Nobody in high school taught you how to invest or how to do your taxes. After high school you probably went to college or some other kind of trade school. When you looked at the classes you had to take there still was not a class on how to manage your money effectively. Unless you are a finance major or have friends who enjoy talking about money, you may have no idea what to do with your money.
Everybody seems to have an opinion about what to invest in, how much you should invest, and how often you should put money into your different investments. There is not one way that works for everyone. You can tailor how you invest according to your own personal finances.
Here are some aspects to look at when investing:
Have a Plan
If you do not have a specific goal in mind you will find yourself wandering everywhere. It is best to have a big goal in mind, such as getting (and staying) out of debt. You can’t just wake up and decide to do that in one day or even one month. Sit down and decide what you are going to do each day and week to get out of debt. It will mean looking at your budget and deciding where you can cut spending and put that money towards paying off your debt. This approach can be applied to debt, investing, and even saving for a vacation. Whatever your goal it needs to be specific and detailed.
Retirement
You may have seen some of your older relatives complaining about how small their pension is or how awful it is living on a fixed income. It can be super stressful when medical bills start to pile up and there is not any income to pay for it.
If you do not want this to be you, the best way to prevent this from happening is to start saving for retirement. Nobody wants to work until they are in their late 60s and early 70s. There are several different retirement accounts you can open such as a 401 k, a roth 401 k, simple IRA, and roth IRA. Each of these have different rules about the amount you can invest, the minimum you can invest, and whether the money is taxed after you start taking it out.
Mutual and Index Funds
After you have decided what kind of retirement account you want (you can choose several) you will have to decide if you want to invest in different funds. Your money can work for you if you start investing in it with mutual or index funds.
Index funds can be mutual funds but they also follow a certain index like the S&P 500. Mutual funds have active funds that are made to outperform a certain index. These funds follow the stock market but they are protected from it. If the stock market drops, your fund will drop as well but not as much. These funds are not as volatile which gives you some peace of mind. Since there are so many funds they are grouped into different categories such as growth, growth and income, and foreign investment.
Choosing a Broker
This word sounds scary, but let’s look into it to see what it really means. A broker is someone who buys and sells for another person. If you want to open a retirement account, you usually have to open a brokerage account before you can start investing. This can easily be done by your local bank or credit union or you may want to go to a different financial institution to invest.
You have to have a great relationship with your broker or finance manager. If you do not have a good relationship why would you trust them with your money? You want a relationship where they do not talk down to you and where they are willing to teach you when you do not know something. This way you can ask all kinds of questions with
