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Investing Tips For Beginners

Investing Tips For Beginners

Those who don’t know anything about investing tend to fall into one of two categories: people who think it’s incredibly easy to get involved, and people who think it’s impossible to understand the first thing about investing.

Though you do have a lot to learn if you want to be successful when investing your money, it isn’t impossible to increase your net worth through the stock market. But it’s also not a get-rich-quick scheme, either. Before you dive into the stock exchange, there are a few things you should do and understand first.

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Set a purpose

Okay, so obviously your purpose for wanting to invest in the stock market is to make money. But why do you want to make more? How much are you willing to invest? How long are you willing to wait until your investment pays off? Like I said, you won’t start making money overnight, so it’s in your best interest to think long-term. Are you looking to pay off school loans or your mortgage? Are you trying to save for retirement? Or do you want to ensure you have some money saved up at the end of each year?

Once you set a goal, do some research regarding the length of time and the amount of money you’ll need to invest in order to reach that goal. Be realistic, and you’ll end up being much more successful.

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Know the risks

Investing your money in the stock market is definitely a risky venture, especially if you haven’t done the proper research. Even if you have done the research, there’s always going to be the possibility that you could lose everything due to factors beyond your control. You have to be okay with that. In other words, don’t put out more money than you can afford. Investing too much money leads you to make decisions based on emotions rather than logic, and will almost certainly lead to ruin. As long as you are comfortable with the possibility of losing the money you’ve invested, you’ll be able to make sound decisions that will benefit you in the long run.

Understand the basics

Earnings per share, return on equity, fundamental and technical analysis. If that sounds like a foreign language to you, do not put your money into the market just yet. Don’t just hire a broker and hand them your money while asking them to work their magic, either. You should have a full understanding of exactly how your money is being invested. Otherwise, you run the risk of being played by a broker with an ulterior motive. Understand the different types of investment accounts available for your goals, so you can have a good idea of how to make your money work best for you.

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Diversify

The most important piece of advice I can give you when investing your money is to never put all your eggs into one basket. Creating a diverse portfolio ensures that, even if one of your investments fails, you’ll almost certainly never lose all of your money. Diversifying your funds also allows you to set different goals for your investments. An investment in an ETF is much different than a gold IRA investment account in terms of the amount of time and money needed to be successful.

Use your own money

I previously discussed the importance of only investing money which you can afford to lose. Along with this, you should never invest money that you’ve borrowed from a bank or other service. Leveraging, or borrowing money to be invested, will ultimately destroy your profit margin once you take into consideration factors such as interest and brokerage fees. Not only that, but if you invest money that’s been loaned to you and the market crashes, you’ll still owe that money, with interest, to the entity you borrowed it from. If you want to experience true monetary gain through the stock market, use your own money, and only your own money.

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Featured photo credit: Grow Your Money / Chris Potter via farm9.staticflickr.com

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Last Updated on June 6, 2019

The Average Retirement Savings and How to Save Wisely

The Average Retirement Savings and How to Save Wisely

Are you on track for retirement?

If not, don’t worry, I’m not sure either. I save each month and hope for the best.

Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

What Does the Average American Have Saved for Retirement?

Saving for retirement is tricky.

Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

Here are the average savings Americans hold by age bracket:

20’s – $16,000

During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

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Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

30’s – $45,000

At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

40’s – $63,000

This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

50’s – $115,000

During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

60’s – $172,000

By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

Ways to Save Money on a Tight Budget

The sad reality is that most Americans aren’t saving enough for retirement.

Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

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How to Save Money Each Month

By this point, you know the average amount of money you should have saved for retirement based on your age.

But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

Top Money Saving Challenge Tips

To prepare for your financial future and not be another statistic you need to be different.

How?

By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

Automatically Contribute Towards Retirement

If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

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Use the Right Tools to Know Where You Stand

Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

Bring in Experts to View Your Blind Spots

If you have too little or too much money saved, you should consider hiring financial experts.

Why?

You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

Regardless of the reason, getting help may help improve your financial situation.

Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

Speed up Your Retirement Contribution

After learning how to manage your money well, the next best thing is to earn a higher income.

You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

By starting a side-business.

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This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

Reach Financial Freedom with Confidence

What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

My guess is that you’d feel happy and relieved.

Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

If you do, you’ll save money and pay debt faster.

Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

Featured photo credit: Huy Phan via unsplash.com

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