The question, “Why save and invest?” is one not emphasized nearly enough. Often, savers and investors – whether having accumulated millions of dollars or those just getting started – focus almost exclusively on the various investments themselves, without first and often taking a step back to establish the “WHY” of investing.
The WHY can vary greatly, which is the reason the question is so meaningful.
Just this week I heard about the show currently on Netflix called “How to Get Rich” (haha, I may have just lost a few readers who will jump to find out more about the show). But it is not the show that is the focus of this week’s edition of TGIF 2 Minutes but rather one of the ideas behind the show. The idea comes from the author and successful entrepreneur, Ramit Sethi. One of the key ideas Sethi emphasizes is the “rich life” we all may wish to attain.
Which leads to asking the question, “What could my ‘rich life’ look like?” Would it be:
- Having a lot of money?
- Having certain things?
- Owning a beautiful home or homes?
- Saving time in order to DO and experience more meaningful things?
- Traveling to fabulous or relaxing places?
- Being healthy and enjoying a healthy lifestyle?
- Being financially independent?
- Getting started saving to relieve stress?
- Being debt-free?
- Saving on taxes?
- Starting a family?
- Providing for a family, spouse, friends?
- Changing careers?
- Having more free time?
- Giving generously to charitable causes?
- Living a simple, stress-free life?
- A combination of ALL or a number of these things?
Notice that “owning X or Y investment” is typically not on the “rich life list”, although investments are part of the tool set for accomplishing a rich life. (Note that liquidity, transparency, simplicity, cost, and efficiency are several often-overlooked elements of effective investments).
Saving and investing can create a small, medium, or even large amount of pain for people. Focusing on or starting the conversation with investments does not lessen the pain! What has been proven to lessen the pain – and even be fun – is to break down the situation to the WHY. Ask the personal question, “Why am I/are we investing?” This thought process can create a pathway to spending less on certain things and more on others, thus creating savings for the longer-term or narrowing down investment options. In addition – and important – focusing on the bigger expenditures (“bigger” means something different to everyone) can make the most financial difference, and lead to greater overall savings and investment success.
Another way to lessen the pain is to repeat the “ask WHY” process often – with someone who makes answering these questions worth your precious time.