Category: Bank + Invest

Forget Retirement – Here’s Why You Need to Start Investing Now

No time (or money) to start investing for something so far away?

The first time I ever heard the term ?retirement savings? was when I landed a job with a traditional company in my 20s. We got called in by our HR department and were given a spiel on market performance and company matching, most of which went right over my head because all I could think was, ?What? You wanna take even more out of my paycheck?” I could see no good reason to start investing now.

I think most of us, when we are in our 20s, just assume that we will make more money later.

Retirement was so far off the map for me. (How ’bout some help with this student loan payment instead, eh?) I understood that the company was also matching up to a certain percentage. But the money that they’re taking out of my paycheck, what are they doing with it? Where is it going? I need it now.

Related: Get $50 to Start Impact Investing

I think most of us, when we are in our 20s, just assume that we’ll make more money later. We reason that we have too many financial demands right now to worry about something so far off. It?s not uncommon to believe that we can tackle something as abstract as retirement…later.?And yet,?money grows faster over time thanks to compounding. That means that the?more time you have to grow your money, the more your money will grow. In other words, the earlier you start, the more money you will have.

You can see why delaying retirement savings is the exact opposite of what you should be doing, right? But ?should? is such an ugly word. So let?s stop trying to force the issue on ourselves. Forget about retirement. Seriously, just forget about it.

Forget about ?retirement.? Seriously, just forget about it.

Instead, think about how you can make the money you are earning today even more powerful. Because not only can you grow your money faster the earlier you start investing, but you can even help to support changes that you want to see in the world by investing your money in companies that are solving the world?s biggest problems.

Think about something fun (that’s just a few years away)

Instead of retirement, how does a down payment for a house in 10 years sound? Or a gap year to travel the planet? Or enough eff-you money to quit your job and start your own business? If you start investing now, you are going to approach these goals much faster than if you merely stuff your savings in a savings account.

Why you’ll reach your goals faster if you start investing

1. You’re losing money in a savings account

Savings accounts have lower returns that simply can?t keep up with the cost of inflation.?Savings accounts pay you 0.75 – 1.9% interest?per year. Compare that to the average annual inflation rate, which has been?3.15% per year since 1913.?This means you are actually losing money over the long term by keeping it in a savings account! What?

2. A savings account isn’t safer (over the long term)

It is true that a savings account is safer than an investment account…in the short term. That’s because investments can go up or down depending on how the companies in your portfolio perform. However, as long as you are not day trading or planning to take the money out in the short term, investing is a much better bet than saving if you?re looking to grow your wealth.?

Over time, it?s more risky to keep your money locked up in a savings account because you are taking away from your future by 1) allowing inflation to eat away at your savings and 2) not taking advantage of market growth.

3. You’ll make more money in the market

The stock market has returned an average of 7% per year since 1926. The lowest return that the stock market has ever had during any 20 year period has been 6.4%. And the best? 18%. Compare that to the paltry 1-2% return in a savings account. If you start investing today, you’ll make a lot more over time than you would in a savings account.

When you take the ?retirement? out of the title, growing your money by investing seems a lot more approachable. Investing your money is better than merely saving ?cash? when you have 10 years to let your money compound on itself. Think of a 10 year horizon. Start investing for a mini-retirement or for a specific goal (like a home or the trip of a lifetime that is 10 years away, not 40 years away.)

How to start investing for profit and impact?

Here?s the good news:? now you can invest in companies that support your view of the world. This is called impact investing.

Today you can choose to invest in portfolios that give you a better return than a savings account and support your values.?Pissed off at fracking? Invest in green tech. Frustrated by wage inequality? Invest in gender funds. Hate how we are destroying the oceans? Invest in companies that don?t contribute to environmental destruction.

Today?s generation has many more options. Impact investing is making a difference in our world, and making people wealthy in the process.

Here’s another bonus: if donation is not in the financial cards for you right now, impact investing is another way to put money in your pocket while also having a positive impact. That?s because when you impact invest, you are buying equity in companies that are changing the world.?

