Personal Finance

Good financial habits may not make you rich. Here’s what will

Key Points
  • People who are able to rein in their spending may be missing out on a key piece of money management.
  • Millennials may think investing is for rich people, or that it takes a tremendous amount of knowledge. And some are learning how to do it for themselves.
Laura Williams, an independent business-owner, is learning to invest in hopes of a comfortable retirement.
Source: Laura Williams

You’re spending wisely? Check. Got money set aside for an emergency? Check. Debts paid off? Check.

Laura Williams, owner of, a client management platform, thought she had a good grip on her finances.

“I’ve always been sensible, but not necessarily smart about money,” Williams said. “I always put money aside and I spend less than I earn.”

But like lots of millennials, Williams, 29, was hesitant about investing, and she wasn’t putting anything aside for retirement.

Don’t know much about investing?

The roadblock for many younger investors is the fear that they’re not knowledgeable enough.

“People assume that to get started you have to have an absolute command over investing,” said Jennifer Dempsey Fox, a certified financial planner and president of Bryn Mawr Trust Wealth management in Bryn Mawr, Pennsylvania.

Asking questions is a new investor’s best strategy.

“I know it’s kind of trite but there is no such thing as a stupid question when it comes to investing,” Fox said. “Especially if it’s holding you back from the next step."

Young people are often confronted with an overwhelming number of decisions. “Where should they put the money first?” said Adam Vega, a CFP at United Capital in Miami.

There is no such thing as a stupid question when it comes to investing.
Jennifer Dempsey Fox
CFP, Bryn Mawr Trust Wealth Management

“Pay off loans? Save? What I’ve seen them do is start, but start too late. They’re in their 40s or 50s when they finally begin investing,” Vega said.

If you wait until you’re more settled and more knowledgeable, “you’ve lost 20 years of saving potential,” Vega said. It seems to be a more or less static problem for this age group, and one Vega does not see changing.

Good financial habits are a great starting point, but starting to invest as early as possible is the best way to meet substantial goals. “Begin early,” Vega said, “so you can take advantage of tax deferrals, compound interest, and interest on your interest.”

Take that first step

“As much as people can save, they should save,” Vega said. Whether it’s $100 or $1,000, start with any dollar amount and gradually increase.

Build the habit of saving and investing, and when you start to see some results, it becomes easier. Vega recommends setting checkpoints so you can realize your accomplishments when you hit that first $1,000. (Click on chart below to enlarge.)

Don’t get discouraged by unrealistic numbers. The recommendations to save $1 million or $2 million can be off-putting. “You feel you’ll never have enough,” Vega said.

Vega’s solution: “Don’t look at those numbers. You’ll never start saving if you do.”

Not for millionaires only

Williams started thinking about retiring someday, and looking at her finances, she didn’t see that happen unless she changed some of her strategies.

“I have money in the bank but when it’s sitting in the bank it’s not doing anything for me,” Williams said.

It was a revelation that money in the bank or in a low-interest savings account could mean actually losing money because it wouldn’t keep pace with inflation.

She began reading Ramit Sethi’s “I Will Teach You To Be Rich,” a personal finance best-seller aimed at people ages 20 to 35.

“I wanted to look into where I’d put that money where it wouldn’t be too risky but would give me a really good return,” Williams said. She began exploring robo-advisors like Betterment, which she found appealing because they allowed her to set a comfortable level of risk without an exhaustive amount of research.

If I’d started when I was 24, I’d have been able to put away a very small amount of money that would have been beneficial to me when I‘m 65.
Laura Williams

“What frustrates me is I didn’t start earlier,” Williams said. “If I’d started when I was 24, I’d have been able to put away a very small amount of money that would have been beneficial to me when I‘m 65.”

The idea of investing always conjured up an image of old men in suits for Williams.

To her surprise, she learned that she could control how much risk to take on and learn enough about investing to feel more comfortable. Different types of people invest, and you don’t have to be a millionaire.

“It’s for regular people, and for young people, and actually it’s a very smart thing to do," Williams said.

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