Investing: Why Investing is Better Than Saving & Wealth Circle FAQs
Episode Summary
This week, Julia talks about why investing is so much better than saving for building wealth, especially with rising inflation rates. She shares how compounding interest helps you grow your money without doing anything, why investing is going to help you prepare for retirement, and answers some FAQs about the Wealth Circle. The Wealth Circle doors will be closing soon and won’t open again until 2023. Don’t miss your chance to start building your wealth!
Episode Notes
This week, Julia talks about why investing is so much better than saving for building wealth, especially with rising inflation rates. She shares how compounding interest helps you grow your money without doing anything, why investing is going to help you prepare for retirement, and answers some FAQs about the Wealth Circle.
The Wealth Circle doors will be closing soon and won’t open again until 2023. Don’t miss your chance to start building your wealth!
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Transcript
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Hey, it is Julia. Welcome back to Coffee and Coin. I'm taking over the podcast while Allegra is on maternity leave. And today we're going to be talking all about why investing is so important, and why it's so much better than saving when it comes to actually building wealth.
This is Allegra Moet Brantley and you're listening to the coffee and coin podcast where women talk wealth. I'm the founder and CEO of Factora have company on a mission to lead 1 million women to 1 million in net worth. Because when women have more money, we'll have more power to be the change we want to see in the world. If you're ready to hear real women share their real numbers and investment journeys and have a sneaky feeling you should be doing a little more with your money, you are in the right place. Just sit back, relax and turn me up.
All opinions expressed by Team Factora and podcast guests are solely their own and do not necessarily reflect the opinions of Factora Incorporated. This podcast is for informational purposes only and should not be used as the basis for investment decisions. Team Factora. And podcast guests may maintain positions in the securities or investments discussed in this podcast. Only 26% of American women have money in the stock market. Are you part of this 26%? Or are you part of the majority? I think we all know we should be investing. But today we're going to talk about why it matters. I think the most simple explanation or definition of investing is that it's the skill of using your money to earn more money. Who wouldn't want to be good at that. And it's important because first of all, it helps you keep and grow the actual value of your money. Inflation is one of the key reasons why we should all be investing. And inflation is defined as a general increase in prices. So an increase in the cost of living and a decrease in the purchasing value of your money, which means your money is worth less, the numbers stay the same, but the value decreases. I think women are sort of natural savers, we tend to be more risk averse. And we want to, in quotes protect our money. So we prefer to save it because we know where it is. And we can just see it sitting in the account. And we're scared to sort of put that money at risk. But saving doesn't protect our money. Because every dollar sitting in the savings in your savings account is getting eaten away by inflation. And inflation is hard to see because that number won't change, you'll still see the same amount of money sitting in your savings account. But as the cost of living goes up, the money sitting there can afford you less and less. When you save your money, there's no potential for exponential growth like there is when you invest your money. So it's not possible to accelerate your savings faster than the rate of inflation. My high yield savings account has a 1.7% interest rate, the current inflation rate is about eight and a half percent. So my money is losing value at a much faster rate than I'm earning interest on it.
So if I have $50,000 in a high yield savings account, it's going to be worth 6.8% Less next year if that inflation rate stays the same. So I just lost $340 in value without spending a dime. And like I said, it's tricky because I'm going to look at my account and it's still going to show me $50,000 Or I guess $50,000 Plus that 1.7% interest that I earned, which isn't very much, but it's still gonna show that amount. But the actual value of the money that I possess is less, it will buy me less if your money is earning more than the inflation rate. This means that your money is worth more tomorrow than it is today, which is what a situation that we all want to be in. And this is why investing is a much better hedge against inflation because the rate of return can be much higher. The s&p 500 is a stock market index tracking the stock performance of 500 Large companies listed on exchanges in the US. And the s&p 500 has gained about 10.7% On average annually since it was introduced in 1957. Just in the past decade, it has returned about 14% annually on average. So if I put that $50,000 in the s&p 500 instead of in my high yield savings account for an example, and I got a 12% return, which is somewhere in the middle of its historic performance, even with an inflation rate of 8.5% My money is going to grow in value without me doing anything This is a great segue into the next reason that you need to be investing, which is compound interest. Investing helps you take advantage of compound interest. Compound interest is the interest that you earn on your interest. It's amazing. So let's take that $50,000. Again, say you put it into an index fund earning a 10% interest rate annually. In one year, you'd have $55,000. And the next year, it'll earn you 10%, on that 55, not on your original 50,000. So in 10 years at a 10% interest rate compounding annually, you'd have over $129,000, without doing anything to it. So your money can grow substantially, truly without you adding a dime. If you compare that to my high yield savings account, so if I put that same $50,000, into my savings account, earning 1.7%, in 10 years, I just, I'd only have $82,000. So just by changing where I'm parking my money, I'm earning an extra $47,000. Albert Einstein loved compounding interest so much, he called it the eighth wonder of the world, because that's how your money can grow exponentially. There's a lot of really fun compounding interest calculator that you can play with online. And if you look at them, you can see that it's a Nike swoosh. So it starts growing faster and faster and faster and faster as you have more time in the market, because you're earning more interest, and that interest continues to earn more interest. And there are two really important factors when it comes to compound interest. The first one is, what is the interest rate