My husband and I are not big spenders. We save 20%-30% of our income every month. Our cars are paid off. We live in a house that we can afford and it is the only debt we have. We pay off our credit cards every month. However, we feel like we are not getting ahead.
We are coasting — but we don’t want to coast anymore. We want our money to grow faster than … well … not. We already have allotted 20k for emergency and that’s really all we need. Not sure what’s the next step. Try the stock market? What’s your advice for people like us who kinda have the right intentions and habits but just not the smartest game plans?
This sentiment is probably a common one. While there are indeed a host of Americans who remain in tough shape due to hardship like the loss of a home or job, millions more are fiscally secure right now … but just not getting anywhere long term.
If you’re looking to grow your cash but interested in keeping risk down, the best thing you can do is decide on an asset allocation and stick to it. That means picking how much money you need to keep locked up tight, how much money you want to take mild risk with, and how much money you’re willing to take reasonable chances with in the hopes of making it grow.
A decent rule of thumb is to subtract your age from 100, and that will tell you what percentage of your cash should be in riskier assets like stocks. The idea is to grow your money when you can take risk in your peak earning years, and to protect it as you get older and have no choice but to live off your savings.
Just in case this isn’t abundantly clear, here’s the breakdown.
- Age 35 – 65% risky, high-growth investments; 35% safe, slow-growth investments
- Age 50 – 50% risky; 50% safe
- Age 65 — 35% risky; 65% safe
- Age 85 – 15% risky; 85% safe
Here’s how I would categorize the most common forms of investment to help you build out your portfolio: