- Eric Roberge is a financial planner whose clients always ask if they're putting away enough money for the future.
- Although everyone is different, he says you might not be investing enough if you got a raise but didn't increase your contributions, or if you aren't investing outside of a retirement plan.
- He also points to the size of your goals, risk adversity, and likelihood to keep savings in cash as potential warning signs.
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Want to know the one big question every single financial planning client asks me? It's some variation of, "Am I putting away enough money for the future?"
Saving, investing, contributing to retirement accounts we all know we should be doing these things, but that doesn't mean we always execute on that knowledge (or on the good advice of others who encourage us to contribute enough to create sound financial futures for ourselves).
Even people who are investing enough to be on track to hit their goals tend to question themselves and wonder if they should be putting more into their accounts.
To help you understand whether you're likely on the right track, or if there are some warning signs that you might not be investing enough, check out this list of five indicators that it could be time to bump up contributions to your retirement and brokerage accounts.
1. You got a raise but didn't increase your investment contributions
This may be the biggest red flag that says you're not investing as much as you should be. If you earn more and more money, but your savings stays flat and it's your spending that goes up you may be behind where you should be in terms of building wealth.
Don't let lifestyle creep eat away at your potential to add to your net worth. Anytime you receive a raise, put 50% of the pay increase into a long-term investment (like a diversified portfolio within your 401(k)).
2. You don't have any investments outside of a retirement plan
While contributing to something like a 401(k) or other retirement account is extremely important, it might not be enough on its own if you're only contributing to that one account.
Consider opening and funding something like a non-retirement investment account (also known as a brokerage account) as well. Building a nest egg above and beyond just what is specifically earmarked for retirement can help you create the wealth you need to fund your lifestyle in the future, whether that's retirement or any number of other goals you'd like to accomplish in the long term.
3. The savings you have for your mid- or long-term goals is in cash
You're almost certainly not investing enough if you're only investing for the goals that are furthest out on your time horizon. Don't forget about goals with 10- or 15-year timelines !
Money that you set aside for what you want to do in the "mid-term" ought to be invested, not sitting in cash, to avoid having it lose purchasing power due to inflation. Get that money working for you in the market so you can have the opportunity to earn a bigger return than what you can get in a savings account .
4. You are risk-averse
If you have an investment portfolio with a very conservative asset allocation for your age and time horizon, then you may not be investing enough to reach your goals. This sounds a little counter-intuitive, but the less risk you take, the smaller the reward you can expect.
That means you can't rely on big market returns to generate the money you need to reach your goals. You will have to rely more on your savings power to create a sufficient nest egg, since your portfolio will likely provide less of a return than a more aggressively allocated one over time.
5. You have really big goals
This last sign might not mean you're not saving enough but it certainly indicates you need to do some serious planning if you have goals that will require a very large amount of funding. That could include financial freedom, early retirement , or both.
Goals like this usually require that you save a lot of money. Rules of thumb commonly suggest putting a minimum of 30% or 40% of your income into long-term investments . If you're not investing at least that amount, it might be time to get more aggressive with how much you contribute to your investment portfolio.
Eric Roberge, CFP, is the founder of Beyond Your Hammock . He helps professionals in their 30s do more with their money.
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