Finding The Real G-Spot…
Are you stressed out about pleasing your woman? Well, you should be – that sh*t is important! But, if you’re stressed out about investing, then chances are… you’re doing it wrong. You need to stop “looking for the G-Spot” and start looking for the “Good Spot.” Sure, we all remember bragging about that one time we found the G-Spot. Well, were you lucky or good? Investing successfully is about removing the luck and doing the right things…
Getting to the “Good Spot”:
1. Focus on what you can control, such as: (1) automating monthly contributions to remove your emotions (2) following a plan and (3) giving your savings an annual pay raise
2. Savings pay raise: increase your 401(k) / retirement contributions 1-2% annually – if you receive a pay raise then you won’t even notice the difference!
3. Invest for the long haul: don’t try to be a hot-shot, saving for retirement isn’t about dick sizing… it’s about putting your money to use today so you’re prepared for tomorrow. Know your goals and invest with a purpose…
4. Don’t stress too much over “where to invest” … try stressing over “how to invest a little more” – the results will speak for themselves!
5. Periodically review your investments and your goals (every 6-12 months, at least)
Dirty Little Secret:
It’s never the wrong time to do the right thing. Finding a “Good Spot” does mean taking some risks. The investments below reference a 6% return. Check out target year retirement funds or an S&P 500 index fund 5-10 year returns, you’ll find that 6% is not out of the question.
Do you want to be Investor 1 or Investor 2? Investor 1 focuses on the “Good Spot” by raising their retirement contributions annually…something well within their control. Investor 2 focuses on finding the G-Spot (chasing performance, higher returns, higher risks)… Investor 2 likely spends a lot of time worrying about fund research and market performance – time that could be spent elsewhere (family, friends, relaxing…).
Shared Assumptions (Investor 1 & 2):
• $60,000 salary with 2% pay raises every year for 25 years
• 5% contributions starting Year 1
• Contribute to retirement for 25 continuous years, no money is withdrawn
Both of these investors have done very well in following their plan, as shown by their continuous retirement contributions. Besides a $290,000 variance, what are their differences?
Investor 1 Assumptions:
• Investments return 6% after fees, year over year
• Increase contributions by 1% each year for 10 years (until 15% contributions, remain at 15% contributions for the next 15 years)
Investor 2 Assumptions:
• Investments return 8% after fees, year over year
• Contributions are not increased (remains steady at 5% of salary)