Start investing, even if you have debt

Some people think they don?t have enough money to start investing because they have consumer debt or student loans. Paying down your debt is crucial. But the thing is, developing good money habits also takes time. It is important to pay yourself first.?This is why we believe in saving (emergency fund), paying down debt and investing simultaneously, right from the start.?

Developing good money habits takes time. The amount you invest doesn’t matter. It is the act of starting that matters most.

The amount you invest doesn?t matter. It is the act of starting that matters. Automating it and staying consistent matters. Setting something aside for your future self, no matter how small, matters. To win the money game, you need to set yourself up with a good money mindset, right from the start.

Think about how good you will feel when you create a little account that is just for you and your future. Start small and start now. It only takes $50 to open an impact investing account. In fact, our partner Swell Investing will even match all WellWallet readers with an additional $50 investment when you sign up.?

Become an investor. Start investing today.

Our partners at?Swell Investing?have agreed to give all WellWallet readers $50 toward their portfolio when you open an account. You can start impact investing with as little as $50. That means when you put in $50, you?ll get another $50 from Swell Investing. Use the code?WELLWALLET?when you set up your account. To learn more, read our in-depth review of Swell Investing.

Jump in. You don?t have to think about retirement to start investing for your future. In a few months, you’ll look back and be glad you started investing.

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How To Get a Bank Fee Refunded

The Banks are Making Bank by Charging You Fees

Calling my bank to get a fee refunded is truly one of my least favorite things to do. You most likely feel the same way, but I’m here to tell you it’s worth it. Banks made $34.3 billion in overdraft fees alone in 2017?and they are counting on you to begrudgingly do nothing about these ethically questionable fees despite a bill passed in 2010 that explicitly requires you to opt-in for ‘overdraft protection’.

Make Money While Doing Chores

Depending on the fee, it can be well worth your time to get a bank fee refunded. If the call takes 15 minutes and you get two $35 overdraft fees returned, that’s the equivalent of making $280/hr. I typically do it during down time, when I’m driving somewhere or doing laundry, so I feel like I’m making money while doing chores.

Get a Bank Fee Refunded in Three Easy Steps

So, how do you go about getting a fee refunded? Follow these steps:

  1. Call your bank and get a human on the phone (just keep pressing zero). You can find the number to call on the back of your card. Have your account information handy.
  2. Once through to a rep, use this script:

    ‘Hi (rep’s name), I was reviewing my statement and I noticed that I was charged a number of fees. The fees were (x, y, and z) and totalled ($x). I’ve been a loyal customer for (X) years and I’d like to have these refunded as a courtesy.’

  3. If the first answer you get is ‘no,’ don’t give up. Remain polite, use the rep’s name, and repeat your request and ask what they can do. Insist that you’ve been a valuable, loyal customer and that you would really like to stick with the bank.

    ‘These fees are quite substantial and I’d like to have them waived. What can you do to help me?’.

Also: Stop Paying a Monthly Fee for Your Checking Account

If you’re being charged a monthly service fee for your checking account, you can follow a similar approach. Use this script:

‘I noticed I’m being charged a monthly maintenance fee on my checking account. I’ve received a number of offers from other banks that offer free checking. I don’t want to be paying a service fee and I’d prefer not to switch banks. What can you do to help me?’

FYI, there’s no reason you should ever be paying a monthly fee for a checking account! There are banks that offer zero fees for checking accounts.

Important Last Tip

One thing to remember is to be firm in your request to get a bank fee refunded. But be kind. Don’t yell or threaten. The rep has the power to help you and you need them on your side. Say please and thank you. Use their name. They get yelled at all. day. long. If they get someone nice on the phone for a change, they are often more inclined to help.

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How Much Cash Should You Have in Your Checking Account?

One question I often get asked is, “how much should I keep in my checking account?” Magic numbers are hard to come by when it comes to personal finance and this question is no different. If you read an article or have a professional who gives you a one-size-fits-all solution, it’s probably a good idea to get a second opinion. Personal finance is meant to be personal,?after all. So if there’s no magic number, how do you figure out what’s right for you?

What’s so bad about leaving all my cash in my checking account anyway?