you're getting slash? How often does it compound, the higher the interest rate, and the more often it compounds the better. And to how long do you have, the more time that your money has to take advantage of compound interest, the more exponential your growth is going to be. That's why it's so important to have time in the market to leave it in the market, put it in the market, if you haven't started investing. Time is one of your biggest assets as an investor. So if you haven't gotten started, now is the best time. There's a quote that says the best time to plant a tree was 20 years ago, the second best time is now. So learning how to invest building the skill, getting your money in the market is urgent. And if you haven't done it already, now is the absolute best time to do it. Another reason why investing is so important is because we all want to be wealthy women, and we can't save our way to being truly wealthy women. And we also want to make the world a more equitable place. Everyone is aware of the gender wage gap. But currently, women on average earn 17% less than men. And this wage gap costs women hundreds of 1000s of dollars throughout our lifetimes. And that's even more so for women of color. But the lesser known far more detrimental gap is the gender investment gap. This one costs us millions of dollars throughout our lifetimes. And this gender investment gap is simply that only 26% of women are investing and that percentage is much higher for men. I think there are a lot of reasons for this gap. But we can work to close that gap by learning how to invest and getting your money into the market. And fun fact, it's actually been proven that women are factually better investors. Fidelity did a women and investing study last year and they found that women on average outperformed men. However, that same study found that only 33% of women felt confident in their ability to make investment decisions. And 59% of women ages 20 to 34 differ investing decisions and financial planning to their male partners. Despite being better at it than men. This lack of competence is costing us millions of dollars throughout our lifetimes. And the reality is investing is not hard. It's a skill. It's a skill, like walking. It's a skill like marketing. It's a skill like sales. It's a skill like entrepreneurship. It's a skill that like many of the skills that we have learned as adults. But it is one of the most important fundamental skills that we all need to have as women and we don't. And whatever your goals are, whether it's start a business, buy a house, start a family, take a gap year travel the world investing can help you get there so much faster than saving ever could.
And so much faster than even getting a promotion or getting a raise ever good. The average wage increase in the past year was just 3.3%. And again, inflation right now is At 8.5%, so that 3.3 doesn't really do much to help. You can only earn so much more money, you can only reduce your living expenses so much. But it's really investing that is going to grow your money quickly and more than saving ever could. Another really important reason why investing is so important is to prepare for retirement. Investing is learning how to put your money to work so that you don't have to work for the rest of your life, Social Security is running out. And we all need to be our own safety nets and plan for our future selves. If you don't want to work for the rest of your life, you'll need to have enough in order to cover all of your expenses. By the time you're ready to start. Getting ready for retirement isn't just about having a huge pot of money, you can also own assets that cash flow every month, and that provide you with income. But the thing is, you don't get to have those assets unless you invest. And the higher your investing rate, the faster you can retire. Mister Money Mustache actually has an entire blog post that you can Google. And it's called the shockingly simple math behind early retirement, where he basically shows you that the higher your investing rate, the faster that you can retire. All of this is to say that investing is arguably one of the most important skills that we can learn as adults, and especially as women, we are not taught this skill anywhere else. And I was lucky to have realized this back in 2018, when I joined the wealth circle and my entire life changed. I started with literally $0 to my name, my net worth is now well over half a million dollars. And most of the time during this period, I was earning $75,000 or less. Now I own three properties. I have over 50k invested in the stock market, I have a full emergency fund. I know how to analyze deals, and I love my money, and I can't wait to keep growing it. And I say all of this, because I never thought that it was possible. For me I was an English major in school. I always thought of myself as like a as a left brain person. And I'm just oh, I'm not good at, you know, like spreadsheets and stuff. But investing is a skill that will continue to serve me for the rest of my life. And the only way that I could have ever learned how to do that is through the wealth circle. So I actually want to take this time to answer a few of the most frequently asked questions that we get about the wealth circle. Because enrollment is open now. And spots are filling up fast. The doors are closing really soon. And the wealth circle is one of the reasons why I feel so confident about my money even during an economic downturn. Even during the pandemic, I was confident that I was going to be okay because I have these life lessons that continue to serve me. And I have assets and I'm excited to keep buying more assets. And I just want every woman to be able to feel the same way. That's why Factora exists. So the first question that we get asked a lot is what exactly is the wealth circle. So it is a 12 week course, it's going to teach you proven investment strategies to build wealth. The wealth circle opens twice a year, once in the spring. And once in the fall and the Fall Enrollment is now open. What do you learn during the wealth circle. So there's so much amazing content and material that goes into the wealth circle. First, you start off before the course even begins, you start by getting a clearer understanding of your financial picture. One of the most important things I ever did was complete the Lifestyle Analysis where you just get really clear on where you're spending money, and you dig into your money. If you've been if you are someone who's kind of been avoiding your own personal finances. This can be one of the most empowering exercises because you get to really get clear on where you're spending money. And you learn that your money isn't really as scary as you thought. The first session is all about your investment foundation. It's where you learn how to increase your investing rate and expand your money mindset. Because mindset is really important on this journey.
