How to Turn Your Savings Into Investments (Step by Step Path)

All right, you did something most people never do. You saved real money. Maybe it's $50,000, maybe it's $100,000, maybe it's even more than that. But now you're sitting there looking at the balance feeling like, "I'm proud, but I'm stuck. What do I do?" Proud because you worked hard for every single dollar, but stuck because you don't know what to do. And you know that it's not enough on its own. You know that something has to happen next and you're just not sure. What? So here's the truth. Savings not the— is not the finish line. It's the starting line for your next race. And if nobody has shown you what your next race looks like, that's exactly what we're going to do today. This is Building Your Money Machine, where we help you master your money, eliminate financial stress, and live a life by choice. And I'm your host, Mel Abraham. So today I'm going to give you the exact step-by-step path to move from savings to investing. What accounts to open, how to open them, and what to put in them. Simple, clear, no experience required. Let's do this. All right, so you've done something that most people haven't done. You've saved money, like real money, and now you're sitting here wondering, what do you do with it? Well, let's talk about that, because there is truly a difference between savings and investing. And it's something that nobody tells you clearly enough. See, they're not the same thing and they're not interchangeable. They do completely different jobs. Savings is all about protecting your money. Investing, though, is about growing your money. That's it. Two different jobs. And if you only have one of them working for you, then you only have half the equation. That's the problem. So think about it this way. Your savings account is like a parking lot. You pull the car in, it stays safe. Hopefully nothing happens to it, and nothing is going anywhere though. That's the problem. See, your money sits there, it doesn't move, and it doesn't grow. It earns maybe enough interest to buy you a cup of coffee at the end of the year. Then again, at today's rates, you might only get half a cup of coffee based on what's going on. But here's the thing, investing is very different. Investing is putting your money to work. It's taking those saved dollars and saying, hey, your job now is to make more dollars without me. That's the key. That's the whole game. All right, and here's what most people don't realize: you can't save your way to wealth. It just doesn't work. You can save your way to stability, And stability is important, but stability, that's not freedom. Stability is just not broke. And so it's important to look at how do we build wealth in the process. And people who actually build wealth are the ones who eventually don't have to trade their time for money anymore. They crossed the line. They went from being savers to investors. And that crossing, that transition is exactly what you're going to walk through today. Now, before I go any further, I want to say something to the person who's watching this who's never invested before. I see you, all right? You, you work hard to save what you have. You were disciplined. You said no to things that you could have said yes to, and that's important. And now you're sitting on this balance thinking, I don't want to lose it. And that fear, that fear's real. It's valid. And it's also something that I felt. It's also something that will keep you stuck if we don't deal with it. So the fear of losing what you worked for is exactly what keeps most people from building more. So we're gonna deal with that fear the only way that actually works, with clarity, with a simple path, with the truth so you have it. Because here's the thing, savings gives you a foundation. Now it's time to build the house. And in a moment, I'm gonna show you exactly how to do that step by step, starting from zero investing experience. Think about this. I had a client that came to me. They were smart, they were driven, they wanted to build wealth. So he did what a lot of people do when they decided to invest. He asked around. Someone told him real estate was the way to go, and he, he didn't fully understand it, but it sounded right because a lot of people talked about real estate. Sounded like what serious investors might do. So back before the 2008 recession, he went all in, not just with his own money though. He borrowed money from his parents, so he had his money in there and he had his parents' money in there. And then the financial crisis hit in 2008. And the fact is, is he lost it all. His investment, his parents' money, everything. Now, here's where that story really breaks your heart. He didn't just lose the money. He lost himself. He decided he wasn't capable of it, that investing wasn't for him. And so, he was one of those people that just didn't have what it takes. That's what he thought. So, he sat on the sidelines. But when then I had a chance to sit down with him years later and asked him, "Okay, so what's your plan for retirement? What's your plan for your future?" And you know what he said to me? He says, "I'm just gonna work till I drop." Now, I've heard that a lot over the last 30 years. That one has to be one of the top. That I'm, or I'm counting on the lottery, or maybe my kids will take care of me. Solid strategy, zero math. It doesn't work. Underneath all of that though, the answer was just real pain, real shame, and a complete shutdown of any belief that he could actually do this. Here's what I want you to hear. His mistake wasn't investing. His mistake was investing something he didn't understand at the wrong time in his journey with money he couldn't afford to lose. Real estate's a great investment for the right person at the right time with the right foundation under them. For someone who's starting out with no investing experience, I think it's too complex. I think it's too illiquid, and I think too much can go wrong before you know what hit you. So what he needed was simple, accessible, diversified, something that didn't require him to be an expert to get started. So that's what we built together. Uh, when we sat down and I walked him