Your checking account was intended to keep the cash you need to cover your day to day spending and really nothing more. The average checking account pays 0.05% in interest because there is an expectation that the funds in this account won’t be there for very long. So this means if you are stashing your extra cash in a checking account at the average interest rate, you will earn $4 on a balance of $10,000 after one year. Oof.

Not only is that return disappointing on its own, it also will not keep up with the average inflation rate in the U.S. This means that your money can actually lose some of its purchasing power because prices are going up faster than your money is growing in your checking account. So rather than losing out to inflation, it may be time to consider putting your extra cash to work for you.

Related: This Checking Accounts Pays 1% and Helps the Planet

How much is too much?

Despite the low interest rates on checking accounts, it’s still important to have some extra cash as a buffer. On average, the equivalent of two to four weeks worth of spending money in your checking account is enough to cover any surprises without overdoing it. This can help avoid overdraft fees, cover scheduled automatic payments, and maybe even pay the rent if it’s due a few days before your next paycheck hits your bank account.

In order to figure out the exact right number for you, consider your paycheck, monthly bills and your spending habits. How often do you get paid in an average month? How regular is your spending? Do you often find yourself coming up short every month? Despite the fear of sounding like a broken record here, remember your finances are personal!

If you have a steady paycheck twice a month and your bills are fairly regular, you may feel perfectly comfortable with only two weeks worth of spending in your checking account. However, if you are paid monthly, have lumpy income from freelance gigs, or have any other special circumstances, a month’s worth of spending (or even more!), might make you sleep a little better at night.

Determine your own checking account threshold based on your situation and stick to it. Anything beyond this would likely benefit you more if you put it to work somewhere other than your checking account.

So, what should I do with my extra cash?

There are a few different options for what to do with any extra cash you’ve been stashing in your checking account. First, tackle any high-interest rate debt you may be carrying (this means debt with an interest rate in the double digits). There’s no reason to hesitate to repay your credit card balance and save big on interest payments in order to keep extra cash in your checking account earning next to nothing.

Next, make sure there is enough in your savings account to cover any unexpected expenses or an emergency. Also, for the same reasons we’ve already talked about, make sure that your savings account has a reasonable interest rate (over 1%). A typical emergency fund has enough to cover three to six months of expenses.

Related content: How to Build An Emergency Fund

Beyond paying down debt and building your emergency fund, figure out your next goal for your money. Perhaps this is increasing your retirement savings in a Roth IRA or opening your first brokerage account to start investing for a future home purchase.

If you are new to investing and feel a bit intimidated, you can try an online roboadvisor, like WealthSimple, Betterment or Wealthfont, who can do some of the heavy lifting for you to help you get started. We even found roboadvisors who offer sustainable investing options, so that you can grow your money and have positive impact in the world.

Related content: 4 Ways to Make Real Money with Sustainable Investing

The bottom line:

Although your checking account can feel like a safe haven for cash, don’t be afraid to try something new. You can still maintain a buffer in your account to avoid the anxiety of feeling like you’re living paycheck-to-paycheck. Whatever you decide to do with your excess funds, you will likely see much greater returns than your checking account interest rate can ever provide.

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A Radically Practical Approach to Sustainable Investing

A Radically Practical Approach to Sustainable Investing

Cornerstone Capital Group does not distinguish between ?impact investing,? ?ESG investing,? and ?sustainable investing.? They believe these terms reflect the same motivations and strategies – a mindful method of investing which is ?radically practical.??While environmental, social, and governance (ESG) practices generally describe the actions investors and companies take to achieve progress towards sustainability, Cornerstone Capital sees these practices as a critical discipline.

ESG as a discipline

Cornerstone Capital is a registered investment advisor founded in 2013. Cornerstone?s CEO, Erika Karp, feels that she came to sustainability quite organically. In Karp’s over 25 years experience on Wall Street, she has observed that systematically analyzing the most important environmental, social, and governance factors leads to a more predictive insight into issues which have been outside of traditional financial metrics that affect companies.

For example, a company might struggle with reputational issues around food safety incidents, or corruption within a company?s supply chain. As an investor, having access to this information makes you a better investor. Sector by sector, company by company, environmental, social, and governance indicators are absolutely material to the financial outcomes. Water scarcity affects a beverage company and their operations. Carbon prices and emissions affect shipping and airline companies.

