Money management can be difficult. Saving money does not come naturally to everyone. Creating and sticking to a budget isn’t easy for everyone. It is up to each of us to educate ourselves so that we can take control of our personal financial management.
Smart investing is the way to grow your net worth. Wise investments can help ensure you have enough money for retirement, enough to pay for your children’s college or to take that trip around the world you’ve always dreamed of. Here are a few tips for the beginning investor.
Tip 1: Start investing now.
If you have not already, the best time to start saving and investing is now.
The longer you invest, the more money you will make off of your investments. Over time an investment account will have ups and downs with the market, but over many years you will see a rate of return on your investment.
Tip 2: Understand “compounded interest.”
Compounded interest is interest calculated on the initial principal and also on the accumulated interest of previous periods.
When your money earns interest, that interest is added to the principle sum. So you then have more money in your savings account. Assuming you do not make any withdrawals from the account, then that increased principle sum earns interest. Compound interest is essentially earning interest on interest. Thanks to the powers of compound interest, the earlier you save money the more will accumulate.
When it comes to investments, this principle can be applied, too. If you have an investment, such as a stock, that pays a dividend and you reinvest that dividend payment into shares of more stock, then those shares will grow, too.
Tip 3: Take full advantage of employer matching in your 401(k) or 403(b).
If your employer offers retirement account matching, take full advantage of it. For example, some companies will match “up to 3%” of your salary. It is important then for you to invest 3% of your annual salary into your retirement account. With your employer’s 3% match, you are then investing 6% of your annual salary into your retirement account — but only 3% is coming out of your paycheck.
If you do not take full advantage of employer matching, you are leaving free money on the table.
Tip 4: Diversify.
To diversify means to invest in different assets and different securities in an effort to minimize overall investment risk. A good asset mix is the key to earning steady returns. This investment tip is really the don’t put all of your eggs in one basket advice.
People new to investing may choose to invest in mutual funds. These are investment portfolios that are designed with diversified holdings and are professionally managed.
Tip 5: Soak up knowledge.
Just as you are doing by reading this article, educate yourself about investing. The more you know, the more empowered you will be to make smart investments.
Explore your options. Consider speaking to a financial advisor. Some may offer a free consultation. Understand what types of accounts and investments are available, and what the pros and cons of each are.
We hope you found these investing tips helpful as you begin your journey into becoming a savvy investor!
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The Law Office of Barbara B. Braziel helps people get out of debt. We offer free consultations to people of Savannah, GA and the surrounding areas, including Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Ludowici, Springfield, Pembroke, Brooklet, and Garden City.
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