through the basics, we opened up a simple account, a brokerage account, a discount brokerage account at Fidelity, Schwab, um, Vanguard. We moved some of the cash there. We bought a couple of low-cost index funds and that's it. That was it. No complexity, no speculation, no tips from someone's brother-in-law, just simple diversified, low-cost starting point, liquid. And then we let time and the market do what they do. The day he made that first investment, something shifted in him. He stopped being someone who used to, used to invest and failed. He became someone who invests, an identity shift that, that's worth more than the first dollar of returns. And I think this is the thing that I want us to understand is that we're going to talk about opening an account, what to do, but I want you to think about the identity and what that means about you. Because here's what I've learned. The real cost of waiting isn't just the compound growth that you miss. It's that you never develop the mindset, the skills, the perspective of an investor, that you stay a saver with a fear problem. And the fear doesn't go away by waiting, it goes away by starting. So let me show you how to start. So think about this: you've decided you're ready, you're gonna do this, and you sit down and you pull up Schwab, Fidelity, Vanguard, and you click open an account, and then The questions start. Now, this is the very reason most people stop is because when you start to open the account, we get this barrage of questions. It says, what type of account would you like to open? What's your annual income? What's your net worth? What's the investment experience? What's your risk tolerance? How long is your time horizon? Who's the beneficiary? How would you like to hold title? All those things that maybe you had never thought about and you go, I'm out. And you just check out. And it feels less like opening an investment account and more like applying for a mortgage or security clearance or, or a spot on a game show simultaneously. And it just doesn't feel good. And nobody warned you about it. I literally have a friend, a sharp person, successful in their career, sit down to open an account and get hit with all those questions and they didn't know how to answer them. So they closed the laptop. They told themselves, eh, they'd come back to it later. You know, that was 3 years ago and we just got their accounts open. See, this is the moment that kills more investment journeys than any other market crash. And so that's the thing that I want us to start to understand. I'm gonna walk you through some things 'cause we're gonna fix that right now and gonna do it in plain English. So when you sit down, You're ready. So the questions basically will fall into 4 buckets. Bucket 1 is who are you? This is just identity verification. So you need to be prepared with your name, your date of birth, your Social Security number, your address, your employment status, standard stuff. They're required by law to ask this, and it's nothing really scary. Just fill it in. All right. But then there's bucket 2. What's your financial picture? Now they're going to ask you some things about you and your investing and your income. So they're going to ask about your income range, your net worth, your liquid assets. These are ranges. They're not exact numbers. Under $50,000, $50,000 to $100,000, that kind of thing. They use this to understand the kind of investor they're dealing with. And again, Just answer honestly. It doesn't really matter because there's no shame in where you're at, and it really doesn't have a huge impact on the account. But we move— have to move through it to get to the account. And bucket 3: what are you trying to do? This is where they ask you about your investment objectives and your time horizon. Now, for most beginners, um, You want growth, and your time horizon is typically long-term, meaning that it's 10 years or more. Don't overthink it. You're not locking yourself in forever. This is just to get started. You're just telling them that you're, you're in this, not today trade your grocery money, that you're in it for the long term. Then bucket 4 are the account setup questions. This is where people will also freeze. Beneficiary, how to hold title, margin privileges, option trading, all kinds of questions that maybe you've never been exposed to before. Here's how to handle it. And this is going to make it easy, or at least easier. For beneficiary, this is the person who gets the money if something happens to you. For most people, it's your spouse. It might be your child. If you have a living trust, it's the trust if you have one set up. Just name someone. You can always change it and update it later. Okay, don't let this question stop you. Title, you know, how are you going to open the account? Is it in your own personal name? And that's typically what it is unless you have a living trust, in which case you're going to open it up in the name of the trust. If you're not sure, open it up in your personal name and talk to your estate attorney later and then make an adjustment to it. And then for the questions around, do you need margin or options? The answer is no. You don't need any of these as a beginner. They add risk, they add complexity, and you don't want that right now. Just leave them alone. Just let it go. I mean, you think about this, the margin and the options are like, like a turbo button on a car that you just learned to drive. Technically it's there, but you probably shouldn't push the button. And I'm one of those that is a button pusher, you know, a lever puller, just to see what happens. You don't want to do it with your investing. So the goal of this section is really not perfection, it's just completion. Get through the questions, get the open— the account open, get yourself in the game. Now you're in the game. Now you're in the game. Now, before we go any further, because you're also going to get some questions about the types of accounts. I have a downloadable tool. It's a worksheet that is your investing accounts demystified. It's going to break down all the types of accounts, what they are, when they apply, what you should do. So, if there's any