Investing is an area that’s filled with misconceptions. A lot of people think that if they had millions in the bank, they would know how to turn them into billions. That’s not the case. If that were true, all of the people that won the lottery would still be wealthy today.
Almost always, the people who get rich quickly lose their money in the following year or two. On the other hand, most millionaires are self-made. There’s also the misconception that you need to be born into a wealthy family to become a millionaire. Click on this link to learn more.
That’s not the case. In fact, the only thing you need is knowledge about how to handle your finances. Being consistent with your investments is the best way to achieve financial freedom. Here’s some specific advice that might help you to make clever moves and create a strategy that will lift you off the ground.
Savings can be automated
In the past fifty years, we’ve realized that we absolutely love automation. If a robot can vacuum the house for us, that’s the best invention of the planet. The same thing is true about the dishwasher and the washing machine.
Those appliances save hours of time that we can use to watch movies and enjoy life. Well, one of the best things you can do about your savings is to automate them. Set a consistent amount of money and create a plan that will direct that cash into your portfolio.
This will pay off huge dividends in the long term. Since most people don’t have the organizational skills and the willpower to do this, it’s best to link your bank account or use an app that does it for you. Nowadays, there are phone applications that round up your change and invest it.
Instead of paying 1.83 dollars for your groceries, you’re going to pay 2 bucks. It’s not a lot. However, penny after penny creates a dollar. Every time you shop, a bit of money will go into your IRA or your stocks portfolio.
Take care of your debts
Imagine trying to fill a pool with a leaking bucket. That would be impossible if the hole was too big. That’s the same scenario if you’re trying to invest and create a portfolio if you’re stuck with a lot of debt. Before you start saving, you need to figure out how much it costs you to fulfill your current obligations.
Take a piece of paper and write down how much time it’s going to take you to finish paying off all of your loans. Credit cards are the worst, and you need to repay them immediately. The interest rates can be as high as 20 percent.
The second biggest issue is student loans. Some of them have rates that can be higher than ten percent. That’s why, before investing, you need to take care of your debt. Of course, you can’t expect to precisely return everything on time.
However, paying off a loan with a 20 percent rate a year earlier is the same as getting the same percentage increase on your portfolio. This Regal Assets rating has some quality information on the topic. Finally, if you’re employed, you need to make sufficient payments to your 401k account. Since your employer matches the contributions, it’s like getting free investment money.
Think of your retirement
When you’re younger, you can handle a lot of risks. In the finance niche, the terms risky and smart are subjective, and they depend on the person. If you don’t have kids, aren’t married, and you don’t have a lot of debt, then you can definitely handle a lot more risk than the regular investor.
Since you have a lot of time before retirement, you can put your money in places where you think you might just be plain lucky. Sometimes, ten percent of your portfolio outperforms the other ninety percent. Since the market has a lot of time to unfold in your life, this is going to motivate you to keep adding to it.
Instead of taking the money out, think of ways how you can increase your portfolio and diversify it. On the other hand, people that approaching retirement are going to be much more sensitive to the fluctuations on the market. If you plan on using your account as means to pay your living costs, then you might suffer a lot of losses.
What to do with a tax refund?
A lot of people use their tax refund to buy a new car, a new gaming console, and other items that are not going to bring in more money into the future. If you’re the type of person that has trouble saving money throughout the year, then putting all of your tax returns in a portfolio can make up for it.
Since the money just arrives in your bank account, think of it as a gift that you should keep on giving. It’s not always expected, and you can set it and forget it.
How to start?
You don’t need a lot of money to start. You can begin with as little as 500 dollars, even though it looks like a tiny sum. This amount can go a long way if you start it when you’re 18, and you keep adding on to it. The snowball effect is going to surprise you.
When you start rolling a small ball of snow from the top of the mountain downwards, it’s going to keep getting bigger and bigger. The same thing is true about investing your money. An exchange-traded fund is the best option since you need zero commitment to it.
Unlike other funds, this variation has reduced operating costs. The downside here is that you’re going to need to pay transaction fees on the occasion of taking out your money. This will motivate you to keep adding more and then cash out when you really need it. Other options are crowdfunding campaigns and peer-to-peer lending. Create a plan, be consistent, and enjoy your profits in a few decades.