Today’s show is part of our special podcast series for Money Smart Week – coordinated by the Federal Reserve Bank of Chicago to help individuals and families better manage their personal finances. Learn more at MoneySmartWeek.org.
On The BIGG Success Show today, we were thrilled to talk with Erin Lowry. You may know Erin from her critically acclaimed book Broke Millennial*. She’s back with a new book called Broke Millennial Takes On Investing: A Beginner’s Guide to Leveling Up Your Money*. Erin joined us today to talk about it. Here’s a summary of our discussion…
What is a “beginning investor”?
Erin says a lot of personal finance books assume a basic level of understanding of the stock market. In addition, they tend to use jargon which makes people feel like outsiders. It prevents them from learning more.
She wrote this book for these beginning investors, people who in many cases may not even think of themselves as investors. But if you have a 401(k) with your employer, you’re an investor – whether you think you are or not.
Want to hear Erin and George each share an unpleasant memory from math class, which illustrates what it’s like when you don’t understand investing? Listen to the show by clicking the PLAY button above.
How do you know when you’re ready to begin investing?
Before you start investing, Erin suggest you put on your financial oxygen mask. Flight attendants tell you to put on your oxygen mask first. Similarly, it’s important to protect yourself and your money before you begin investing. She shared three ways to protect yourself.
- Pay off high interest debt, like credit cards
- Set goals, so you know how much money you need to set aside for short-term goals. For example, Erin’s moving. It’s costly. You don’t want the money you need for the move tied up in the stock market.
- Establish an emergency fund, which would cover three months of basic living expenses (not at the level of your current lifestyle)
Erin says there’s one BIGG exception to waiting to invest until you shore up the three items above. Want to know what it is? Listen to the show. Simply click the PLAY button above.
Isn’t playing the stock market a lot like gambling?
Erin says she hates the comparison to gambling. There’s a BIGG difference. When you go to a casino and put money on the table, you don’t have claim of ownership in the business. But if you use that same money to buy stock in the casino, you own a piece of the company, with all the rights of a shareholder.
In addition – when you invest your money, your money does the heavy-lifting it takes to reach your financial goals for you.
Does just the thought of investing make you feel nauseous? Erin says, “No problem.” Hear her solution by listening to the show. Simply click the PLAY button above.
What should do when the market crashes?
Erin says the “tried-and-true” advice is: Don’t panic. As long as your investments are aligned with your risk tolerance and the time horizon when you will need the money, stay the course!
If you cash out when the stock market is down, you “lock in your losses.” This means you guarantee you won’t recoup your money.
On the flip side – if you have a well-diversified group of stocks or you’re in mutual fund – you can wait for these investments to bounce back. You may even invest more! If you think about it, it’s like buying at a discount, or buying something that is on sale for a limited time.
The wealthiest investors have learned one critical lesson from the history of the stock market. Want to know what they know? Listen to the show. Simply click the PLAY button above.
What is a robo-advisor?
Erin says that “robo-advisor” is simply a fancy way to say “online financial advisor”. Unfortunately, the term “robo-advisor” makes people think they no humans are involved, that algorithms are working in the background to fix all your financial problems and help you beat the market.
On the plus side, a robo-advisor may be a good companion to the do-it-yourself (DIY) approach. And they may cost less than going to a human.
Which is better: a robo-advisor or human advisor?
Erin states that the answer ultimately comes down to weighing the value of one versus the other. Specifically, do the fees you’re paying make sense for the value you’re receiving? Remember: $1 paid in fees today is $1 less for your future you.
As the robo-advisors have expanded, they have added human options, Erin adds. But you probably won’t have a dedicated advisor. With your own advisor, if the market takes a tumble – you have someone you work with, someone who knows your finances, just a phone call away.
What’s a sure sign you should walk away from an advisor? Find out on the show. Listen by clicking the PLAY button above.
This Podcast Series Sponsored by: FinancialFreedomTool.com
Do you feel doubt when making money decisions? Let the Financial Freedom Tool be your decision-making guide, twenty-four-seven, three-hundred-sixty-five days of the year. So you can make your next money moves with confidence and clarity. Learn more at FinancialFreedomTool.com.
What’s the first step?
Erin emphasizes the importance of educating yourself and learning the language. A great first step is to set your financial goals.
What do you want to achieve in the short-term (less than 3 years)?
What do you want to be doing in the medium-term (3 – 10 years)?
What do you want to be doing in the long-term (over 10 years)?
When do you want to retire? This may be the long long-term for some and the short-term for others.
Once you know what you want, ask:
How much do you need? Start trying to assign numbers to each of your goals. Then, you can determine how much you need to invest to achieve your goals. That’s BIGG success!
You can learn more about Erin and her new book, Broke Millennial Takes on Investing, at BrokeMillennial.com. We highly recommend it!
Join us next time to hear NBC Today’s financial expert, Jean Chatzky, share how to manage your money so you feel less stress and live with greater purpose – especially if you’re a woman.
Until then, here’s to your BIGG success!
George “The Professor” & Mary-Lynn
Co-Founders, BIGG Success
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