6 Things You Shouldn’t Do When Your Savings Reach $50,000 (From GoBankingRates.com) [3 Articles]
~ Saturday, August 12, 2023 Blog Post ~
By Angela Mae, August 08, 2023
Saving up $50,000 is a significant milestone, one that can provide a bit of financial security in life. But many people aren’t quite sure what to do with such a substantial amount of money once they have it. Is it better to invest it or keep it liquid in case of emergencies? Should it be used to pay off high-interest debts or to fund other big-ticket purchases?
What you do with $50,000 is ultimately up to you, but certain options are financially smarter than others. Here are several things you should avoid doing once you have that much money saved up.
Spend It on Things That Don’t Generate Income
Having a lot of money in the bank can increase the temptation to spend it. But this is one of the worst things you can do, considering how much time and work likely went into saving it up in the first place.
“The top thing that one should not do when they have $50,000 in savings is to spend the money on things that do not produce income,” said Sebastian Jania, owner of Ontario Property Buyers. “One such example would be to spend the savings on a car, boat or even designer clothes. What one should really do is to figure out how they can take the $50,000 and make more money using it to then be able to pay for those goods that one wants through the interest and earnings.”
Keep It All Liquid — Or Invest It All
Once you have $50,000 in savings, you may be debating about whether you should invest it or keep it liquid — in this case, easily accessible in a savings account. On the one hand, investing that kind of money could be financially beneficial down the road. On the other hand, you might run into trouble that requires a bit of extra cash on hand.
Rather than go to extremes, consider a 50/50 split. “If [you’ve] accumulated $50,000 in savings, [you] should keep half of the funds in a liquid savings account or money market fund to serve as an emergency fund,” said Robert R. Johnson, PhD, CFA, CAIA, professor of finance at Heider College of Business, Creighton University. “[You] should have an emergency savings fund. Most financial advisors prescribe six months expenses for emergency savings. This fund is meant to cover life’s unexpected black swans — like losing [your] job or a significant health setback.”
Having some money in savings can keep you afloat in times of emergency, so keep some of it liquid just in case.
Inflate Your Lifestyle
The average U.S. household savings is around $5,500, according to the Federal Reserve. So when you have $50,000 sitting in the bank, you might feel pretty good about your finances. And that’s not a bad thing unless you start making expensive decisions like moving to a more expensive apartment or buying a new vehicle you don’t need.
Make Your Money Work for You
“Do not succumb to the temptations of oversized lifestyle upgrades,” said Todd Stearn, founder and CEO of The Money Manual. “Have fun, splurge a little. But remember, job losses happen, the economy can change or health issues can pop up, so take care of the future-you first. Buying an expensive car or expensive home can quickly deplete your savings. Present you definitely deserves a vacation. Future you might regret blowing your budget on lavish vacation upgrades that you can’t really afford.”
“In today’s times, $50,000 should really be looked at as an emergency fund, rather than something to spend on improving one standard of living,” Jania added. “Further, because inflation is still rampant, if one chooses to increase their standard of living, the cost of that will likely go up even more over time.”
Take on Risky Investments — Unless You’ve Done Your Research
Investing wisely can help you build financial stability. But investing in ventures you haven’t thoroughly looked into can cause more problems than it solves.
“Don’t invest in risky ventures without doing your research first. Stay away from money schemes that tout that you can double your money in less than a year or require you to recruit others to gain from your investment,” said Annette Harris, AFC, FFC and owner of Harris Financial Coaching. “These multi-level marketing schemes rarely result in you receiving a benefit and are consistently the topic of the show ‘American Greed.’ The last thing you want is to lose your hard-earned savings because of a bad investment.”
Leave It in a Traditional Savings Account
Most traditional savings accounts offer minimal yield on your balance, so at the very least, you should put it into a high-yield account.
“Keep in mind that if you have $50,000 in savings, you want to keep it in a high-yield savings account. A traditional savings account at your local bank is likely to have a very low interest rate, while a HYSA might be almost 10x the interest,” said Jay Zigmont, PhD, CFP®, founder of Childfree Wealth.
“Don’t let your savings sit in a low-interest savings account,” Harris added. “Find different ways to invest your savings to help you grow it. Research high-interest savings accounts, savings bonds and certificates of deposits to bring in higher returns over time. These are relatively safe investments that ensure that your money continues to grow.”
