Dollars and Sense

Susan Warren of Fort Collins credits her father for her understanding of money. She now manages a good portion of her investment portfolio herself and often outperforms the financial planners who manage the rest of it.

Warren says her father, who left a national advertising firm in his 50s to start his own company, had a simple system. “He said you should always pay yourself first,” Warren, a Realtor, says. “Then you work with what’s leftover. If you buy something on a credit card, you pay it off at the end of the month. He really guided me, and it worked.”

Susan Warren, Realtor

But since most of us didn’t have Warren’s father to teach us that stuff, and not all of us learned about it in school, the world of investing can be daunting and confusing.

The confusion is exacerbated by the fact that everyone has different plans and goals. Some want to put away extra money for retirement or watch their hard-earned savings grow. Some are trying not to be part of the more than half of Americans living paycheck to paycheck. Others inherited money and have no idea what to do with it.

The solution is often found in the world of annuities, IRAs and other types of investments, each with their own benefits and drawbacks.

“Our industry has been successful because it has created confusion for the public,” says Justin Davis, certified financial planner and CEO of Impact Financial Strategies in Fort Collins. “It’s pretty simple, but the whole industry is about making it more complex.”

Justin Davis, CEO of Impact Financial Strategies

Start with retirement

The first step many people take in investing is participating in a 401(k) program provided by their employer, says Christina Abbey, vice president of investments at Raymond James in Fort Collins. “That’s a good starting place for someone who doesn’t know about investing. It comes out of your paycheck pre-tax, so you’re actually investing more upfront.”

Abbey also likes this strategy for people who are just starting out because their contributions are automatic and out of sight, out of mind. In other words, you can set it up and forget about it.

While 401(k)s have a limited number of investment options, they do have a manager overseeing the funds who you can talk to. That provides peace of mind knowing that a professional is handling your investments and you don’t have to put much thought into them.

“You may never hear from that person, but that doesn’t mean you couldn’t or shouldn’t reach out to them and say, ‘I’d like to learn more about my options and if I’m invested in the right kind of funds,’” Abbey says.

Christina Abbey, vice president of investments at Raymond James

To DIY or get help

The choice of investing on your own or with an advisor comes down to how much work you want to do. For Warren, reading up on businesses and managing her own buying and selling is fun.

“I’ve always been fascinated by it,” she says.

However, Warren admits she can get emotional about some of her stocks. She’s always loved owning stock in Disney, she says, but when the company numbers started dipping, she had to make some hard choices.

Abbey says an advisor can help with that: “It can be tricky to remove emotion when you’re dealing with your own money. Also, I think it’s easy to get into that group-think mentality, like if everyone is selling, it’s easy to ask yourself, ‘Should I be selling now, too?’”

If you want to work with a financial advisor, Abbey says a personal recommendation from a friend or family member is a good place to start. Davis suggests using a certified financial planner. “They have a lot of education. It’s way more than just obtaining a license to go out and sell mutual funds,” he says.

For folks who want to invest on their own, there are a number of websites—Robinhood, Charles Schwab and others—that have different systems, prices and options to consult with a professional. While these platforms are helpful, they may come with some concerns (see the sidebar on gamification for more information).

Come up with a plan

Davis says there are only a few things you can do with money aside from spending or saving it:

Invest in a company. That’s what a stock is. Your return is based on how the company performs. There are a large number of stocks and even more mutual funds, which are ways to wrap a bunch of different stocks and other investments together.

Invest in real estate and specialty items. These can include antique cars, wine and other high-value products. You can make money this way if you know what you’re doing.

Lend your money. If you lend it to a bank, it’s called a CD (certificate of deposit). Lend to a municipality and it’s a municipal bond. Lend to the U.S. government and it’s a treasury bond. These provide additional income and, in some cases, more stability than traditional stocks because you’re paid a specified return on each of them.

Figuring out which investment option is best for you (and when) is what financial planning is all about. And the amount of money you put in doesn’t have to be big.

“One of the major misconceptions people have about investing is that they don’t have enough money,” Abbey says. “Most accounts don’t require large amounts to get started. Even a little bit at a time goes a long way for your overall financial health when you look at the power of compound interest.”

Compound interest is interest on interest, which means you aren’t just seeing the original principal grow. You’re also making money on the added interest for each term.

“That’s why it’s important to start young and be consistent,” Abbey says. “Even if it’s only $25-50 bucks a month. That may not break the bank for paying bills, but it will go a long way toward saving for your financial security.”

Online investing can feel like a game

Many people get started with investing by visiting one of the hundreds of websites that offer low-cost or free opportunities to invest. These sites try to make it easy for first-time investors, but they can also lure you into spending money you didn’t intend to.

James “Pigeon” Fielder, who teaches political science at Colorado State University and serves as the lead for professional and educational gaming at Mobius World Publishing, says some of these sites add so many bells and whistles that you feel like the money you’re investing isn’t even real.

Fielder calls it “gamification,” where apps use virtual rewards and other fun elements to get people to forget they’re dealing with real money. However, some reputable financial sites, like Fidelity Investments, use game-like aspects to teach first-time investors how the system works, which he says can be a positive use of games.

Having taught at the Air Force Academy and CSU, Fielder has always used aspects of gamification in his teaching to keep students interested. But when he jumped on an investment app a few years ago, he saw that it featured game elements with actual stock purchases.

“Picking stocks can seem like a fun lottery of scratching off the winning ticket. Celebratory confetti drops from the top of the screen for the new users’ first three investments,” Fielder wrote in an article in 2021.

He adds that the intention behind gamification is to “delight people who are new to active investing, taking advantage of the same psychological motivators that drive game behavior. The simple interface is replete with emojis, push notifications, digital confetti and backslapping affirmation emails.”

An easy-to-use investment platform is helpful when doing it on your own, Fielder says, but it’s important not to get swept up in the fun of it.

“I see the optimism. Ease of use is good,” he says. “[But] if someone goes in blind, and that ease of use leads to ‘Oh no! I just cleaned my savings account out,’ that is my concern.”


What the heck are they talking about?

Here are some common investing terms and what they mean:

401(k): A retirement account that invests a portion of your salary (dictated by you) and may be matched by an employer. The money is taken out of your paycheck before taxes, so you take less of a hit upfront.

IRA: An IRA (Individual Retirement Account) is similar to a 401(k), but it’s not provided through your workplace. If you have a traditional IRA, you make either pre-tax or after-tax contributions. If you have a Roth IRA, your contributions are after-tax dollars, so you don’t have to pay taxes on your withdrawals later.

Annuity: The National Council on Aging defines annuities as “an investment option that can provide a guaranteed income for an individual or their spouse throughout their retirement.” Annuities are purchased for a specific period and paid out according to the investment strategy and dollars invested.

Stock: A stock constitutes your ownership of a portion of a company. According to Investopedia, “Units of stock are called ‘shares,’ which entitle the owner to a proportion of the corporation’s assets and profits equal to how much stock they own.”

Compound interest: The interest you earn on interest. illustrates this concept with a math problem: “If you have $100 and it earns 5 percent interest each year, you’ll have $105 at the end of the first year. At the end of the second year, you’ll have $110.25.”