A few years ago, I subscribed to Men’s Health magazine. (I also made the mistake of subscribing to their emails which now come from Rodale and others on a daily basis filled with 3/4 ads for whatever book they are pushing, and 1/4 “tips”. I’ve tried to unsubscribe to no avail, so now they have a home in my spam list.) Each month, I would get new workout tips. A hot new exercise to target my abs, or a new twist on an old routing to kick it up a notch. The catch was, I wasn’t really going to the gym that much in the first place. Frankly, I would have been better off doing nothing but push-ups, sit-ups, lunges, and curls three days a week than trying out new stuff and going once a week (if I was lucky).
For finance, I’m starting to see the same thing in my clients. I have clients and friends who have read dozens of finance books. They have opinions about all sorts of things from where the best place to invest is, to when to pay or not pay fees and so on. Yet, many of them don’t even have a cash reserve fund, let alone enough money to worry about investing details!
Folks, it doesn’t matter if you can squeeze an extra two percent return on your investments if you have $500 in savings, $20,000 in your 401(k), and $3,000 in an eTrade account. You are a debt problem waiting to happen. The first major car repair, furnace repair, or medical bill wipes out your savings. Then what? Then people call me asking if there is a way to get to their 401(k) money. All the while, they are obsessing over the latest trends in investments and whether the Street is crooked. It doesn’t matter if you aren’t even going to the gym!
Start Small and Simple
Ok, let’s make it worth your while to know all about investing. First, you’ll have to have money to invest. It comes from saving money. Do the easiest, simplest thing first. Open and INGDirect account and link it to the account where the paycheck gets deposited. If you get paid on specific days (the 1st and the 15th), then setup and automatic transfer to your ING account to occur one day later (the 2nd and the 16th). One day later makes sure that your paycheck will be there when the withdrawal comes regardless of weekends or holidays.
Don’t worry about where you could get a tiny bit higher interest rate. Don’t worry about whether or not now is a good time to invest in oil or gold or China. Just build up some dough! Go to the gym! That is all we care about right now.
AFTER consistently going to the gym 3 days a week for 3 months, THEN we can look at routine changes. Hey, by then we might even be in shape enough to do some of them. Same thing for personal finances. After we are able to build up $10,000 or more, THEN we can look at investment ideas. Frankly, $10,000 is too low, but hey, at least you got that much. Actually, you need $20,000. $10,000 for those great investment ideas, and $10,000 to leave at ING, because after all, that air conditioner hasn’t been serviced since the year started with a one.
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