Now that you’re taking your first steps towards building your future, it’s good to start with a solid foundation.
In investing for your future, it’s better to start early than regret beginning too late. Here are few tips on how to establish a stable foothold for reaching your dreams.
1. Set your priorities
We all do want a lot of things. Reality is we can’t have all of them at once.
Prioritize what you want in the long run. A house, a car, a small business – all will fall into place one step at a time.
Set your goals straight. Save for the bigger catch and spend less on trivial things. Step by step, you’ll get all that you desire.
2. Think of retirement
Think it’s too early to plan for retirement? Then you’re missing a great opportunity to invest in your future.
Say your goal is to have half a million dollars by the time you retire. You might need to invest around 10% only of your annual income when you’re in your twenties contrary to the 15% you contribute when in your forties.
There are several retirement plans like 401(k) plans and other IRAs which also have their own tax benefits.
Grab the advantages of youth. Who wouldn’t want to retire rich?
3. Be insured
Insurance protects you from uncertain and unexpected losses. Various kinds of insurance plans are available according to the needs of the policy holder. Health and car insurances are the most commonly bought policies.
The future is unpredictable. It is better to be safe than sorry.
4. Take your time
Time is on your side. Starting young creates a longer time horizon for more adjustments and opportunities. You get all the time you need to learn new things and encounter different scenarios.
Moreover, you have better chances of recovering from losses incurred.
Take your time to master the tricks of the trade and work every opportunity to your advantage.
5. Size does not matter
Many people think that they need to have large sums of money to start investing. Large amounts are good if you’re confident with your investment and capable of recovering from unexpected loss.
Good thing is you don’t really need to have a hefty sum of money to start. According to the data from Morningstar, a number of investments average around $250-500 which is reasonable if you want to play safe.
Small amounts are also more flexible and easier to recover if you suffer some losses.
6. Investing requires discipline
Like every diet regime, investing takes time, effort and patience. And money of course.
Self-control is essential if you want to succeed. Young people tend to be rash decision makers. Instant gratification could mislead you from your real targets.
If you invest in the stock market, don’t expect high returns in a short period of time. You need patience, the right knowledge and right timing to garner fruitful earnings.
Start by saving regularly. Follow your saving plans religiously. It would take you one step closer to your long term goals.
7. Pay off debts
Credit cards can be illusive. Thinking that your spending capability has increased by using credit cards would lead you to the wrong direction.
Paying only the minimum each month would just prolong your agony. The interest your debt had accumulated would thwart your investing capabilities.
Use credit cards sparingly and only when necessary. As much as possible, pay off debts in one go. This way you’ll avoid paying interests.
8. Do your research
You surely don’t want your money and opportunity to go down the drain. Doing research and making careful decisions could save you from regret.
Before buying anything big, like cars, houses or insurance plans, be sure that you have gathered more than enough information about them. Know the profile of the company selling them, the perks, dues, and every detail that could affect your decision.
If you plan to invest in stocks, proceed with a thorough check on the profile, history and market trends of the involved company.
Gather information from reliable sources. Look for feedbacks from other investors or buyers. Arm yourself with logical and practical thinking.
Knowledge is power. Do your homework.
9. Emergency funds
Aside from insurance policies, having extra cash that you can readily get your hands on in case of emergency is really valuable. You should have at least six months’ worth of salary reserved as contingency money.
10. Today is different from tomorrow
It is good to be updated with the current trends and news in the business world. Thing is you shouldn’t rely too much on them or sometimes believe in all of them.
In case of stock investments, remember that today’s market performance would be different tomorrow. You shouldn’t expect that recent gains would continue forever.
Too much reliance on current trends could ruin your long-term goals. Stay focused on your long-term plans.
11. Greed is not good
Many people become too exhilarated with their gains that they forgot about their losses. Tendency is they gamble.
There’s also the case wherein people tend to hold on to poorly performing stocks. With high hopes that it will recover soon, they tend to wait more with its value continuously dwindling. The result: instead of getting equivalent gains, they lose more money over the time.
Learn to accept loss when you’re already facing one.
12. Ask for help
Even Anakin was under the tutelage of Obi-wan before he mastered pushing things. Seek the help and advice of those with experience and good reputation.
When investing in stocks, it’s not enough to do research about the company alone. Do a thorough check on your portfolio manager’s background, history and habits as this could affect your investment decisions.
Look for portfolio managers that would suit you well and your character.
Youth certainly has its advantages. Start early and reap bigger rewards in the end.