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Speaker 1: Hi, I'm Stacey Hyde
and I'm back with another

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episode of Better Financial
Health in 15 minutes or less.

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What I want to talk about today
is we live in some pretty scary

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times.

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There's a lot of talk about
recession, stagflation, what

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tariffs, what's going to happen,
and you may think, well, I need

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to invest, but I'm scared to
invest.

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You may think, well, I need to
invest, but I'm scared to invest

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.

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And so what I'm hoping to share
with you today is why it's

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actually scarier to wait,
Because the younger you are, the

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a long time.

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Basically, throughout, from
like 2010 to 2020, we really

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didn't see much inflation.

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Interest rates were super low,
Prices stayed pretty level, but

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ever since the pandemic and the
supply chain disruptions and the

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incentives to people the
incentives to people it's really

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caused inflation to tick up,
and now we're seeing it in our

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homeowner's insurance, the price
of eggs, everything is just

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costing a lot more, and so that
rate increases.

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The reason that you need to be
investing, not just saving.

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And I want to separate those
out because I think of them in

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three ways you have saving, and
then you have investing, and

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then you have speculating or
gambling, and let me explain

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what I mean by that.

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Savings is money that goes into
your bank account.

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This is money for your
emergency fund.

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This is money that you can get
your hands on quickly and it's

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not going to grow a whole lot.

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I mean, you can help it by
using a high yield savings

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account, which we've talked
about before, but it's really

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safe, steady money.

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Investing now that is something
where you're buying.

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You've heard me talk about
before.

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If you've been around very long
.

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We're fans of index funds or
passive investing where you own

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the whole market or, like all
the large company or all the

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small companies international
stocks, emerging markets where

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you're owning broad sectors of
the market.

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That is what I consider
investing when we start getting

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into crypto, into picking
individual stocks.

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That is closer to gambling or
speculating, because that may

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pay off really, really well, but
you may lose everything.

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Whereas if you stay in one of
those broad-based investments,

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yes, some of the companies are
going to do great and some of

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them are going to do terrible,
but overall you're going to do

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just fine because you're taking
the risk of the market and

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history shows us that the
markets do well over time.

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In the short term, it can be up
and down and all over the place

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, but if you step back and look
over a longer term, your chances

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are you're going to do well.

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And what do I mean by longer
term?

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I'm talking five to 10 years,
so you could have several years

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in a row of bad markets.

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We really haven't had that
since.

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You know, late 07, all of 08
was awful and then in March of

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2009, the market bottomed out.

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We've had some short-term pain,
like early on in the COVID.

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Markets were off huge, like 20%
in a couple of weeks, and then

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in 2022, markets were also down.

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But we haven't really had any
prolonged downturn and markets

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could do that and likely will do
that again.

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So that's why it's important to
have your cash reserves in case

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something goes haywire.

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But I want to just give you a
couple of numbers to think about

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, why it's important to start
early.

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So say you, for whatever reason
, maybe you got a big tax refund

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this year and you have $5,000
and you invest it until you're

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65.

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If you put it in the market and
assume a pretty conservative

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for equity investments of 7%
rate of return, your value at

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age 65 is over $53,000.

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Is over $53,000.

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If you put that same $5,000 in
your bank account and you didn't

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monitor the interest rate.

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So say you average 1%, that's
going to be only worth $7,000.

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That's a huge difference.

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Now if you're 40, the
difference is not as great.

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It's $27,000 from 40 to 65 at
7%.

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So you basically have $22,000
worth of growth.

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If you put that same money in
that 1% savings account, it only

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grows to $6,400.

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That's a huge difference.

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But let's think about if you're
trying to save on a monthly

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basis or invest on a monthly
basis and you put $250 a month

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into an IRA, a Roth IRA or just
an after-tax investment account.

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That same investment $250 a
month from age 30 to age 65 at

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7% is going to grow to $427,000.

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Now if you do that but you're
too scared to take any risk I

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don't want any risk, I'm just
going to put it in savings

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you're only going to have
$125,000.

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So you would have $302,000 more
by investing in that risky

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stock market.

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You could have a lot more than
that.

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It could be less.

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But history says if you put it
in there and you leave it alone

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and you just let it grow and you
ignore it, it's going to work

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out for you.

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To give you a comparison if you
started at 40 doing that same

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250 a month, it's only going to
grow to almost $196,000.

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So by starting early, at 30
versus 40, you're going to have

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$233,000 more at 65, just by
starting 10 years earlier.

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That's the power of compound
interest and what compound

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interest is and the reason it's
so huge is you're earning

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interest on interest on interest
and it just grows exponentially

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over time.

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So that's why it's really
really important to start early.

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You know, the easiest way to do
it for most people is to take

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advantage of their employer's
retirement plan.

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The younger you are, the more
valuable I think using the Roth

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option in your 401k is.

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If that's available to you.

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You'll still get matching
dollars if you contribute to a

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Roth versus a pre-tax.

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Now, any money your employer
puts in, that's always going to

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be pre-tax money you put in.

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Most employers these days give
you the option of contributing

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to pre-tax or Roth.

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My personal opinion is if you're
under 40, you definitely want

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to, if not do all Roth.

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You want to use some Roth
because what you put in will be

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a small part of what your
balance is at retirement.

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So you want to take advantage
of that time.

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Now, as you get older and
closer to retirement, you don't

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have as much to compound, so
pre-tax may work better for you,

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but you don't need a lot of
money to get started.

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If you don't have $250, start
$25.

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That's why a 401k works well,
because you can do a small

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amount, a percentage.

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But I also think it's great to
save outside of your retirement

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plan because then you're not
subject to early withdrawals if

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you're not 59 and a half and
penalties and that sort of thing

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, and you can pay potentially
lower capital gains taxes when

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you sell something that has done
well instead of ordinary income

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.

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You don't have to be perfect,
you just need to get started.

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And if you're overwhelmed with
the options, you know S&P 500

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index, a total market index
that's even better because it's

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going to pick up some of the
smaller companies A global stock

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index account.

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Or if you're in your employer's
plan, chances are they have a

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target date fund or some sort of
default investment.

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That's probably going to work
just fine for you.

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So don't overthink it, Just do
it.

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Overthink it, Just do it.

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Try not to worry about it,
because study after study has

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shown that the more we look at
our accounts, even in good times

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, the worse we do, because we're
tempted to touch it or withdraw

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or change something up, because
one of the things in our mix is

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not doing well, so we want to
get out of that.

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If you've done that last year
and dumped your international

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stocks, that's the best
performer this year, because

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that's what markets do is they
rotate around from one

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outperforming to another
outperforming.

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So the future's there for you.

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Just start.

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And if you're late, if you're
listening to this and you're

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like, oh Lord, Stacey, I'm over
40.

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Get started.

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The best time to start was
always yesterday.

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The next best time to start is
today.

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So go ahead, open that account,
increase those 401k

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contributions and save your
future.

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Self will thank you.

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Thanks for tuning in.

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This has been another episode
of Better Financial Health in 15

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minutes or less.