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One reason that keeps people from saving and investing is their belief that they’ve got no discretionary income to work with. They put off their financial plans simply because they think that they do not have sufficient funds to commit to investments.
But you would be surprised to know that a small amount of money could be used to start investing. The truth is, investing does not require huge sums of newly earned or inherited money. Just as long as you have cash flow, you can start the investing process early in order to reap financial benefits in the long term. So how to proceed? Well here are a few tips that can help anyone get started!
Step 1: Note down your investment goals
People dream about being rich. Many of us want to become successful millionaires one day — but we should go beyond dreaming and instead create goals that we plan to accomplish. New investors should follow a consistent and disciplined approach with managing their money in order to be successful. We need to set goals in order to benchmark our progress; goals are motivating factors when we invest.
To get started, you should sit down and pinpoint specific goals for you and your family, such as sending your children to a particular college, buying a house or retiring. These are some meaningful goals that you can set as part of your investment plan. While most of us have these standard, long term milestones to aim for, there’s certainly nothing wrong with having many shorter term goals as well. Why not add a more personal goal to your plans, such as planning a vacation in Europe or buying a boat?
Write these down in your personal diary or a piece of paper which you paste on something that you see everyday — say your refrigerator or your computer. Place your written ideas somewhere visible — this will keep you motivated while you move forward.
Step 2: Determine how much money to invest
When people think about the prospect of investing, many of them give up quickly. But all you have to do is to put aside a few dollars every week in a high interest savings account, in a systematic fashion. You may be surprised to find that you’ve got some dollars to spare when you do a review of your monthly household budget. Try to cut down on expenditures wherever possible. Even a small amount of money adds up — with just a few bucks a month, you can build an emergency fund over time.
After your emergency fund is established, you can think about building an investment portfolio for longer term goals. Start by opening an account with a discount broker, where you should contribute a small amount every week through an automatic savings plan. You’ll realize soon enough that your contributions can lead to satisfyingly huge gains later. As an example, take the case of investing $25 per month for the next 30 years at an annual rate of 8%; over this length of time, your contributions plus returns will yield $29,346.47. While this might not necessarily be as hefty as you may think (after 30 years), this amount can very well address a smaller financial goal you may have in the future.
So I would encourage you to set up a systematic investment plan where a certain amount of money is automatically withdrawn each month from your bank account and invested in a consistent basis. This ensures that you continue your disciplined saving without fail and will get you going without any more delays.
Step 3: Manage your investments wisely.
Do not put all your eggs in one basket. When you start investing, do so by spreading your money across various asset classes and investments in order to moderate the risks associated with market volatility. Invest in bonds, fixed income and other instruments for consistent and relatively safer returns. And every so often, rebalance your investment portfolio to keep your asset allocation in check. One can accumulate a great amount of wealth over time if one takes on solid financial habits and decides to be prudent with their approach towards investing.