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.
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.
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.
Set goals to help you make better investment decisions
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.
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.
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.
Time works in your favor to give you the most return on your investments
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.
- Spend less than you earn. ...
- Have a saving mindset. ...
- Create a rainy-day fund. ...
- Control debt—don't let it control you. ...
- Get insured. ...
- Think retirement starting now. ...
- 10 Steps to Financial Freedom in 2023. ...
- Establish Financial Goals. ...
- Track Your Spending and Create a Budget. ...
- Pay off Debt. ...
- Invest in Retirement Accounts. ...
- Build an Emergency Fund. ...
- Increase Your Income Streams. ...
- Automate Financial Tasks.
- Clearly define your financial goals. ...
- Track and analyze your spending. ...
- Automate your money. ...
- Pay down your debts. ...
- See whether investing makes sense. ...
- Keep an eye on your credit score. ...
- Consider meeting with a financial adviser.
- Set Life Goals.
- Make a Monthly Budget.
- Pay off Credit Cards in Full.
- Create Automatic Savings.
- Start Investing Now.
- Watch Your Credit Score.
- Negotiate for Goods and Services.
- Stay Educated on Financial Issues.
- Save $1,000 for Your Starter Emergency Fund.
- Pay Off All Debt (Except the House) Using the Debt Snowball.
- Save 3–6 Months of Expenses in a Fully Funded Emergency Fund.
- Invest 15% of Your Household Income in Retirement.
- Save for Your Children's College Fund.
- Pay Off Your Home Early.
- Build Wealth and Give.
One of the most common types of percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings.How to save $10,000 in 2023? ›
If you're serious about meeting a big savings goal for 2023, put the savings process on autopilot. Arrange for $833 to bounce from your checking account over to your savings account at the start of each month so you're not tempted to spend that cash.How much money should I have saved 2023? ›
An analysis by Fidelity Investments provides some general guidelines for defining this. These guidelines suggest you should have one times the amount of your salary saved by age 30, three times by age 40, six times by age 50, eight times by age 60 and 10 times your salary by age 67.What is the money savings challenge for 2023? ›
52-Week Saving Challenge
This challenge encourages you to build a savings habit by gradually saving a little more each week. During the first week of the year, you save $1. In the second week, you save $2. And the week after that, you save $3, and so on, until you reach $52 saved for the last week of the year.
Having trotted out those disclaimers, the math result is that financial independence happens when your assets are equal to your expenses divided by 4%. In other words, Assets = Expenses / 0.04 = Expenses * 25. Once your assets are 25x your expenses then you're financially independent and able to retire at any time.
The five pillars of financial planning—investments, income planning, insurance, tax planning, and estate planning— are a simple but comprehensive approach to financial planning. They are foundational in the course for financial freedom in any financial plan.How can I be financially intelligent? ›
- Identify your money stressors. ...
- Sit down and make your budget. ...
- Manage your debt. ...
- Create a savings plan. ...
- Spend wisely. ...
- Build your credit and track your credit score. ...
- Get the most out of your work benefits. ...
- Look into retirement plans.
Increasing your income – while keeping the spending levels constant or in check – is one of the fastest ways to reach financial freedom. This requires you to continuously work on advancing your career or your business.Why money is not coming to me? ›
Your thoughts tailor everything about you. If you're going through life constantly feeling like you'll always be struggling financially or you'll never have enough, then that's exactly how it will be. Switch your mindset to a place of abundance and security. Money cannot come where it is not welcomed.What is the best age to start financial freedom? ›
Parents and kids disagree on the right age to become financially independent, report finds. While young adults said 21 is a good age to start paying some of their own expenses, older generations are more likely to think that their kids should be completely financially independent by then.What are Dave Ramsey's 7 baby steps to financial success? ›
|Baby Step||Action to take|
|1||Save $1,000 for your starter emergency fund.|
|2||Pay off all debt (except your mortgage) using the debt snowball method.|
|3||Save three to six months of expenses in an emergency fund.|
|4||Invest 15% of your household income for retirement.|
What Is the 30-Day Rule? Instead of allowing yourself to make that impulse purchase, wait for 30 days before you buy — that's the 30-day rule. Following this rule means you defer all non-essential purchases for 30 days, which gives you ample time to think about whether you really need to make the purchase.What are the steps of financial freedom? ›
- Determine your financial goals.
- Know your current financial situation.
- Open the right accounts.
- Set up a deposit schedule.
- Track your spending.
- Formulate a budget or spending plan.
- Trim your budget.
- Prepare for “surprise” expenses.