confusion, do me a favor, go to melabraham.com/demystified. Demystified. Download it. It's totally free. And get, get the lay of the land and make sure that you're opening up the right account for the right reasons. Okay? Now, all of this is just the door. See, this is just getting you in the door, because if we don't do those things, we can't start the investing. We can't move from invest— from savings to investing without it. So what matters is on the other side of it. And that's where we're going to go next, is to really start to understand a simple 3-step path to get yourself from savings to investing. The account is open, so you've, you've made that one step. The second step, or the sub-step of step 1, is now you have to fund it. So at the end of opening that account, they're going to say, how do you want to fund it? You can fund it by writing a check. You can fund it by connecting it to an account and have it automatically transferred. But we need to get the money into the account. It's open, but it has nothing, nothing in there to work with. So the first step is to, to fund the account. The easiest way is to link your bank account and move it in. Now, how much do you move in? Well, whatever you decide to start with, it doesn't have to be all at once. You can start with a portion of your savings and add to it over, over time, because I want you to dollar cost cost average. In other words, I want you to be buying at regular intervals throughout. And here's the decision that you're gonna, gonna face up front, and I said that before, is this idea of what kind of account to open. At the beginning, just open up a brokerage account, because in most situations we can open up an IRA or Roth IRA down the road. Or if your employer offers a 401, with a match, that's your first account. Honestly, that's the first place that you need to get into because the match is free money and we need to get that dialed in. It's an immediate return on your investment. We don't leave that on the table. When you look at the wealth priority ladder, it's one of the first things that, that we do. So we're not going to leave that money on the table. Now, if you don't have that 401, then the next account is, is in all likelihood going to be a brokerage account like we just talked about, just a regular brokerage account. It's the most flexible. There's no contribution limits. There's no income restrictions. You don't have any rules around it. You put the money in, you invest it, and when you take the money out, you pay taxes on the gains. Simple, easy, get you in the game. Now, if you qualify, we may at some point have you, like I said, open up a Roth IRA. I love these accounts because they're powerful, because they're— you can put money in after tax. You don't get a tax deduction, but it grows 100% tax-free forever. Okay, that is a huge advantage, which is why they limit how much you can put in, and they limit the amount of income you can have to qualify to put in there. All right, so the government isn't known for being generous, so they offer the tax break, you know, You take it when you qualify. So which one is right for you? Well, that depends on your situation. But for most beginners, I'm going to tell you either the brokerage account, or if your income isn't too high and you qualify, you might want to start with a Roth account and get that tax-free money growing. But this is a great question for advisor. This is a great question for someone to Look at your age, stage, and circumstances, because I can't give you direct advice. I'm just telling you about the accounts that you can, can work with and see what happens. So that's step 1: fund the account after it's open. Step 2: choose what to invest in. That's it. This is where people will overcomplicate things. They start researching individual stocks, they start watching videos about which company is going to be the next big thing, the next Amazon, the next Google, and they spend 3 weeks reading forums and come out more confused than when they started. So here's what I want you to do instead. Simply buy a low-cost index or ETF. That's it. Something broad market, you know, a, a total stock market fund or an S&P 500 fund are, are good options because you're investing in the whole market. You get access to a basket of hundreds or thousands of companies depending what you do. You just buy one, a tiny piece of all of the companies comes along with it. You're no longer betting on one company going up, you're betting on the market going up, on the economy being strong long term. Remember, we're doing this for, for long-term investing, 10 years or more, on the idea over time businesses innovate and they grow and they create value, stock prices go up. That's— and if you look at the chart of a stock market, that's what it does. It goes up 8 out of 10 years, and that's the thing that we want to do. And when you go into an ETF or an index fund, it's easy to get into, it's diversified, it's low cost, it's liquid, it's simple. All the big brokerage firms, the discount brokers— Schwab, Fidelity, Vanguard— all have their own versions of these funds. And like I said, total stock market fund, you invest in all the companies in the stock market. S&P 500, the top 500 companies, rock solid starting point for someone that doesn't have a manager, doesn't need a manager. And you can sit there and allow that to grow for a long time. That's pretty much the kind of investing that I do. And, and really start to work through it from that perspective. See, where people really still will get stuck is they open the account and then they've decided they wanted an index fund and then they look at the list of them and they're There's a ton of them and you go, which one? And again, the laptop closes. So I am telling you that you go and make the decision, total stock market, S&P 500, and make it easy. But if that still puts you in a quandary, I'm gonna give you an easier way. And it's called a target date index fund. This, they make the decisions for you. You have to make one decision. Well, two decisions. How much you're going to put in, and two, when do you think you're going to need the money? In other words, if we're sitting