Investing 101

If your goal is to build wealth and be financially stable, investing is what will get you there. Contrary to popular belief, you don’t have to be a financial expert to start investing.

It’s time to break some common myths. One, you do not need to be an expert in order to invest. Second, you don't have to be rich to invest. Investing can take many different forms, and it’s up to you to choose the one that suits your needs best. Starting your investing journey can seem overwhelming, but there is no reason to worry. Millions of people have been on the same path as they navigated life’s twists and turns and managed to come out on top.

1. Benefits of Investing

Be Wiser than Inflation

Think of it this way: if you don’t invest the money you put aside, you will be actually losing money thanks to inflation. With investing, not only can you protect your money from weakening purchasing power but also increase its value if you make smart choices.

It Will Help You Build Wealth

It goes without saying that reaching higher financial goals greatly depends on investing. Fortunately, there are 101 ways to invest your money. All you have to do is make a plan that suits your goals best.

It Could Even Get You to Retirement

Leaving your savings aside won’t get you far. On the other hand, investing will make it work for you. The earlier you start investing, the more you’ll have by the time you retire, all thanks to the power of compound interest – when your interest starts earning interest.

It Can Help You Save on Taxes

It’s no secret that rich become richer by figuring out how to save on taxes. This is also a great advantage of investing. The money you put into a 401k, SEP IRA, or Traditional IRA is not taxed the year you earn it. You will pay taxes on it only when you withdraw it which will save you a lot of tax. If you prefer to pay tax now and not when you withdraw by choosing a retirement account like the ROTH IRA.

It Can Help You Achieve Your Financial Goals

Besides retirement, there are college funds to think of and simply things that are a decade or more away. Investing can greatly ease your way towards achieving such long-term goals.

2. Investing Tips

This goes without saying but you need to review your goals and think how soon you need your money back. For example, if you want to buy a house in a few years, stick to cash savings. But, if you are saving for retirement, you can afford to ignore short-term volatility. Once you clarify your needs, you can devise an investment plan. The most important thing is to diversify your investments across different sectors. Then, decide how much time you want to devote to your investment activities. If you enjoy making such decisions, you can consider buying individual shares, as long as you are aware of risks. If you don’t have the time or have only a limited amount of money to invest, you can choose investment funds that include a wide share of investments.

Don’t ignore charges

Keep in mind that both individual shares and funds come with charges so make sure you know what you signed up for. While higher charges can mean higher quality, it’s always good to inquire if the fee is reasonable and compare if you could get a better deal elsewhere.

Investments to avoid

Unless you fully understand the risks, make sure to avoid high-risk products. You can consider such investments after you have been covered with low and medium risk investments. Although it is important to review your investments, there is no reason to panic every time the price moves in an undesirable direction – if your portfolio is diversified.

3. How to save money for investing

Saving is a key principle of investing if you want to have something to invest in the first place. Savings is a very rewarding habit that will set you on the right path.

Understand your spending

If you track your spending and separate wants from needs, you will identify areas where you can save more easily.

Pay yourself first

This means that each time you are tempted to spend, commit to putting money away towards your savings.

Avoid using credit at all cost

Using credit will increase your future payments. Do it when you must, but if you need to use it to pay for your bills, it means your budget has not been well made and it’s time to re-do it.

Cut or at least downgrade services

Do you need an Amazon Prime account? Or Netflix? Try for a month to go without one subscription service and use the time to learn more about investing. Or just cut your landline if you mostly use your cell phone.

Reduce your energy bill

In most cases, your utility bill forms the largest part of your expenses pie. Yet, there are always simple things we can do to reduce it. Other than making sure you have the best utility rate there are multiple ways you can reduce your energy usage causing you to have a cheap electricity bill. A great way to reduce your energy bill is to understand which appliances use the most energy and implement a more energy efficient lifestyle. Some energy efficient tips are remembering to turn off appliances when they are not in use, investing in energy efficient devices such as smart thermostats, using blackout curtains to help insulate your home which helps lower heating and cooling costs, only using your washing machine and dishwasher for full loads and utilizing ceiling fans to lower heating and cooling costs and many more

Conclusion

If you want to be financially stable, grow your wealth, and welcome retirement peacefully, it is imperative you come up with an investing plan. In all scenarios, investing will make your life easier- and you will get to enjoy your life more when you reap its rewards.