Saving to Invest: Why It's Important to Start Today
Investing can be a powerful way to build wealth and secure your financial future, but it all starts with saving. Whether you're just starting out or looking to ramp up your investment strategy, saving is the foundation upon which successful investing is built. Here's why saving to invest is important, and five ways to start saving money today. Keep in mind, this post is designed to inform, not to instruct. Always consult with a financial professional when making decisions, and we humbly welcome you to consider our team, as we have been serving the Greater Grand Rapids area for over two decades.
The benefits of investing are clear. Over the long term, the stock market has consistently delivered solid returns, outpacing inflation and helping investors grow their wealth. However, investing requires money, and the more you have with which to invest, the greater your potential for returns. That's where saving comes in.
By putting aside money today, you're building a foundation for future investment growth. Even small amounts saved consistently over time can add up, giving you more money to put towards investments and potentially increasing your returns. Additionally, saving can help you build an emergency fund to cover unexpected expenses, reducing the likelihood that you'll have to sell investments at a loss to cover those costs.
For a visual, consider what J.P Morgan shows in their 2023 Guide to Retirement1. It’s clearly better to start saving earlier, than later. Using their model, someone saving at age 25 ended up with a portfolio well over someone who started at 35, when using the same percent savings rate. Further, someone who started at 25 but didn’t save at the same percent, ended up with much less in their ending portfolio. (Past data isn’t a guarantee of future performance.)
Our takeaway? Save often and save early, but also: save savvy.
To help you get started, here are 5 Ways to Start Saving Today:
- Create a budget: One of the most effective ways to start saving is to create a budget. This involves tracking your income and expenses, identifying areas where you can cut back on spending, and setting aside a portion of your income for savings. Budgeting tools and apps can be helpful in getting started.
- Automate your savings: Another way to start saving is to automate your savings. Set up an automatic transfer from your checking account to a savings account each month. This can help you save without having to think about it, and can make it easier to stick to your savings goals.
- Cut back on unnecessary expenses: Take a close look at your expenses and identify areas where you can cut back. This might include eating out less, canceling subscriptions you don't use, or finding ways to reduce your utility bills. Every dollar saved can be put towards your savings and investment goals.
- Look for ways to increase your income: In addition to cutting back on expenses, consider ways to increase your income. This might involve taking on a side gig, asking for a raise at work, or selling items you no longer need. More income means more money to put towards your savings and investments.
- Prioritize your savings: Finally, make saving a priority. Treat your savings contributions like a bill, and make sure they're paid before you spend money on anything else. By prioritizing your savings, you're putting yourself on the path to financial success.
By now hopefully you understand saving to invest is a crucial step in building wealth and may help to secure your financial future. By starting small and consistently putting aside money, you can build a foundation for future investment growth. Whether you're just starting out or looking to ramp up your investment strategy, these five tips can help you pursue your goal of saving money, starting today.
Everything we share is to inform, not to instruct. You should always meet with a professional before making any decisions. If you are interested in working with our team, Schedule a Fit Meeting by clicking that link to get the process started. We're conveniently located outside of Grand Rapids, MI just 5 minutes away from the airport and Ada, MI. We can't wait to meet you.