Pay Off All of Your Debts Without a Plan
“Having more in savings does not necessarily make you more secure financially. If you have $50,000 in savings, but still have debt, you should probably use the money to pay off your debt,” Zigmont said. “If you have no debt, your next goal should be [to put] three to six months of savings in an emergency fund. If you have no debt and three to six months in an emergency fund, the remainder should be invested toward your goals.”
But keeping that in mind, you might not want to spend all $50,000 on your debts. After all, if you do that and have nothing left over, you could end up in trouble if something unexpected happens later.
“Don’t pay off all your debt and leave yourself with no savings,” Harris said. “If you pay off all your debt, you may face an emergency that requires a substantial amount of money. It could be a medical emergency, necessary car repairs or damage to your home caused by a natural disaster. You want to make sure that you have money in savings that can help you get through unexpected situations.”
Sources:
https://www.gobankingrates.com/top-alternative-investments-1270486/
https://www.nasdaq.com/articles/6-things-you-shouldnt-do-when-your-savings-reach-%2450000
Article #2: 3 Things You Must Do When Your Savings Reach $50,000 (From GoBankingRates.com)
Three Investing Strategies The Wealthy Use That You Should Consider Right Now
By Adam McFadden, August 1, 2023
Well done! You’ve worked hard and pinched pennies to finally get to the point where your savings account is looking solid. Now it’s time for the emphasis to shift from saving to making your money work more actively.
These three moves just might be what you need to keep your money growing. Best of all? It only takes a few minutes to check them out and see which ones are best for you.
Find the Right Expert for Your Unique Situation
You wouldn’t be reading this if you didn’t know how to save.
But there comes a time when it makes sense to get an expert opinion to make sure you’re not leaving money on the table.
Working with an experienced professional who can advise you on what to do to better diversify your portfolio is always a good idea. But who has time to sift through thousands of advisor profiles?
WiserAdvisor does all that work for you. It matches you to the best financial advisor for your specific situation so you get an expert in the areas you need.
There’s not much to lose with no cost to use their service and no obligation to hire the advisor. WiserAdvisor screens advisors to make sure you’re only getting matched with the best experts.
Protect Your Portfolio With Precious Metals
Pandemic, supply chain, bear market. We’ve seen in recent years that market-changing events are not in short supply.
Is your money safe from any of these?
The answer may be “no” If you haven’t hedged your bets against the stock market and world economy.
Precious metals often outperform other investments in a volatile market, and their value tends to rise with inflation, making them an effective hedge during uncertain economic times.
Goldco is a great place to begin if you’re interested in investing in precious metals. Opening a gold or silver IRA is easy and funds can be rolled over from existing retirement accounts. Or you can buy gold and silver directly from Goldco’s extensive collection.
Worried you may need to sell your precious metals in the future? Goldco offers a buy back program and will purchase your assets back from you at the highest price.
Earn Like A Landlord Without Working Like One
For many, the draw to earn passive income from real estate investments is strong. But for most, buying an entire property is out of reach, not to mention the added maintenance and operational responsibilities that come with the purchase.
That’s where CrowdStreet comes in. Their online platform gives accredited investors a chance to invest in large-scale real estate projects with other investors, without having to foot the entire bill.
Real estate projects on their Marketplace are sourced from some of the nation’s top real estate sponsors, from nearly every U.S. market and across a range of asset classes.*
Bottom Line:
It’s just as important to make your money work for you as it is to save. Some key strategies include hedging your savings against inflation with an investment like gold or silver and building passive income through real estate investments. The right financial advisor can give you the best advice for your unique situation.
*As reported by Dr. Adam Gower in Best Real Estate Syndication Platforms | Gower Crowd — UNLEASHED, published 2022, based on dollars raised by individual investors. GOBankingRates is a third party advertiser for CrowdStreet. This article was written by an employee of CrowdStreet and has been prepared solely for informational purposes. The views and statements expressed by GOBankingRates are made solely by the third party and are based upon the opinions of GOBankingRates. All information is from sources believed to be reliable. Nothing herein should be construed as an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet or otherwise. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance or success. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. GOBankingRates is a third party advertiser for CrowdStreet and GOBankingRates is compensated, either directly or indirectly, by CrowdStreet.
GOBankingRates maintains editorial independence. While we may receive compensation from actions taken after clicking on links within our content, no content has been supplied by any advertiser prior to publication.
Article 3: Taking The Stress Out Of Financial Planning (From Forbes)
By Tim Maurer, August 6, 2023
Personal finance is more personal than it is finance.
