1 in 4 Americans Is Investing Less to Pay for Everyday Expenses

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  • It's a good idea to invest money you don't need to use right away.
  • If your bills have increased, you may need to cut back on investing to cover your basic needs.

Sometimes, you have to put your near-term needs ahead of your long-term goals.

Inflation has been soaring for well over a year now, and it's been putting a massive strain on cash-strapped consumers. In fact, since the latter part of 2021, many people have had to consistently dip into their savings accounts due to the higher cost of living. 

It's not surprising, then, to learn that 25% of Americans are now putting less money into the stock market because they need that cash for everyday household expenses, as per a new Wells Fargo survey. Specifically, some of the areas consumers need more money for are groceries, transportation, utilities, debt obligations, and housing. 

If you're in a position where you're struggling to keep investing and cover your bills in full, you may need to hit pause on funding your brokerage account or IRA. And while that may not be ideal, it's also something you shouldn't feel bad about. 

Don't sweat a drop in investment dollars

It's definitely a great thing to put money you don't need right away to work by investing it, whether you do so in a regular brokerage account or a savings plan earmarked specifically for retirement, like an IRA. But if money has gotten tight, you shouldn't feel guilty for investing less so you can cover your rising bills.

Now that said, if it's possible to cut back on spending to some degree, that could do the trick of allowing you to keep funding an IRA. And that's an important thing, because traditional IRAs offer you a tax break on the money you contribute. That's a benefit that can save you a lot of money, and it's one you probably don't want to give up.

So, let's say you live a pretty frugal lifestyle but do spend $45 a month on streaming services and $100 a month on social outings. If you're able to cancel a streaming service and cut your social budget in half, you'll free up $65 a month for your IRA. That's $780 worth of annual income the IRS won't get to tax you on.

But let's say you're not paying for streaming content or social events. Rather, you're pretty much spending every dollar you earn on essentials. In that case, there's probably nothing left to cut. And so if you have to hold off on funding your IRA or brokerage account for a while, so be it. 

Should you take money out of savings to invest?

If your paychecks aren't giving you enough money to keep investing, you may be wondering if you should take a withdrawal from your savings account and invest it instead. If that savings account is earmarked for emergencies, then no, don't do it. While you might earn a higher return on your money by investing it than keeping it in savings, you need that money protected and accessible in case an unplanned bill lands in your lap and you need to cover it on the spot.

If you have $10,000 in an emergency fund and another $2,000 in a vacation fund, and you're willing to part with some of your vacation fund, then sure, go ahead and invest that money. But don't take money away from your emergency stash. We don't know when inflation levels will start to cool, and it's important to have extra money available while living costs are so high.

Once inflation slows down, you may be able to ramp back up on investing. But until then, give yourself a break and make sure to leave your emergency fund alone.

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