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- The absence of a clear financial goal is no excuse to stop saving money, according to certified financial planner Eric Roberge.
- After establishing an emergency fund, contributing to retirement accounts, and feeling generally pleased with their lifestyle, most people spend any extra money they have, Roberge said.
- Roberge recommends putting anything "extra" — money that’s not going toward expenses or a specific goal — into a taxable brokerage account. It has the opportunity to grow and will be there when you inevitably need it.
Even if you’re not working toward an obvious goal right now — like buying a house, preparing for a baby, or starting a side business — don’t use it as an excuse to stop saving money all together, says certified financial planner Eric Roberge.
In a recent blog post, Roberge explained why it’s imperative to continue moving forward financially after setting up an emergency fund and funding your retirement accounts (this should always be happening in the background). None of us can predict the future with certainty — what we’ll want to spend, buy, or invest in years down the line may very well evolve, Roberge wrote.
"You don’t need specific goals. But you will need money at some point, which is why the goal doesn’t matter so much as whether or not you’re saving for that thing you’re gonna want someday," he wrote. In other words, don’t disrupt your momentum simply because there’s no clear end goal. Instead, aim to create freedom and flexibility for your future self, Roberge said.
Simply spending the "extra" money that seems to have no immediate purpose can be tempting, and it’s fine to do in moderation, Roberge said, but "if you want to enjoy more financial success," put the money in a brokerage account.
"You don’t need goals to save or to plan. What you need is a wealth-building account," Roberge wrote. A taxable brokerage account "is for the times when you don’t have a detailed goal you’re striving to achieve, but you still want to save for a future you want to enjoy," he said.
A brokerage account will allow you to invest in stocks, bonds, and mutual funds. It’s called a taxable investment account because any money deposited into it has already been taxed, unlike an IRA or deferred compensation plan like a 401(k).
You can open a brokerage account at almost any financial institution, usually with a minimum deposit of $1,000 or more. Before choosing a brokerage, make sure to browse through the investment options and keep an eye out for low-cost funds with expense ratios below 1%.
If you don’t have much money to invest up front or don’t think you’ll need much professional advice, you may consider opening a brokerage account through a robo-advisor such as Wealthfront or Betterment. Robo-advisors use complex computer algorithms to create the ideal investment portfolio for your needs, specialize in low-cost investment options, and typically require a lower minimum account balance.
While returns are never guaranteed, the stock market has returned an average of 7% to 8%, after inflation, annually. If the alternative to investing your extra money in a brokerage for a "someday" goal is spending it frivolously, you have nothing to lose. When the time comes to put the money to good use, you can sell your investments and withdraw the cash.
As Roberge put it, "You may not know if you want to save for a house or to take a year off and travel. Maybe you’re not sure if a traditional retirement is right for you, or if you’d prefer to achieve financial freedom instead… but once you do figure these things out, you’re going to be very happy to have the money available to do what you want because you saved it along the way."
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