Beginner's guide to investing: 7 tips for greater financial freedom (2023)

Beginner's guide to investing: 7 tips for greater financial freedom (1)

When you read any financial articles, most often than not they will recommend investing as one of the best ways to grow your wealth and enjoy a bit more financial freedom. While this may feel like just another to-do added to your plate, along with budgeting, paying bills, saving, and paying down debt, investing is something that you will likely find is worth your time.

Investing doesn’t have to be extremely time-consuming, or even extremely expensive. Here are 7 investing tips that may help you get started with investing.

1. Do your research

Know what you’re getting into before you start investing

Busy people don’t have the time to learn a completely new subject. That’s just the way it goes. But, with investing, you should make sure you are doing a bit of research into investing best practices so you know you’re making the right investment decisions.

You don’t necessarily have to be reading textbooks' worth of information to understand investing -- though surely it couldn’t hurt if that’s your thing! You can easily find helpful articles online through reputable sources to start laying a foundation of knowledge for your investments. As you dig deeper into investing, you may feel yourself wanting more information. Then, you can take a look at different books and resources to start building your knowledge even further.

If you have a lot on your plate, with work and family life, then you may want to take a more hands-off approach to investing. There’s a lot of value in utilizing a personal financial advisor to do the legwork for you. Be sure that you still do a little bit of research into investing to ensure that you understand the investment choices being proposed to you.

2. Start small

Start investing a small amount of money regularly until you get the hang of things

Investing beginners are normally stumped when it comes to deciding how much money to invest. Many people often assume that they need to invest a large portion of money otherwise they won’t see results. While investing more money will absolutely lead to different results -- and more than likely more expedited results -- you aren’t disqualified from investing if you can only invest a small amount per month.

Especially if you haven’t invested before, it’s actually a good idea to start small with your investments. As you get a better grasp on how to invest, you can gradually start investing more and more as you feel comfortable.

The most important thing to remember is that you should be as consistent as possible with your investments. Even if you can only invest $50 per month, making regular contributions to your investment accounts will help them grow exponentially. And in the day-to-day, you may not even notice a difference without that $50 per month in your account.

3. Understand your investing options

Know where to start putting your money with beginner investing options

As you start digging deeper into your research on investing, you will become much more familiar with your investing options. Every option comes with its own pros and cons, so you will have to do your due diligence to make sure that you fully understand each option and the associated risks.

For those new to investing, they often boil down their investing options to the following:

  • Stocks -- ownership share or equity in a company purchased at a share price.
  • Bonds -- a loan you give to a company or the government that gets paid back after a certain amount of time while accruing interest.
  • Mutual funds -- a mix of investments in a package intended to diversify your portfolio and eliminate high risk.
  • Exchange-traded funds -- a mix of investments in a package that is traded throughout the day like a stock.

As mentioned above, each investment comes with its own risk and own reward. Ensure you look into your options as thoroughly as possible before making any investing decisions.

4. Set investment goals

Set goals to help you make better investment decisions

Beginner's guide to investing: 7 tips for greater financial freedom (2)

Just like any goals you set in life, your goals for investing will help you determine a roadmap for success. Your investment goals will be based on what you want to accomplish and when you want to accomplish it. You may want to invest your money so that you can retire, buy a house, or even save up for your child’s college fund. With a clear understanding of what you want to accomplish, you can make better decisions while investing that can help bring you closer to reaching your goals.

Just like many other goal-setting practices, it’s best to follow the SMART goal guidelines. With this, your goals should be:

  • Specific -- Determine how much you’d like to save and why you’d like to save it.
  • Measurable -- Set a specific numerical goal so you can check your progress along the way.
  • Achievable -- Make sure that your goals are realistic and reachable.
  • Relevant -- Ensure your goals align with your broader goals in life.
  • Timely -- Set a timeline to achieve your goals to help you better understand how aggressively you should be investing.

With this approach, you will be able to make better decisions when investing to ensure that every decision you make ties back to your investment goals.

5. Open an investing account

Get the most out of your money by using investing accounts specific to your investment goals

Understanding your investment goals is the first step to knowing what you need to succeed. Investment accounts are created to get you the most value for your money.

For example, if your goal is tied to retirement, you would want to open up some retirement accounts. You may have the option to open an employer-sponsored 401(k) retirement plan or maybe a Roth IRA is more your speed.

Both come with their own pros and cons, but both of these account types are designed to make the most of your money. Again, do your research into the different investment accounts you can open and see which ones work best for your investment goals.

6. Have a backup plan

Make sure you have a financial plan in place now in case the unexpected happens

It can take a long time to see your results come to fruition from your investments. Depending on your investment strategy, you may not even see a return at all. While investing can give you quite a bit of financial return, you may be more concerned about your financial situation now.

Let’s say you don’t have a lot set aside in savings. You may be using investing as a way to boost those savings. Depending on the route you take when you invest, it could be years before you see a return on your investment that really moves the needle.

In this case, you may fear that you don’t have enough money set aside to take care of your family in case you or your spouse were to pass away unexpectedly. Ask yourself:

  • What debt would your family be left with?
  • How would your family adjust to a single-paycheck household? Or, if you’re a stay-at-home parent, how would your family afford to pay someone for the services you normally provide to your family?
  • Would there be enough money set aside to help your children afford education expenses?
  • How would your family afford their everyday expenses?

If you and your spouse don’t have a great game plan in order for your emergency financial backup plan, now’s the time to start thinking about it. Life insurance is a great investment for families who don’t have a ton of money set aside for the unexpected.

With an active life insurance policy, if the policyholder were to pass away, their beneficiaries would get what’s known as a death benefit payout. This money can then be used to help pay for funeral expenses, can be used as an inheritance for your children, or can simply be used to help with the day-to-day expenses your family faces.

The idea of applying for a life insurance policy, undergoing a medical exam, and then going through the long underwriting process may feel a bit unrealistic. Nowadays, though, many companies have started offering a type of no medical exam life insurance policy that’s easy to get and affordable ongoing.

In most cases, when you bypass a medical exam for a life insurance policy, you can expect to pay a lot more on a monthly basis. This other type of no medical exam life insurance, though, works a little bit differently. You will still have to detail a bit of your medical history on the application, but this type of life insurance eliminates the need for medical underwriting. Instead, it uses predictive models to understand your associated health risks without a medical exam. This makes getting life insurance so much easier and you can rest assured knowing your family is financially protected.

7. Start investing now!

Time works in your favor to give you the most return on your investments

Beginner's guide to investing: 7 tips for greater financial freedom (3)

When it comes down to it, the best time to start investing is right now. Time works in your favor when investing, and you will see much better returns on your investments the more time you give yourself to grow those accounts. Even if you don’t invest a ton of money, investing regularly and letting your investments grow with time is key to seeing the payoff you want.

Don’t let your fear hold you back. Get started with investing today and see why investing makes such a huge difference in your financial life.

It’s fair to say that investing is one of the most effective ways to help you grow your wealth. As you become more familiar with investing, you will find that it’s not as difficult or time-consuming as you anticipated. While it may seem a bit intimidating to get started, rip the bandage off and you will see why people place such a high value on investing.

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