This bucket represents how much you want to draw during retirement. You will be pulling money from this account for living expenses, food, entertainment, hobbies and whatever else life holds. It’s better to overestimate the amount of income you will need rather than underestimating. If you don’t plan for enough income, you could find yourself working long after retirement age, just to make ends meet.
2. Growth Bucket – This money represents the Investments you have made in the past and those you are willing to make even into your retirement years. This bucket will experience more fluctuation, or at least it will be capable of handling market ups and downs. This money has far less impact on your daily life than the income bucket. It is not money that you depend on or will need to access quickly.