Check out these four tricks used to get you to spend more (without you knowing it).
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Did you know that Americans spend nearly 12 hours a day consuming some form of media—mostly via television or digital device? That’s an increase of more than two hours a day since 2010.
We’re all aware that our insatiable appetite for entertainment isn’t good for our health or our family lives, but have you ever considered how if affects your retirement?
Never-Ending News Cycle
When the stock market takes a hit like it did in 2008–2009, there’s no escaping the gloom and doom the media dishes out. For months, financial news and talk shows predicted the end of our economy as we knew it. Investors might as well cash out and stash gold bars in their basements.
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Many of them did—at least the cashing-out part. They jumped out of their investments and were afraid to get back in until it was too late to cash in on the rebound.
Now the market is setting records. The S&P 500 is up more than 25% this year and 112% from five years ago. The coverage hasn’t been as overwhelming as when the market was down—after all, bad news sells better. But it’s convinced investors who’ve been sitting on the sidelines that now is the time to jump back into the market.
Don’t Get Sucked In
Unfortunately, this is a cycle far too many investors fall into. They sell low and buy high—the exact opposite of how you grow your investments. They base their investing decisions on yesterday’s news, and it’s proven to be a bad idea.
It’s fine to stay informed about the latest economic news, but it shouldn’t play a dominant role in your investing decisions. Successful investors take a long-term view because they understand that consistent investing over long periods of time is the best way to build a retirement nest egg.
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Your New Plan
If you’ve been basing your investing decisions on the news of the day, it’s time for a new plan:
- Turn off the television (or smart phone or tablet).
- Invest 15% of your income in retirement accounts, starting with your employer’s retirement plan. If it’s available, invest enough to receive the full employer match.
- Invest the reminder of your 15% in a Roth IRA. You can invest up to $5,500 a year ($6,500 if you’re 50 or older).
- Choose good growth stock mutual funds for each account. Invest equally in each of these four categories: growth, growth and income, aggressive growth and international.
As you launch your new plan, you must also make a mental commitment to stick to it no matter what the financial headlines are. When you allow your investments to track the long-term growth of the stock market, you also allow compound interest to work in your favor. Once you see how it affects the growth of your nest egg, it will become much easier to ignore the financial news of the day.
Make It Work With Advice From a Pro
Dave always recommends that you with a professional advisor—after all, he works with one himself! If you have an advisor you trust, great! Always be sure to get their advice before you make any changes to your retirement plan. But if you'd like to know which advisor Dave recommends in your area, check out his network of Endorsed Local Providers (ELPs). Find your ELP today!