Ever wondered why personal finance and life’s general wisdom have so much in common? If you look at the personal finance advice on the internet today, you will notice that the essence of all such pieces on the internet doesn’t seem like an extraterrestrial entity. In fact, they all appear so strikingly familiar with the values that our guardians have instilled in our minds since our early years.
It’ ain’t no Rocket Science Bruv
It’s because personal finance is not rocket science… never has been. Personal finance is all about making the most out of resources at hand; putting them to best use, using them in the most effective manner possible and building riches over time while you go about making your ends meet through various phases of life. This is how we succeed in life, don’t we?
You can Control the Outcome… it’s with you
Though it’s possible that you (like most of us) haven’t been able to keep up with your personal finances. Probably because it has been too hard to tame your wild instincts.
Instincts which lead you to make impulse purchases or grab hold of anything on which you have set your eyes on (like a predator).
Like a Prisoner in a No-Name Town
You see that this unregulated sense of freedom isn’t freedom in a real sense. You are being held captive in the cage which has no doors… Your Cravings. It is not always feasible to discharge your instincts at a go.
Therefore, breaking the bank every time by the third week and spending (somehow) the fourth week as a pauper won’t always work.
Along the same lines, you have got to save for the future and the best way to build your riches and save for the old age is to INVEST.
Now, you would be having inhibitions equivalent to the size of ocean foam about investing as a beginner and rightly so. But this is not just another write up flaunting general advice around investing for beginners (at least not totally).
We would guide you to making money by investing from scratch. So, here is a step by step rundown on investing for beginners:-
1. Save each penny to become rich
Now investing money and saving money are intertwined and intermingled that they can’t be separated. To invest money you would have to have extra pennies; a stash of cash which is sitting idle in your cupboard. Sounds strange? Understandable.
Saving money is easier than you would have ever thought of. Most people fear that they would have to curb down on things which make them happy in order to save money. However, this is just a mirage and reality is altogether different.
Reality Bites. The truth is that you spend quite a lot of money on things such as subscriptions and memberships and seldom experience them. These subscriptions are like the cash vampires who are good for nothing except soaking up your hard earned money.
You need to curb on these expenses but the question is who would do the herculean task of monitoring your expenses and filtering out the least important services. The answer is TRIM.
Trim helps you regain control of your finances. As the name itself suggests, Trim is the budgeting app which has sworn in to manage your finances and help you in adhering to a budget. It monitors expenses that you make and gives you summarized report on how much you are spending on what heads.
Moreover, Trim also helps you detect and get rid of unwanted subscriptions, memberships, and services that you have opted for but barely use them. This way, it helps you curb down all expenses which soak up your money.
The best part is that Trim will negotiate with service providers on your behalf and negotiate a lower bill. The hustle which is quite impossible to do on your own and you only have to pay when the Trim fetches you a lowered bill or a canceled service.
Trim is like your ultimate financial wingman which can save you in thousands over a period of time.
Another tool which works on the philosophy of Every Drop in The Ocean Counts is Acorns. It rounds up your purchases and invests those extra cents for you.
It works with both debit cards and credit cards. It might not build riches for you overnight but remember that Rome wasn’t built in a day. So, Acorns could help you in getting started with Investments.
2. Put Robots on the Job
Robo advisors are computer-based algorithms which help you invest your money in customizable portfolios. They don’t require and expertise on your side and educate you through the investment cycle from buying assets to realizing profits to churning more money out of those profits.
They also produce various investment options at your disposal depending on your long term financial goals. In all, Robo advisors can be counted on particularly when you are an amateur investor and don’t own a portfolio worth millions.
Betterment is perhaps the favorite Robo advisor of the amateur investors. It has two plans:- Betterment Digital and Betterment Premium.
Betterment Digital is best suited for investing for beginners. It has no minimum balance requirement and charges only 2.5% of the assets handled. You can also chat with CFP’s through chat via the app for the purposes of consultation.
Betterment Premium is a superior plan for seasoned investors which allow investors to acquire and uphold a highly diversified portfolio.
It invests in exchange-traded funds that run across 12 divisions of risk tolerance for investments which extend over various time horizons.
A robo advisor with a social responsibility; Swell investing stands out from other. It is oriented towards making planet earth a greener planet. Swell Investing invests in green tech, clean water, zero waste, renewable energy, disease eradication, and healthy living companies.
The eco-theme based portfolios of Swell Investing have been proved to be in sync with the broader market over the years. However, diversification is a challenge to some because Swell investing invests only in stocks.
However, until its thematic portfolios are proving to be lucrative, customization should not be a deterrent.
The best part about swell investing is that it has no complicated fee structure. It charges a flat out 0.75% of the assets handled, that’s it.
3. Resort to 401(k) and meanwhile evade taxes
If you are living paycheque to paycheque, even the thought of participating in your employer retirement plan which is 401(k) in most cases drains you out.
However, investing for beginners in an employer-sponsored program is easier than what most people think.
You are under no obligation to invest a major chunk of salary in 401(k), amounts equivalent to 1% of your salary can count in the long run.
You won’t even be conscious of such less amount being deducted from your salary. The tax deduction that you will get for contributing to 401(k) will push you to put more money for your retirement years.
Getting started is the most difficult part, and once you have contributed 1% of your salary, you can up your game in the coming years.
If you increase your contributions alongside your increments, the contributions would seem (perceived to be) even lesser.
For instance, if you get an annual hike of 10%, you could divide the incremented salary into two halves and keep each half for retirement and checking account respectively.
Blooom is a fine tool for managing and optimizing your 401(k). It provides you with a free scan of your 401(k) and tells you what are your assets relocating options.
401(k)s are often ignored whereas their time and again rebalancing can prove to be of higher value while uncapping the resource amid the retirement. You can do this hands-off with Blooom in as little as $10 a month.
4. Mutual fund investments could show you the way
Mutual funds are also a good option for beginners. They are nothing but securities which let you invest in a diversified portfolio with just one transaction.
The catch is that most mutual companies have a minimum investment criterion and that could be an aching point for initial investors. The minimum investment amount run from $500 to up to 5 grand depending upon the reputation of the company.
However, some mutual investment companies could waive the minimum amount if some monthly influx of investment is committed on your behalf.
Mutual fund companies also offer automatic investing feature. This feature lets you electronically transfer the account into your mutual fund investment like you transfer it into employer-sponsored 401(k)s.
Just ask your HR and s/he will help you set it up.
5. Buy savings bonds from Uncle Sam’s treasuries
Though not the fanciest of the investment options for beginners, US Treasury Securities are probably the safest investment option.
You may never acquire filthy riches like Mr. Trump Ooops Mr. President. However, you will be assured of parking your money safely until maturities which range from 30 days to 30 years.
These bonds not only pay interest but also make adjustments based on inflation. You can automate the funding of Treasury direct account from payroll savings.
With each passing day, there are numerous options evolving for investing for beginners. You will have to shed off your inhibitions and start somewhere. There is no wax on wax off for investing, you learn by doing it. START NOW and your future self will thank you for it.