In the second session, you learn about the stock market. And you learn how it works, what you can buy in it and the power the true power of compounding interest, which we love. Then you learn about asset allocation, which is how to build long term wealth by selecting and managing a portfolio of paper assets. It gets really into the nitty gritty so that you get really clear and the one thing I'll say about the fact to our content is that it's so easy to understand. And it's gorgeous these slides if you're an aesthetic person like me, if you appreciate a vibe a palette, you will never learn about investing in a more gorgeous way. So I love it even asset allocation. Factora makes it look really beautiful and really, really easy to understand. Then, we learn about realist Investing. And Factora teaches you how to get creative with partnerships and strategies to earn income from real estate investing. This is such a fun session and women love it. And there have been so many women that have bought first, second third properties after learning the information that we teach you here. Then you learn about business investing, which is when you learn all different ways that you can invest in a business, it doesn't have to be starting your own, it can be investing in somebody else's. And the last piece of the puzzle is really tying it all together into accountability systems, where you learn how to make your goals and actual reality by setting up systems for ongoing accountability. And throughout all of this, you get access to the Slack community, which is where women are sharing advice and asking questions and sharing their own exciting investing updates. It's a really fun place to be a part of, and actually, I was just reading a thread about Airbnb management because my partner and I managed to Airbnbs together and there was a little tip on a thread, and I was like, I'm going to start doing that. So because of something that I read in Slack, my partner and I immediately implemented that into our Airbnb management strategy, which was really awesome. Another question that we get asked a lot is like, Okay, well, what is this community element until you keep talking about this community. So one of the reasons why I think the community element is so cool is that people who write their goals down are 42% more likely to achieve them. If you tell a friend that rate goes to 78%. But meeting regularly with an accountability partner about your goal increases this even higher to 95%. That's why the wall circle comes with a built in community because Factora actually wants you to achieve the investment goals that they help you create. There is an option to get paired up and meet one on one with accountability partners to share your learnings, and to meet new money friends all across the country. There are also live calls every other Wednesday from seven to 8pm Central where you can connect with hundreds of women from all over and talk about your financial strategies in small discussion groups. So there's a ton of opportunity for you to make connections and to have this sort of built in accountability, which is really amazing. That was one of my favorite parts about my wealth struggle experience is getting to make a lot of money friends that I know that I can talk to, and I can share my money wins. And I don't necessarily feel that way about my friends outside of this Factora community. Another thing that we get a lot of questions about is how long will you have access to the wealth circle, you have full access to the course portal with recordings, tools, bonus resources in the Slack community for a full year. And any spreadsheets that you fill out with your information, you have access to those for a lifetime, I still use my lifestyle analysis to check in with myself on my spending. And I also still use the net worth tracker, because I love tracking my net worth over time because it just keeps going up. So if you're ready to learn key investing principles that you need to accomplish your biggest goals, I highly recommend joining the wealth circle. It won't open again until next year. So if you're ready to learn what you need to do to hedge against inflation, how to grow your wealth, how to retire early, if that's something that you want to do, how to accomplish all of your life dreams and start having a blast with your money. The wall circle is the place for you. You can pay for the wall circle all upfront, or you can pay in 12 monthly installments. So it's essentially like a yearly subscription to your own wealth. It's a no brainer. Join before the spots are all gone and before they close the doors again, it's not opening again until 2023 and thanks for joining me here. I'll see you in the next coffee and coin episode.