A few weeks ago, I was excited to participate in a panel at a Bravely event focused on answering questions for new investors.
I was happy to share advice, tips and tricks for how first-time investors can get started and how to make wise investments for your financial future.
As a first-generation-not-poor-person – a term I coined myself – I love the opportunity to chat with people who are new to finance. I’ve lived that life and am now on the other side.
In case you missed it, here is a recap of the wisdom shared during this great event:
Stocks are down? Don’t get nervous!
The news can be overwhelming when it comes to the stock market, but don’t let that keep you from investing.
With 24-hour news cycles, programs have to make every day seem like the most exciting one ever. When you hear the market is up or down, all it really means is that the closing level of the market indicates more people bought or sold shares of stocks represented by different indexes than the previous day.
If you are investing for goals like retirement that can be decades away, try not to get too anxious about what is going on in the market day-to-day.
This can help you avoid unnecessary anxiety and poor decisions based on emotions.
Take care of your future self, first.
It is a good idea to have 3-6 months’ worth of expenses saved in the bank in case of emergencies like job loss or transportation issues that can impact your ability to work.
You may want to save a little more than that if you are self-employed or have irregular income. Once you have that, it is a great idea to start investing.
Ideally, if you can get in the habit of saving 10-20% of every dollar you make when you start working you will set yourself up for financial success.
Good habits are important when it comes to money. If you pay yourself first by investing and saving it will be easy to stick with that habit as your salary goes up.
Get it done on the job.
Becoming an investor has never been easier.
However, the number of options available to start investing can be overwhelming. A good place to start is your own employer. If they offer a retirement plan like a 401k or 403b it is easy to elect to defer a portion of your salary and start investing.
They will have different investment options to choose from and it is worth researching them to determine what makes sense for you. Also, they may make a matching contribution, which is like a raise just for saving money for your future.
Companies may offer stock ownership programs that allow you to become an “owner” by investing in the company you already work for.
You’re your own boss? No problem.
If you don’t have a retirement plan at work or you are freelancing, you can start your own retirement account as long as you have earned income.
Starting a traditional or Roth IRA can be done in minutes and there are several companies that provide these services.
There are some important differences between these accounts that you should know. If you are just starting out and have decades until retirement Roth IRA may have the best tax advantages for you.
There are IRS income thresholds, so if you are making a lot of money you will want to make sure you can contribute to a Roth.
If you are in a high tax bracket now and want to defer paying taxes on your contribution until you are earning less in retirement a Traditional IRA would be the way to do it.
Don’t let your lizard brain stop you from earning.
Try not to let fear keep you from investing.
Your brain doesn’t like to do new things. When you were little you learned to walk and read. You might not have been very good at it to start, but now you don’t think about those skills very often.
You can still learn how to do new things and you don’t need to be an expert before you get started.
You can become an investor without having a ton of money in the bank.
There are ways to become an investor with the amount of money you wouldn’t think twice about spending at a restaurant, or your favorite store.
You may be trying to think of reasons not to try it, but I’d encourage you to get started even if it is a small amount each paycheck. Go get that money!
Misty Lynch is Twine’s Resident CFP®. She didn’t buy a single item of clothing or footwear in 2018; she’s competitive with new year’s resolutions. When she’s not blogging, reminiscing on her rugby days, or tending to her Rottweiler, you can find Misty helping her clients make wiser financial decisions. Or making meals her toddlers will never eat.