Knowing where and how to invest money can be confusing and a little scary. Laura answers 3 questions from Money Girl Podcast listeners that will give you smart tips for setting financial priorities, leveraging retirement accounts, and knowing when it’s a good idea to use “robo-advisors” to make more money.
I’ve never met someone who doesn’t want more financial security and peace of mind. The secret to making that happen is simple: invest for the future.
No matter how much or little you earn, if you consistently put away 10% to 15% of your gross income, you can build impressive wealth over time.
But knowing where and how to invest money can be confusing and a little scary. Few of us are taught the ins and outs of investing in school or at home.
In this post, I’ll answer 3 questions from Money Gir l Podcast listeners about setting financial priorities, retirement accounts, and whether it’s a good idea to use “robo-advisors” to make more money.
Free Resource: Laura's Recommended Tools—over 40 of the best ways to earn more, save more, and accomplish more with your money!
Smart Tips to Make More Money
To hear the audio version of this post, subscribe to the Money Girl podcast on iTunes or the Stitcher app, both are free and make sure that you’ll get each new weekly episode as soon as it’s published on the web. The show is also on the Spotify mobile app!
Investing Question #1:
Wendy M. says, “My husband is in his 3rd year of medical school and we have taken out a total of $60,000 in student loans. It’s our only debt besides a mortgage and a loan we took for the house down payment from our parents.
I have a job and we have just enough savings to pay his tuition and school expenses for next year. Or should we take an additional $15,000 or $20,000 in student loans if that would allow us to maintain savings and contribute to our IRAs?”
If you’re a student or are considering going back to school, you’ll probably need to finance some amount of your education, depending on the degree you want and the school you attend.
I’m a big believer that paying for education is an investment in your future that will pay off. Studies have shown that despite the increasing cost of college and graduate school, the lifetime financial benefit of higher education has never been more valuable.
Having a bachelor’s degree is worth almost $1 million more in lifetime earnings, on average, when compared to only having a high school diploma. Getting a master’s degree is worth an average of $1.3 million more.
And if you’re like Wendy’s husband and go for a professional or doctoral degree, you earn $3 million more than if you didn’t continue your education after high school. In other words, making an investment in your own education pays off for the average person.
Besides the financial benefits of more education, it can be exciting and personally rewarding to study a subject that you love, meet like-minded students, gain more confidence, and have experiences to draw from for the rest of your life.
No matter your professional or personal motivation for getting more education, make sure than you can complete the program on time and justify the price. Taking on too much student loan debt can hurt you, but the right amount can open career doors that make it painless to pay off.
It could take years to see your income grow substantially. Until then, you may feel stretched thin to pay student loans, bills, and invest for the future.
Wendy and her husband are in an excellent financial position because they have what I call good debt, instead of bad debt. Good debt allows you to build wealth by earning more or owning an asset that grows in value. Bad debt, like credit cards and payday loans, typically leaves you with less wealth.
Taking a reasonable amount of student loan debt to earn a medical degree will pay off in higher lifetime earnings. Having an affordable mortgage, especially on a property that appreciates in value over time, is also a wise investment.