How to Start Investing in Your 20s
I’m still so young; I don’t need to think about retirement yet. I need to travel the world first or save for my future family, a house and a car. I can’t start thinking about investments yet.
This is a common feeling for 20-year-olds, and it is widely accepted by most young adults. Many people don’t even start thinking about investing in their futures until they hit their 40s. Unfortunately for them, this is a big and costly mistake.
The sooner you can start investing, the better. This way, you give your investments more time to compound and grow, so you can have more money in the future without investing large amounts of each paycheck or sacrificing future retirement savings.
It may not seem like it, but most people have little expenses in their 20s. And you definitely have fewer expenses now that you will likely accrue at any other time in your life. Therefore you really can afford to put away a significant portion of each paycheck into savingswith little effect on your everyday life.
Because of all these factors, it is highly recommended to start investing now and creating a financial plan to save yourself some stress in the future. Here are some brief rules and guidelines to follow when investing in your 20s. Your future self will definitely thank you.
Make sure you are ready to invest
Even if you have an extra few thousand dollars lying around this month, you cannot predict what the future will hold. Set up a substantial emergency fundthat will cover all your expenses for 3 months at least before you consider investing. Having the extra money on hand in case you lose your job or any other unexpected expense arises will be a very valuable asset.
Utilize your employer’s 401(k)
Though it is not really groundbreaking advice, it is still smart for anyone starting their career to set up a 401(k)with an employer. Check out what options are available to you at your current position. You can allocate a certain amount to come out of your paycheck every month. If the money is reserved even before it even gets in your hands, then chances are you won’t even miss it. To get even higher returns, increase the amount invested with every raise you receive. You can still operate on the same amount each month and get the opportunity to save even more for the future.
Educate yourself about other investment options
From stocks to mutual funds to Beanie Babies (yeah, please don’t invest in Beanie Babies), there are a lot of different options out there that you can take advantage of. Instead of just listening to the sales pitch from your bank or doing the same investments that your parents did, find out for yourself what each plan is all about. Weigh all the options and pick the one that is right for you and your future goals. There are amble amounts of information available to everyone, you just have to invest the time to educate yourself.
Don’t panic when funds are tight
If your stocks fall slightly or you have an unexpected expense (and you don’t want to dip into your emergency fund to cover it) don’t panic and pull out all of your investments. You will have to start over completely and hurt your chances of fulfilling your financial goals. Instead, consider a low interest, easily repayable options, like TitleMax.com, to give you a little extra cash now so you can stay on track for the future.
With these tips you’re be set of a path for financial success both then and now.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.