Money makes the world go round, but what if you only have a little to spare?
Knowing how to start investing is a skill that can help your money to grow over time. No matter how much you currently have, investing can help you to see great returns.
Investing happens in many different ways. There’s no one best way to invest, but having a strategy is key. In fact, most investment experts suggest diversifying your investment portfolio.
This means that you should invest in different types of stocks, bonds, and other investment opportunities. Taking on different levels of risk is also a good way to diversify your portfolio.
They say “the greater the risk, the greater the reward.” But sometimes investing can surprise you. Even with a small amount of money, certain investments can prove to be extremely fruitful.
While it’s unlikely that you will get rich overnight, investing does give you financial opportunities you wouldn’t have otherwise.
If you’re like many Americans who live paycheck to paycheck you may believe that you can’t invest. But, even with a tight budget, investing can be a reality.
So, what’s the best way to start investing? Read on to find out.
Living on a Budget: How to Start Investing Today
Many Americans are struggling to make ends meet. And, it’s not just folks in the lower tax brackets.
We live in a culture that encourages us to take on debt. Many of us bought into the idea that living beyond our means was normal. But, once all of our bills and debts add up, we may discover that we’re strapped for cash to do other things.
Americans also aren’t widely taught financial literacy. This may leave many Americans scratching their heads wondering how to start investing. Many people also may struggle to stick to a budget.
But, we can reclaim our financial security by learning these important skills. And, we can help ourselves, our families, and futures by learning how to start investing.
Explore the following steps to learn how to start investing and types of investments that are available.
1. Create a Budget
To start, it’s imperative that you create a budget. A budget is a way to track all of your incoming and outgoing money.
If you want to change your current spending habits, then it’s a good idea to start from scratch. Changing your spending habits may also inspire you to make other changes in your life. For example, you might discover that you would prefer to spend less on rent after budgeting.
One good way to start a budget is to allocate 55% of your income towards your necessities. This includes your rent, utilities, and grocery bill. From there you can grant a percentage of your money toward leisure, savings, debts, and investing.
2. Every Little Bit Counts
Every little bit of cash you have matters. Even the coins you are tempted to toss away! To start investing, you should begin saving every bit of money you have.
You can start a coin jar or a cookie jar, and put any spare change or bills inside after each day. You’ll be surprised how fast these jars can grow and you’ll be happy to know that it’s going towards investing for your future.
3. Speak with a Financial Advisor
Financial advisors can sometimes be expensive, but it may be well worth the cost when you first start investing. A financial advisor can help to look at your budget and the state of your finances. They can then make suggestions and guide you towards which investment opportunities are best for you.
4. Sign Up for Your Company’s 401k Plan
If your company offers a 401k plan, then signing up would be a great investment. 401ks are typically mutual funds which both you and your employer can contribute to. However, not all companies do contribute to a 401k, so it’s best to read through your company’s policies.
If your employer does contribute to your 401k, then they will match your contribution to a percentage of your paycheck. Employers have a maximum percentage, however, which will also be based on your company’s policies.
5. Stocks and Bonds
Stocks and bonds are two popular investment options. A stock is a piece of ownership in a company. A bond is a form of debt that guarantees a payback in the form of interest.
Bonds are usually less risky than stocks. But, this also means that they have less potential for financial gain. Stocks, on the other hand, can be extremely financially beneficial if the company performs well.
However, there’s never a guarantee that the company will perform well. The stock market also goes up and down. To accommodate for these fluxations, you’ll need to have an investment strategy.
For example, some people suggest buying stocks when morale/price is low and selling when morale/price is high.
Find out more about investment opportunities before making your final decision.
6. One Decision at a Time
Take each investment decision one step at a time. While it’s natural to get excited about investing, it’s also important to do your research. Create a budget, choose one investment option, and then wait for a period of time.
Allow your finances and spending behaviors to shift, so that you set yourself up for long-term success.
How to Start Investing and Gain Financial Security
Knowing how to start investing is the first step toward financial security.
If you’re considering placing your money in the hands of a bank, financial advisor, or broker, conduct research beforehand. Many of these institutions will charge a variety of fees which could dwindle your investment account. You should also read online reviews to determine how satisfied their customers are.
Before investing, make sure that you have an investment plan. Understand how much you want to invest each month and how this will affect your monthly budget.
Want to learn more about creating a budget? Check out our blog post to learn more.