Your Money Should Work as Hard as You Do

By: Jen Posyluzny Mallia

Let’s say you have a little money. You know you should be doing something with it to prepare for the future. But when faced with all the options out there, sometimes it feels like the easiest option is just to put it in your bank account and forget about it. The options are simply too overwhelming. Leaving it in your low-interest earning checking account may be the easiest approach, but it isn’t likely the best choice. You worked hard for that money and now it’s time that money worked for you.

The Name of the Game is Diversification

As the old saying goes, “Don’t put all your eggs in one basket,” and nowhere does this apply more than in investing. Ideally, you want to create an investment portfolio for yourself that is varied enough that if one of your investments drops in value, you have enough money in other spots to soften how severely that one loss affects you.  

Set Financial Goals

Setting goals can help you figure out what kind of investments and financial decisions you should be making. They can be long-term, such as retirement planning, or shorter-term, like saving for a boat or a vacation. Part of this will mean determining whether you need to keep your money “liquid” (easily and quickly accessible) or if you can afford to lock it into an investment for a fixed period of time.

Some investments will let you pull money out if the need arises, but you pay a penalty fee to do so.

Evaluate Your Risk Tolerance

Factors that might make you less risk-averse:

• You are the sole breadwinner in your household.
• You need the money to survive.
• You are close to retirement.
• Other people rely on you financially.

Factors that might make you more risk-tolerant:

• Your family has more than one source of income.
• Your investment returns will be necessary only for fun and luxuries.
• You still have many earning years ahead of you.   
• Your dependents are financially stable on their own.

Which Investment is Best?

Unfortunately, there is no clear-cut, one-size-fits-all answer. The most important question is “Which investment is best for me?” The answer will depend on your income, your goals, your risk tolerance, and to some extent, your financial savvy. 

Get an expert

The best advice is to seek out professional help.The IAFF Financial Corporation (iaff-fc.com) has a wealth management initiative and offers webinars and education for union members that may be a great place to start. A good financial advisor will ask you lots of questions to get a grasp on your individual situation and will craft an investment strategy that reflects that.