Are You Investing Enough?

You're probably not investing enough to have the retirement you want.

It's true that the important thing associated with saving and investing is that you get started. Right now. Even if you only have a few bucks a month to invest, you should get started. However, it's vital that you progress further as you earn more money. It's not going to help you much if you remain at the same level of investing throughout your life.

Sure, it's important to diversify appropriately, look for value, and do all those things that savvy investors do. But you need to have the right-sized portfolio for it to work out in your favor.

Increase Your Contributions and Start Investing Enough

It's true that, while you are a college kid with a part-time job or while you are working on digging out from under mounds of debt, you might only be able to invest $50 or $100 a month. (With a site like Betterment, you can set up automatic investments. Also, read my Betterment Review.)

Don't think for a second, though, that investing $100 a month automatically for the rest of your working life is the road to riches in retirement. As you pay down debt, move on to better jobs, and find yourself with a higher income, you need to boost what you are investing each month. If it's too hard to make the jump from investing $100 a month to investing $500 a month (or more), you can step it up. Make a plan over the next few months to add another $50 a month to your automatic investment. Every two or three months, step up your monthly investing plan by a little more.

My son started by putting $10 a week in a Roth IRA. After a few months, when he got a raise at work, he began contributing $15 a week. Now he's up to $20 a week. Once he finishes school and starts a full-time job, he's planning to continue stepping up his contributions. Right now, he's not investing enough to have a comfortable retirement. But he's building a habit. And he sees the value of compounding returns.

Investing more each month doesn't have to be an all-or-nothing proposition. Work up to it until you're comfortable, but don't take too long. Realize that an increase in income shouldn't be an excuse to go on vacation more or buy more toys — at least until you have upped your regular monthly investment.

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