On the Money is a monthly advice column. If you’re looking for advice on spending, saving or investing — or any complicated emotions that may come up when you’re getting ready to make a big financial decision — you canSubmit your question in this form. Here, we answer two questions asked by Vox readers, which have been edited and condensed.
I am currently 27 years old and am lucky enough to still live at home with my parents and have a solid paying local government job. I could be more financially literate in many areas, however, investing is one that I should probably focus on now. I have used any earnings in my life to increase a large sum.
Dear 27,
I’m fairly bearish on investing, as you may know if you’ve read my column for a while. Yes, you can do the math “if you invest $1,000 a month for 35 years with an average return of 6 percent, you’ll retire a millionaire” but the way to know if such advice is worth your attention is Look at all the retirees you know and ask yourself how many of them are millionaires.
It’s not just that investing $1,000 a month for 35 years is impractical for most people, although it is a lot. It’s also that you can’t count on 6 percent returns. Some years may provide returns of only 4 percent. Other years may provide a negative return – and that’s before you crash and correct. Even if today’s retirees were diligent about adding money to their portfolio each month, they could lose a significant portion of their portfolio’s value. three separate times (The dot-com bust, the global financial crisis, and the post-pandemic bear market). The market can rebound relatively quickly, but it takes much longer for compound interest.
With that in mind, ask me the questions I always ask you. why Are you looking to increase your lifetime earnings to a large sum and are investing the only way To do it? Living with your parents while working a solid paying government job is a great way to add to your savings. CD ladders are sure bets right now, and high-yield savings accounts (HYSAs) are still going strong. From my perspective, there are many different ways to increase your net worth – and that’s before even getting into the question of how you can increase your income over the next 35 years.
I’m certainly not going to discourage you from investing, especially since you can get significant tax benefits from traditional IRAs, 401(k)s, HSAs, and the like. I will also remind you that I am not an investment advisor, but standard financial advice suggests that you look into index funds rather than becoming a day trader. Also, don’t forget to compare expense ratios.
That said, we have to go back to the question of why you want more money. Down payment for a home? You probably don’t want to invest in doing this, because the time horizon is too short. Starting a business? the same Retirement? Sure, get those tax breaks and keep your money somewhere you can’t touch without paying a penalty. Investing can work, in that case, though you can keep your retirement savings in CDs.
But if you get that weird feeling that you’re leaving money on the table by not investing, well – read Helen Olen’s excellent book Pound Fool: Exposing the Dark Side of the Personal Finance IndustryView any investment analysis by Dan Olson folding ideas (Incl “The line goes up” And “This is financial advice.”), and remember that there is no such thing as an average 6 percent return. Know the risk you are taking before you take it and don’t invest money you can’t afford to lose.
I am starting a business and I would like to find a mentor. I’ve been emailing everyone I can, but I’m getting no reply. How can I build such a relationship?
Dear Mentis (since there were two of you who wrote variations of this question),
There are a variety of organizations, however, that can help you match your small business with a small business mentor, including your local library, your local chamber of commerce, and the alumni center of any institution you may have graduated from. Finding out after an evening of networking or an hour-long lunch with a patient alumnus can be shallow at best.
The best way to get real mentorship—the kind that can actually help you get a business off the ground—is to prove you’re ready to do the work.
Mentorship, like almost all relationships, is one of those deals where you can’t ask someone to give you what you want. Even if your small business idea isn’t really, really good. Before people will be willing to help you, you have to help someone else first.
In some cases, you may need to hire someone. However, you don’t want to end up with a demanding or unfulfilling task because you think the boss might notice you someday. If you find a potential mentor who needs a right-hand assistant in a business that coincidentally matches the one you want to start, well, That might work — but such work often goes to people the consultant already knows.
Which means you may have to be helpful in other ways. For example, there are in-person and online communities for small business owners, and if you contribute positively to those communities, you may find people interested in recommending your business. This will definitely be a more positive contribution than showing up to an event and passing out your business cards You want to be the person everyone knows and the person who can be counted on to add value to the conversation. You might even want to be the person who helps plan and host events where everyone else stands around and passes out their business cards.
You can volunteer at any type of organization that attracts smart, ambitious people — industry groups, political groups, and so on — and thus attract the attention of a potential mentor.
If your business idea is really, really, really Well and all the shortcuts you want to do, see things like Emergent Ventures or Y Combinator. Remember that the first question these mentor-investors may ask is, “How will your business help someone else?” Make sure you know that answer – like, really, really, really Know it — including the answer to the question, “How is your business going to make money?”
But you can stop cold emailing. As you already know, they are not responding to you.