ESG issues need to be part of the mosaic that an investment decision relies upon. The idea of sustainable and impact investing should be viewed outside of the ideological, politicized, and moralistic, and seen instead from a perspective of enhanced analytics, pragmatism, and risk-adjusted return analysis.

Companies and investors with a long-term perspective on value creation will pursue strategies consistent with this idea of sustainability.

Cornerstone Capital

We use the discipline of ESG analysis to identify emerging trends that may create disruption.

The convergence of technological, regulatory and behavioral change can help to identify both investment risk and opportunities. – Erika Karp

Currently, there are a lot of factors driving sustainable practices

Pension funds, endowments, and foundations

We are seeing real leadership from the major asset earners, like pension funds, which have to supply benefits for a very long time. There?s been incredible push by some asset earners such as pension funds, endowments, and foundations to think about our world as a system, and to view investments as existing within that system.

Corporations

On the corporate side, there is aggressive movement towards transparency and disclosure. Corporations are asking how they can do what they do for the long-term. Even if there is an administrative or regulatory authority that’s entirely misdirected, the economics play out first. This amounts to great progress notwithstanding any misguided policy. The establishment of standards for disclosure of ESG factors by corporations further serves to drive innovation.

Capital markets

Today there is an unprecedented demand for the transparency of corporate sustainability and sustainable investment. We’re seeing a huge shift in the dynamics of the capital markets among asset owners, asset managers, investment banks, regulators, exchanges, accountants, and ?academics.

Related Content: 4 Ways To Make Real Money With Sustainable Investing

The Disruptive Trends Driving Change

Social media is driving transparency

We are seeing social media driving transparency like we’ve never seen before. Big data is allowing all of that noise out there to become insight and companies are finding their corporate responsibility viewed under a microscope.

Massive inter-generational transfer of wealth

In addition, there is a massive intergenerational transfer of wealth. Over the next 30-40 years, an estimated 30 trillion dollars will transfer from the older to the younger generations.??The younger generations are really starting to explore what money and their financial life means to them.

Change in mindset on a grand scale

While it seems that, traditionally, people have been able to separate their?financial life from the rest of their life, today people are feeling a strong emotional need to resolve the inner turmoil they experience when their financial life is in conflict with their values and beliefs.

Even though trust in institutions has been destroyed, we can fix it because the discipline of finance is changing. It?s becoming more transparent and ultimately more democratized. For example, as an individual, if you work at a company and have a 401(k) but are not invested in any of type of impact funds, it is really just a matter of using your voice and expressing your demand.

A Change in Language

It?s true that the language on Wall Street has been purposefully inaccessible because that is what sustains the status quo and keeps the power structures in place. But all you really have to say as an investor is, ?I wanna put my money with a manager that believes I can get good financial returns and a good social impact. Can I please have those options?? And this needs to happen on a grand scale. There needs to be a lot of people asking for it, demanding it, and we need to see the voices rise.

It?s finally being recognized that the system of capitalism is broken and there is a fierce urgency of now. The magnitude of the problems that we have to address is not going to take millions, nor even billions. We need to move trillions now.

Related Content: Start Impact Investing for as Little as $50

Where can people find out more?

Cornerstone Capital has a lot of research on their website that they believe can empower people to take discussions about sustainable investing to the traditional investing mainstream, such as archaic investment committees or pension fund boards.

Use our research. Take it to the people you want to influence, and show them that there is no inherent underperformance as a result of considering your values in your investments. There are choices you can make as a consumer.??

There is a lot of retail education that you can get by researching by yourself, quite simply. Once you get your voice and really exercise it, that’s when it’s powerful. For example, if you have a 401(k), there is no downside to asking direct questions of the corporation you work for:

Why can’t I invest sustainably? What do I gotta do? Who do I gotta talk to? Who is the board that represents my money? Let me talk to them.”

 


This article was derived from an interview with Erika Karp, founder, and CEO, and Sebastian Vanderzeil, Director and Global Thematic Analyst of Cornerstone Capital Group. For more interviews like this and other videos, check out the Prosperity Roadmap.

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