here in 2026 and you say, I'm not going to retire for at least 30 years, I'm not going to need this money for 30 years. So you tack on 30 years, 2026 to 20— '56, or it'll probably round to the nearest 5, so a 2055 fund. You'll look for a target date index fund with the date of 2055. That's it. You pick the year that closest matches the year that you plan to need the money, and it could be 30 years, 40 years, uh, away. It could be 20 years away. And that's the whole decision. You invest in that, and guess what? They stack the funds inside there and they automatically diversify the portfolio based on when you're going to need the money. So it goes from aggressive early on to more conservative to when you need it. It's a place that I want people to get started. If people, if people are concerned and they're unsure what to do, I need you in the game to win the game. You can't win the game of wealth on the sidelines. It's not a spectator sport. So if this will get you in the game, then we start here. You don't have to worry about rebalancing, you don't have to worry about monitoring it, you just keep contributing. And for someone starting out with zero experience, this is one of the most powerful tools to get you in the game. Not because it's most sophisticated, but because it removes the excuse not to start. So is this something that you do forever? Probably not. Just so you know, once you've built up some real momentum, what I call critical mass, once you have the invested dollars and you have a better understanding of how things work, you might graduate and say, I'm no longer going to use target date funds. I'm going to start to build my own portfolio with individual ETFs and index funds so I have more control, more customization, and frankly, more fun. If, if it's your kind of thing, that's the game I want you to play. But I got to get you in the game. So yes, some people do find this fun, and I'm one of them. My wife Stephanie, she'd argue that that's a character flaw, and she might be right. But here's the thing, the mission is simple: get in the game. All right, target date fund does that, an S&P 500 fund does that. Either one gets you started. A total stock market fund gets you started. That's the whole point. Step 3, make it automatic and let time do the work for you. Set up automatic contributions every single month. Set amount, an amount that moves from your bank account to your investment account and gets invested. You don't have to think about it. You don't have to pull the levers. You don't have to push the buttons. You don't have to worry about the dot, the, the, the market. You don't have to do anything. You don't have to watch the financial news. Just let it run. And that's the thing that happens is that when you do this, then then it's just going to build in the background. And most people don't appreciate this until they see what happens. Time in the market beats timing the market every single time. And when the market's going up 8 out of 10 years, the person who consistently invests 30 years will almost always outperform the person who's tried to jump in and jump out at the right moments because the right moments are impossible to predict. Get in the game and get the clock running because you can't get time back. But you can start using it today. So, I want to come back to my client for a moment. The day we set up his account and moved his first dollars and bought his first index funds, he looked at me and said, "That's it? That's all I had to do?" I said, "Yeah, that's it." He spent years on the sidelines because he thought investing was complicated. Because one bad experience, one investment he didn't understand, had convinced him he wasn't capable. And all that time while he was sitting on the sidelines, the market kept going. It kept compounding. And for other people, not for him. Here's where I want you to really hear though, because this is the part that matters the most. The real cost of waiting, it isn't the money you didn't make. The real cost is who you didn't become. Every year you wait, You don't just miss the returns. You miss the chance to become an investor, to develop the mindset, the patience, the perspective that comes from watching your money work while you sleep. You stay a saver with a fear problem. And the fear doesn't go away by reading more. It doesn't go away by waiting for the perfect time. It goes away by starting. My client said something to me a few years after we got him started. He says, Mel Abraham, I can't believe I wasted all those years. I thought I wasn't the kind of person who could do this. And I looked at him and I said, you were always that person. You just didn't know it yet. That's who I'm talking to right now. You're already that person. You've proven it by savings, what you have. The next step isn't complicated. It's just a step. Open the account, fund it, buy the simple index fund, make it automatic, and then get out of the way and let your money do what it was meant to do. Work for you. Because earning more doesn't make you free, a money machine does. And today you just started building yours. All right, listen, if this video helped you, if this episode helped you, hit your thumbs up. Do me a favor, share it with someone who needs to hear this. And while you're there, if you haven't subscribed, hit that subscribe button. It makes the algorithms happy, but it also warms my heart. And if you've got questions or comments, do me a favor, Send me a note, send me a DM, leave me a comment. I love having conversations with you. Until I get a chance to see you in the next one, we're on your path. Thank you for listening to the Affluent Entrepreneur Show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com/group, and I'll see you there. And that's it for this episode of Building Your Money Machine, where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you'd do me a favor, go to Apple Podcasts or wherever you're listening to this podcast and rate and Review review it. the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people, because I truly believe that financial freedom is your birthright, and I want to help each and every one of you claim it. Thanks so much.