Dr. Rebecca Summary is a professor emeritus at Southeast Missouri State University in Cape Girardeau. She taught principles of macroeconomics, law and economics, and economic problems and policies, among other courses, for 38 years. She says she is fascinated by the ways psychology and human behavior affect the economy and is passionate about the ways trends in the national and world economies such as interest rates impact people’s day-to-day lives.
Here, she passes along some tips about finances, investing your money and making your money work for you:
1. Assess your tolerance for risk. That’s going to affect where you put your money and the return or the yield that you get on the money. And I think the conventional wisdom is the younger you are, of course, the more risk you should be able to tolerate because you have a longer period of time to sort of overcome any downturns in the stock market or the real estate market. …
Some people are simply more risk-tolerant than others. And it’s really important to understand your own risk tolerance, so you won’t be shocked or dismayed if you lose some money somewhere along the way because the ups and downs in the market are probably going to cause that to happen at some point. The older you get, the more you should probably be looking at less risky, more secure assets because you just don’t have that time horizon to recoup any losses. …
Some people have invested in cryptocurrencies, which are pretty highly risky. A lot of people have made a lot of money; a lot of people have lost a lot of money. So if you have that kind of tolerance for risk, then that’s great. If you don’t, then you’re probably better off putting your money into a mutual fund or something that has a little less ups and downs in terms of performance in the market.
2. Don’t sell in a down market, if you can help it. Just hang in there, and eventually, your portfolio will start going back up again at some point. Or at least, that’s what history tells us for the past 60, 70 years. It’s important to be able to ride those downturns out as much as you can.
3. Take advantage of employer-matched 401k or 403b or Health Savings Account funds. If your employer’s going to match your contribution to a retirement account, that’s 100% right there, off the bat, so that’s an important thing. As soon as you can afford to do that, start right in.
4. Try to diversify yourself somewhat. The old [adage], ‘Don’t put all your eggs in one basket’ [rings true], because that’s going to spread out your risk and help you again ride out any downturns in markets. There’s mutual funds, exchange-traded funds, where you can invest relatively small amounts of money. So there’s different places where you can go; you don’t have to be a millionaire to put your money away.
5. Set a budget, and budget some money aside to put in a savings account. Even if it’s only $50 a month, just start small. But get into the habit of saving as soon as you’re able to do that. And I know it’s difficult for a lot of folks, especially right out of college when they do have college loans and maybe moving expenses and other kinds of things that can really take a chunk out of their income, but try to save even just a little regularly [to get into that habit].
6. Know where your money is and know what’s going on with it. Don’t just kind of ignore it, because things can happen in your life over time where you really will need to know that information, so make sure you have knowledge of where the money’s invested and how it’s being invested.
7. If you have younger children, carry life insurance. I’m not sure that life insurance is so necessary after the kids have flown the nest and they’re out on their own, but when they’re young, I think that’s probably [important]. Sometimes, you can get that from your employer, so take advantage of that. It’s usually really inexpensive, and it’s a way to make sure if anything should happen to you, that your kids will have a cushion that they might need going forward.