“Remember, today is the tomorrow you worried about yesterday.”
Those words of early personal development sage, Dale Carnegie, spun around in my brain, and then it hit me: This is the reason financial planning stresses people out.
So much of financial planning is unknown, even unknowable. It has such a future orientation that it’s hard to feel settled with it in the present.
- My income is stable today, but who knows what the future holds?
- My investment portfolio went up today, but with these headlines, it has to go down soon.
- I can live with today’s tax rates, but I have no control over where they’ll be when I no longer have control of my income in retirement.
- What about health care costs? The viability of Social Security in 20 years?
- And now you want to talk about my death — life insurance and estate planning? — great!
- And what about the stuff that I don’t know that I don’t know!?
Ok, three deep breaths. In through the nose, out through the mouth.
I get it.
I’ve been in this business for 26 years and felt the weight of anxiety from hundreds of financial advisors serving thousands of clients through (at least) three major financial crises and countless corrections.
Yet I find peace. And you can, too. Here’s how:
1) Always start in the present. From the simplest to the most complex financial planning, it all begins with building a household net worth statement and a cash flow statement. The former is a comprehensive snapshot of what you own and owe; the latter is a simple spreadsheet articulating your income from all sources and expenses, fixed and variable.
Investing Digest: Know what’s moving the financial markets and what smart money is buying with Forbes Investing Digest.
2) Next, reflect. Are you further than you expected you might be at this point in life, or do you feel behind? Upon what were those expectations based? Does your net worth statement exhibit financial wisdom to date? Does your cash flow statement put you in a strong position to improve tomorrow through financial discipline today? This step of reflection can be emotionally charged. While I encourage you to process those emotions, I invite you to emerge from this second step dispassionately, enabling you to objectively determine the next steps required to move you forward financially.
3) Now it’s time to analyze. We’ve established where you are with net worth and cash flow statements. Now it’s time to determine where you want to be in the future and what it will take to get there. You could well-frame your analysis by considering a) the income required to live comfortably today, b) the growth of your assets required to replicate your income in the future, c) the risk management required to protect your family, lifestyle and property, and d) the tools and strategies required to give to the people and causes that are important to you. And yes, this is where a financial planner can be very helpful, guiding you through the analysis and making the unknown known. Lest you think that’s a convenient bias of someone employed in the advisory business, I believe advisors should have their own advisors (and I do) because personal finance is more personal than it is finance.
4) Prioritize. One of the greatest challenges with financial planning is its expansive breadth. It’s one of the reasons a perpetual approach to financial planning succeeds where extensive, comprehensive financial plans fail — because hundred-page plans with scores of recommendations often erect an unintentional impediment to implementation through their heft. You will often accomplish more in your financial planning if you commit to achieving less. Consider no more than one major to-do per quarter, and only focus on one task at a time with an explicit next action. For example, “Call estate planning attorney to set meeting to update will.” And while every financial plan will be as unique as the people it represents if you lack help and direction in your prioritization, here is a default list of The Top 10 Places Your Next Dollar Should Go.
5) Habitualize. Financial planning is a process, not a product, so your financial house remains properly ordered through the creation of rhythms and rituals. . For example, consider conducting an annual, over-arching financial plan review (including updating your net worth statement), give your portfolio a quarterly glance, reconcile your cash flow statement monthly, and review your household spending weekly. If this sounds like tedium, remember that it is often the unknown in financial planning that causes the most stress; therefore, it is through the creation of good financial habits that you remain cognizant and retain control of your financial circumstances. It’s brushing and flossing for your finances.
6) Shorten your time horizons. The answer to the question, “Why don’t people do a better job saving for the future?” is “hyperbolic discounting.” While financial planning requires future forecasting, the further we imagine into the future, the less connected to that future we feel (and the less likely we are to optimally fund said future). Therefore, we can improve our planning through the shrinking of time horizons . Where do you hope to be in five years? And what do you need to accomplish over the next 12 months to help you get there?
7) Course correct and flex. Mistakes don’t break your plan. In fact, financial planning is an exercise in mistake management. Therefore, we will optimally navigate the inherent uncertainty of financial planning through our willingness to course correct and flex.
In all the above, one of the keys to reducing our stress in personal financial management is to discern the difference between those elements we can control (like our spending) and those we can’t (like the stock, bond, and housing markets) — and then apply our time and energy accordingly.
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