Oprah stresses the importance of spending and investing your money on/in what you truly believe in.
Amy Sussman/Getty ImagesWith an estimated net worth of $2.5 billion dollars, Oprah is one of the richest self-made women in America, according to Forbes. And she stresses the importance of spending and investing your money on/in what you truly believe in. She writes: “I hope the way you spend your money is in line with the truth of who you are and what you care about. I hope that your money brings joy to you and the ones you love. And I hope you use it as a powerful force for good to fulfill your best intentions.”
It’s advice that pros say can work for some of you, and even help you save more. (That’s especially good news now as some savings accounts are now paying more than they have in a decade — see the best savings account rates you may get now here.) But here’s what you need to know before you take the advice to heart both in how you spend and save your money, and how you invest it.
Spending that aligns with your values: What can it do for you?
Spending in a manner that aligns with your values can lead you to make better, more thoughtful purchases, says Bill Nugent, certified financial planner at Convey Wealth. Indeed, asking yourself, before you buy something, whether it aligns with your personal values, could stop frivolous spending on things that don’t improve your life. (Do you really want to buy your child yet another toy, or yourself yet another pair of pants you can’t truly afford?) “It helps to have the mindset that sometimes purchasing is not merely just spending,” says Nugent. Indeed, spending should be a reflection of what’s important to you.
To be sure, this doesn’t work on all purchases. And spending that aligns with your values doesn’t necessarily mean you’ll save money or curb buying unnecessary things. “Have you ever bought a magazine or candy or brownies you didn’t want, for too much money, because it would help a kid raise funds for something important to them?” says Anthony Ferreira, certified financial planner at WorthPointe Wealth Management.
What’s more, “you need to have sound financial values in place first in order to have enough money left over to spend on things that align with your value system. For most millionaires and billionaires like Oprah, they already have this luxury,” says certified financial planner Eric Presogna at OneUp Financial.
See the best savings account rates you may get now here.
Investing that aligns with your values: What can it do for you?
ESG investing refers to an investment strategy that favors companies with sustainable business models as measured by various environmental, social and governance factors. “Some investors explain this by saying it is investing to do well for society and meet your own values while doing well for yourself,” says certified financial planner Karen Altfest at Altfest Personal Wealth Management.
The question is: Can you make money from this? Yes, but it’s not a given. The Harvard Businss Review recently published a piece with the headline “Yes, Investing in ESG Pays Off,” that noted that “a growing number of studies prove the payoff from focusing on long-term value and ESG.” That said, making money is not a given at all, and Bloomberg Intelligence (BI) released a report in January 2022 indicating that while global ESG assets may surpass $41 trillion by 2022, they’ll face challenges like regulators tackling the risk of greenwashing (when companies spend time and money making unsubstantiated claims that they’re environmentally friendly, instead of minimizing their environmental impact).
So what’s the takeaway? ESG investing can be a good way to invest some of your money as long as you make sure the investments you choose fit into your portfolio as a whole. “Also, do a check to see that the investments you select are really as ESG-conscious as they imply,” says Altfest.
There are a few ways to go about ESG investing. Ferreira says they vary based on how focused and involved the investor wishes to be. “You can choose to invest in a mutual fund or ETF, which is limited as the investor must accept the decisions of the fund manager and they may not agree on all criteria and issues. You can have a separately managed account where an investor tells an adviser where they stand on issues and specifically identifies companies to hold or exclude, or the investor can select investments individually based on how the prospective investment aligns with their values,” says Ferreira.
Before determining if you should invest in ESG, Presogna says it’s important to address why you’re investing and what you’re investing for. “Personal financial goals, risk tolerance and time horizon are three factors investors should consider before looking to employ an ESG strategy,” says Presogna.
Instead of chasing a potential gain that can get you into trouble, Altfest says, “it can be wiser to invest with reasonable expectations in mind. Don’t believe everything you’re told, be suspicious, and examine each company, each mutual fund or each ETF and their management team before making your choices.” To that point, Presogna says, “Do your due diligence. ESG funds come in all shapes and sizes, can have high internal costs and in some cases aren’t that different from broad market index funds that cost a lot less.”
The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.
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January 13, 2023 at 05:30PM
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Oprah Winfrey, now worth an estimated $2.5 billion, says you should spend your money like this — and for some of you, it’s also a simple, but smart, trick to save more - MarketWatch
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