Investing is a topic that can seem intimidating to many, especially if you’re someone who might not have much to invest. The truth is, investing can be simple, and I want to make it simple for you. The most important question you should be asking yourself is, “WHY do I want to do it?” It’s important especially when it comes to investing to have a form of motivation, that will allow you to succeed and steer a clear path for your goals.
Budget like you’ve never before
If you’re like me, starting with only $0 in savings and living paycheck-to-paycheck to survive. You want out, and you want a way to increase your wealth without wasting too much of your valuable time and resources.
I hate to be the bearer of cookie-cutter solutions, but this one is necessary. You’ll need a budget, but you won’t need a super complex budgeting tool to deal with your finances, you need something quick and dirty that’ll get you what you need and now.
Budgeting allows you to free up space, sort of like trying to free up space on your smartphone, you’re always looking for a way to get more space. If you can grow that mentality, then you can start budgeting.
Use the 50/30/20 rule for your budgeting needs:
- Spend up to 50% of your income on necessities.
- Spend up to 30% of your income on wants.
- Spend up to 20% of your income on your debt and savings.
I’d like to highlight the debt and savings when you budget, you are finding room – like our smartphone analogy – to make more. Once you get a handle on your budgeting, you can start adding into your savings. Don’t think of saving as a chore either, it can be extremely motivating to see your 0$ value grow each time you add to your account.
Be Gone Debt
When I first thought of investing, I was in debt. Worrying constantly how I’d find the money to pay it off. I lacked discipline and resolve to tackle my debt and it nearly swallowed me. Fight it. Fight the tendencies and replace your habits with financially minded ones. This is where opportunity cost comes in.
Opportunity cost is the ability to think about what you could save or invest if you didn’t spend it on your wants.
You should try to think about what you could make if you didn’t spend 4$ to 6$ on that coffee you craved or if you’re buying food could you altogether remove buying takeout or fast-food to put that money back into your savings?
Try to pay yourself first. You’ll need the discipline of letting yourself know when you can invest more money and where your limit is. You don’t want to let your cravings for seeing your money grow, exceed to the point where you’ve invested everything into the market, and no means of supporting yourself in your everyday life.
Create a small safety net
Before you invest, it’s important to create a cushion one that will let you fly, crash, and get flying again. I do not recommend that you start investing thousands of dollars on your first investments, because that would put you in a tough spot financially and emotionally. You may hear that you need at least $5000 in savings to invest and while that may be true for some.
I also believe that you can save $1000 and invest $500. Which should let you play around with the market and gain experience first, before you start dealing larger investments. While you make more investments, it is also important to put double of what you invested in savings, for example, if my budget allows for me to invest $20, I also want to look in my 20% rule for an opportunity to save $40 before that investment. Some may think differently, but I find that this gives me more discipline not just with budgeting, but how I invest. I can feel safe knowing that, I put enough money into savings that, if my investments didn’t succeed it wouldn’t hurt me.
Picking an app to invest
You can invest using a broker, but that can be expensive and we’re looking for free and cheap at the moment. An app I highly recommend is Robinhood. Robinhood is an investing app that will get you started investing easily without the commission-fees. Every transaction you make on Robinhood is free and Robinhood offers education within its app for learning more about the stock market. There are other great options to start with like Stash which offers its own set of benefits over Robinhood.
Robinhood gives you access to a friendly and intuitive design, easy-to-read line charts, box-charts and even recommendations on their search page for other stocks you may be interested in.
You can start with $5 on Robinhood and if you’d like you can sign up through our affiliate code clicking here: https://join.robinhood.com/marcg972 which gives you the opportunity of getting stock on Facebook, Amazon, Apple, or Microsoft free.
Quick Tips for Getting Started on Robinhood:
- Invest in what you understand. Let’s say you’re an avid gamer, you understand how companies like Sony, Microsoft, and Nintendo work and you get why people find certain products more popular than the other. Well, this should be your starting point; this will let you start researching in this industry and picking out some great stocks that you know have a high chance of succeeding.
- Start small and think long term. At the moment you don’t want to start investing huge amounts of money into the big-name stocks. Start with smaller companies that will get you moving. Then start planning for the long term. If you try to game the market, buying a stock low, and selling when a stock goes up, you’re more likely to fail. The market is sporadic and there isn’t an “always” to things.
- DIVERSIFY. What’s worse than investing in large companies at the beginning? It’s not diversifying your investment portfolio. Why make a leap of faith on one stock when you can extend through different industries and ETFs.
- Research and question. You’re not always going to be the person who knows everything about the stock market, what’s most important for anyone is to research and ask questions, either online, through social media, or some of your friends who just understand certain companies more than you do. This will give your insight, a powerful tool, for acquiring better investments and judging the behavior of the market.
- Have fun. Investing should be a set and forget kind of thing. After you did your research scrutinizing the stocks you wish to invest in. Invest in them and don’t think twice. Don’t try to keep up with the market 24/7 and just have fun doing the research and analysis. You’ll thank yourself later.