You’re making smart financial choices and you’re saving for the future (amazing, yes, keep going!) but you have other goals too. Like, buying a home, getting married, getting an advanced degree, taking your dream vacation, and so, so much more. Now let’s talk about your plan to pay for these things. All too often when we think about investing, we think about saving for the long haul. For retirement. For money we won’t need to touch until we’re 65 or older … But we need to reframe how we think about investing, and understand that becoming an investor can help us realize all our financial goals — no matter where on our life’s journey they may fall.
Here’s a look at how to start investing today, even if you’re just dipping your toes into the water and you don’t have that much to invest. Because we all have to start somewhere, right?
But First, Retirement
Before we start playing the markets with a goal to make money for our more immediate goals, we’ve got to get our financial futures on lock, explains Shelly-Ann Eweka, CFP, ChFC, director of Financial Planning Strategy at TIAA. This means we need to focus on maximizing our 401(k)s and IRAs.
“Your retirement goal should be prioritized because if you don’t save enough, your assets may not be able to support your lifestyle in retirement — reducing spending is not supporting your lifestyle,” Eweka says.
Also, if it’s available to you, a Health Savings Account (HSA) can be another incredible place to save for the future. Contributions are made pre-tax and any distributions used for qualified medical expenses are tax-exempt. Beginning at age 65, distributions do not have to cover qualified medical expenses, so at that point, the HSA acts as a tax efficient retirement plan that can be used to cover any expense. “These plans are a great way to cover medical expenses and save for the future without incurring any tax liability,” Eweka says.
Taking A Look At The Landscape + Your Goals
Once you’re ready to branch out in your investing, you should know that “successful investing requires time, knowledge and inclination,” says Heather Winston, assistant director of financial planning and advice at Principal Financial Group.
In other words, if you’re just getting started, you don’t know what you don’t know. Read. Research. Be patient with yourself. “To do it well requires discipline, recognition of what you know (and what you don’t) and then acknowledgement of what you’re willing to learn,” Winston says. As with any skill, to become a pro takes a lot of time, and a lot of research. The process of learning to invest with confidence is just that — a process. Don’t expect to become Warren Buffet overnight.
And as you’re learning about investing, start putting pen to paper for your personal goals. What are they? An MBA? Putting a 20% down payment on home by age 30? Becoming an entrepreneur? Take some time to think about the purpose of the money you’re saving. “The ability to save and invest is critical when planning for the future,” Winston says. “However, what’s equally important is thinking about what exactly it is we’re saving for and how, so that we do so in the best way possible.”
Assess your skills — where are they now, and where do you want them to be?
Do you want to know more about asset allocation? Risk tolerance? Index funds? How to open an IRA? When to use mutual funds vs. ETFs? You probably have a long list, so write everything down, but it’s okay to start small in terms of your learning journey. The above links will all take you to HerMoney stories that will help you get started, and if you want a more personalized experience, you can connect with a financial planner via Wealthramp, or join our 8-week FinanceFixx coaching program!
Also, check out Investor.gov, FINRA.org/investors and MyMoney.gov for basic definitions and detailed explanations of a wide variety of financial products and topics. Use these tools alongside your employer-provided financial resources to help you develop strategies to meet your goals. Note: your employer may also be able to connect you with an advisor who can walk you through the bigger picture of how your retirement accounts will work alongside your other investments. The important thing is that you’re never afraid to ask for help, and if you meet with an advisor and you don’t feel like you’ve connected with him or her, seek another one who can better help you understand and reach your goals.
Ready, Set, GO!
You got this. And we got you. Let’s do this.
If all you wanna do right now is open a brokerage account and start trading, that’s awesome. Here’s how to do just that.
And if you’re starting small, that’s no problem at all. We love that. Here’s how to get started with just $1,000.
Oh, and did you know that you can buy the most expensive stocks for as little as $1? Yep.
A few other things to take with you before you go:
- A look at some of our favorite investing key terms that you’ll need to know before you invest.
- 10 investing questions explained in plain english — need we say more?
- Why target date funds are awesome (and what they are, and how to get one.)
- If you decide you want to start with an index fund, here’s a great rundown on what you can expect there.
- Here’s a look at how to open an IRA, if you’re saving for something long-term.
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