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Investing should depend on your situation

June 8, 2017

How you invest should depend on your situation. For instance, there would be different ways to invest and things to do if you are still working, phasing toward retirement, or retired.

If still working, consider saving through a 401k plan or contributing to an IRA. Develop a long range plan and work toward its achievement with a pattern of regular methodic savings.

If you have young children your plan could be to get them through college. Figure out what might be needed as well as funding sources [including student loans] and have a plan based on that.

If you just became an empty nester, your plan could be to now save what you were spending on your children’s schooling. Try accelerating your mortgage payments and pay it off. Ten years of banking these amounts could mount up quite nicely.

If you have 401k or IRA investments you should pay attention to how they are invested keeping in mind that these are very long term investments – they should be able to grow so that they could provide cash flow at a much later point in time, and then last for the rest of your and your spouse’s life. Asset accumulation should be the primary concern, not cash flow, and there should be regular and prompt investment of any dividends and interest.

If you have investments in your own name, i.e. not in a retirement account, these should be invested taking into account your short term as well as long term goals. Taxes should also be a consideration – perhaps not a major concern, but something that should be still looked at. If there is a need for the principal within seven years, I do not suggest investing those amounts in the stock market. Stick to bank CDs and or other short term fixed income alternatives. Also keep some funds separate in a rainy day fund – somewhere from 6 to 18 months of expenditures.

If you are spending all of your income, is it what you are earning and taking home or also all of your investment income? Most people that are still working do not consider their investment income including retirement plan income as spendable income so that accumulates and is reinvested.

For someone that is retired, spending all their income means just that – all interest and dividends are being used to live on. Any growth in cash flow would need to come from a finite source of funds. Investing should provide not only for safety of principal but also for growth.

A choice no matter what your situation is to always to try to spend less, but that gets harder and harder to do when you are already spending as little as you can.

Each person is different, with different needs, goals, feelings of security and what type of risks they want to endure. There is no one investment or plan for everyone. When considering an investment look at it from your situation, not from “what everyone else is doing.”

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