5 Basic Investing Steps

Once you have a good job and have begun to pay off your debt, it is time to begin investing your money. Investing your money is essential because it allows you to amass wealth and ​will open doors for you later in life. People who regularly save and invest are the ones who end up being wealthy. And, the good news is it does not take a lot of money to start.

It is important that you trim your spending so that you can really begin moving forward and acquiring wealth. In order for investing to work, you should not pull money out of your investments but leave them there to grow.

1. Are You Ready to Begin Investing?

It is important to make sure that you are truly ready to begin investing before you do. It does not make sense to begin investing money when you are charging money on your credit cards. You should be spending less than you make and be debt free, except for your house before you get serious about investing. However, you should still take advantage of employer match programs if you can. It is important to start investing for retirement right away, even as you try to get out of debt. Once you are debt free, you can focus on investing on your own.

  • If you are not currently ready to begin investing, set a goal of when you will be ready.
  • Start learning about investing and what your goals are.
  • Set up a debt payment plan that will allow you to start investing as soon as possible. The more aggressive you are in paying off your debt, the sooner you will be able to begin investing.

2. Determine How Much You Can Invest

It is important to determine how much you can invest initially, and how much you can continue to invest either monthly or annually. This will help you determine which investments are the right ones for you and to help you set clear goals on what you want to achieve. Remember that you do not want to invest your emergency fund, since you may need to access the funds quickly. These types of investments are more for building wealth and long-term savings goals.

3. Find a Financial Planner or Investment Firm

The next basic step in investing is to find a financial planner. You will want to do your first investing in basic investing tools, such as mutual funds. Your financial planner should be someone who is willing to take the time to explain the different types of investments to you. She should be willing to look for products that you feel safe using while offering the biggest potential growth. She will also help you set up an effective financial plan.  Your bank may have a financial planner you can use, or you can ask a friend for referrals. If you are comfortable investing on your own, then you will need to find an investment firm that will allow you to trade online. 

  • A financial planner can help if you are not sure what to do.
  • Online investment firms may cost less, but you will need to understand what you are going to invest in and how to spread the risk.
  • Invest time in learning how to read and understand the market.  

4. Understand the Different Type of Investment Accounts and the Risk

It is also important to understand the basic investing tools and accounts. These accounts can be used to help you save for retirement as well. You should understand the difference between mutual funds and money market accounts. You should also spread your wealth among several different accounts, even if you want to focus primarily on mutual funds. As you look at the accounts, you need to determine how comfortable you are with taking risks. This is where a financial planner can help you. When you are in your twenties, you can take more risks because you have time for the market to recover, but as you get older, you will need to be more conservative in your investments.

  • Ask questions about the investments.
  • Read about the different investment types, both online and in financial magazines and books.
  • Do your research and be comfortable in what you are going invest in. 

5. Real Estate Investments

You may be considering using real estate as an investment or a wealth building tool. Real estate is a great investment. However, there is a difference between flipping properties and investing in real estate for the long term. You should carefully consider the differences before you decide which one is best for you. Real estate that generates passive income is a great investment, but you need to make sure that it can cover the costs of upkeep and other potential problems as well.

  • Talk to someone who has real estate investments before you start.
  • The book “Rich Dad, Poor Dad” is a great starting point if you are interested in investing in real estate.