How to Make it Easier to Invest and Achieve Higher Savings Rates
Inflation is an unavoidable part of life and is something we can all plan for—sometimes decades in advance. Welcome to part one of our new four-part inflation series where we're going to address how to get a head start on inflation so you don’t feel its effect as strongly in the future.
There’s a lot of financial uncertainty right now between rising interest rates, supply chain issues, and a potential recession looming. Because of this, it’s understandable why high-income earners such as physicians may be struggling to decide what to do with their quickly mounting savings.
Let’s look at a few ways to make it easier to invest and achieve higher savings rates.
Set up automatic contributions into a brokerage account
Investing large sums of money at once can feel overwhelming. One way to make investing feel like less of a strain is to make your investment goals a part of your monthly budget and to set up automatic contributions into a brokerage account. You can choose an amount you feel comfortable investing each month. Incremental investing can also help you take advantage of dollar cost averaging which can help smooth out market fluctuations in your investing strategy over time.
Investing in buckets
You can also spread out how you invest your savings, by investing into short term, medium term, and long term savings buckets. For more short term savings goals you may want to choose less risky investments, but for longer term goals you may want to choose riskier investments that can lead to higher returns as you’ll have more time for the market to bounce back if it takes a dip before you need to reach your goals.
Consider the yield investments pay
When choosing investments, it’s helpful to consider the yield that investments pay. It’s worth noting that this is different from capital appreciation which is a rise in an investment's market price. For example, if you want a fixed rate of return, you may choose to invest in a bond which can come with a pre-determined yield. However, you may find that a non-guaranteed investment has the potential to generate a higher yield. Which fit is right for you depends on your goals and comfort level.
Pausing student loan payments
If your student loans are currently in deferral right now—federal student loan payments are currently paused until August 31, 2022—then you may find that pausing on payments and investing that money helps you earn money, which can in turn make it easier to pay down your student loans faster once payments resume.
Open a high-interest online savings account or checking account
While you do research on what path you want to take next, your money should be kept somewhere where it can earn interest. While all savings accounts earn interest, most don’t earn a notable amount. That’s why it’s a good idea to stash your savings in a high-interest savings account.
You’ll usually find these savings accounts at online banks. Because these banks don’t have large overhead costs associated with running brick and mortar banking locations, they can pass those savings on to their customers in the form of higher interest rates and less fees. There are also some high-yield checking accounts on the market worth looking into. Do some comparison shopping to see if you can find a bank that can help you earn more on the money you save for a rainy day.
Not sure how to manage your savings right now? We can assist you in coming up with a plan that helps your money grow in a way that you’re comfortable with.