Hey everyone, thanks for joining me for this week’s Finance Talk with Josh! Today, we’re going to chat a bit about investing. The truth is, when it comes to investing, most people have the “ugh I’ll do that later” opinion of it. The bottom line is, learning when and how to invest can be a daunting task for even the smartest consumers. However, without investing, you may end up with a less than desirable retirement. That being said, here is a list of simple things that you can do to get yourself and your budget prepared to start investing.
Step #1: Come Up With A Goal – Investing is a very goal oriented process. For instance, if you’re investing to retire, not only is retirement your goal, you’re going to have an exact amount of money that you need to have to be able to reach retirement. So, that number is going to end up being your main goal. So, start by thinking about what you’re investing for. Once you’ve got a cut and dry goal, it’s time to figure out how much that goal will cost. For instance, if you’re investing to pay for a higher education, you’re going to want to look at how much that education costs today.
Once you’ve got a good idea of what your goal costs today, it’s time to think of inflation. The fact of the matter is, a 4 year degree will most likely be more expensive 10 years from now than it is today. Therefore, do a bit of research to figure out what the average inflation rates have been over the last 30 to 50 years. Now, add the inflation value to your total investment goal. At the end, you should have a number that you plan to hit, and that number should be plenty to pay for your goal by the time you reach it.
Step #2: Time To Rejigger The Budget – When it comes to investing, obviously, if done right, your money will grow. However, if you’re looking to reach goals like retirement, paying for a higher education, or even if you want tens of thousands of dollars worth of a cushion to catch you in tough financial times, chances are, you’re going to need to invest regularly. Small monthly deposits eventually add up, allowing you to reach your goals. That being said, the first thing you’re going to want to do is start working in an investing budget.
When coming up with this amount, you want to think of a couple of things. First off, how long would you like to invest before you meet your goal. For instance, if you plan to reach a goal of $50,000.00, you may have a 7 to 10 year investment plan depending on your budget. If your goal is $50,000.00 and you give yourself 10 years to hit it, that means that you should invest a minimum of $5,000 per year or $417 per month. When coming up with these figures, it’s important not to think about the interest that you will earn. That will help boost your account and help for you to reach your goal quickly, but it’s not guaranteed, so you don’t want to factor it in!
Step #3: Practice Before You Go Big League – I’m sure you remember the old saying, “Practice make perfect.” That old saying couldn’t be more true, and applies to just about anything that you will ever do. Investing is no exception to the rule. One of the common misconceptions is that if you want to practice in the investing world, you’re going to have to put some money up. Well, that’s not exactly the case, several companies, my favorite being OptionsXpress offer a virtual trading option. In virtual trading, you can learn about the market or test concepts that you come up with essentially using funny money. In these cases, the virtual trading platform will offer real time reports based on what your investment would have done for you, or to you for that matter, if it were real money in the real market.
The best way to use tools like this is to run several different strategies over the course of a week or two to figure out which will be the best. If you don’t know where to start there, no worries, most platforms that offer virtual trading also offer in depth training materials. So, if you’re a true beginner, before you start testing, I’d strongly advise brushing up on some of those materials.
I know investing can seem like an incredibly daunting process. However, with a little bit of planning, it can be as easy as 1, 2, 3. If you’ve got any questions about getting started in investing market, please feel free to reach out to me in the comments below, on Google+, or on my website!