Investing For Beginners (Part 1)
Hi everyone, thank you for coming back to my blog. I hope you found my last blog interesting and useful, where I covered ‘3 Ways Of Paying Off Credit Card Debt Sooner’.
Today’s blog is going to be a bit different to my other blogs and will be more like a ‘beginners guide to investing’, so if you are new to investing or want to start investing, but don’t know where to begin, you are in the right place!
Now, before going over the specifics of what you should consider investing in, be it stocks, bonds, properties or commodities, you must go over the basics of how you should invest.
Investing is what happens when you get your pay cheque, after your necessary expenses are paid, and you’ve got a few pounds left over to put towards your future. No investing happens without putting money away.
How are you supposed to find those elusive extra pounds to save? Here’s how:
1. Avoid lifestyle creep
In all likelihood, you will earn more in your thirties than you did in your twenties, and even more than that in your forties and fifties (if you haven’t retired rich by then). The key to saving is to do your very best to avoid what’s called “lifestyle creep”.
Lifestyle creep means that as you earn more money, what once seemed like luxuries are deemed necessities. Just because you can afford to buy a new Porsche 718 Boxster, because you have an extra £811 left over every month in your current account, does not mean you should. Instead, you should do your very best to live the same way you have always lived. Then put away the extra money you are making rather than increase your spending. Pass on the Boxster, get yourself a Toyota Aygo (because it fits the same amount of people in as the Boxster and the up keep is way cheaper), and invest the remaining £580 pounds you saved!
2. Start investing a little at a time
Once you have got some savings, you will most definitely want to start investing. Inflation will almost always outpace the interest rate, therefore effecting the amount of interest you earn on your saving sat in your savings account. You will be effectively saving and losing money at the same time, hence why you should start investing as soon as you can.
Investing is not just for the Warren Buffet’s of the world. If you are finding it tough to put away some investing money each month, then please go back and read my blogs on this, ‘3 Ways To Make Saving Money Effortless’ and ‘3 Best Apps For Savings Automation.
Investing small amounts of money is a great habit to get into and your money will add up over time. If you are looking for more easy ways to invest with little money, here they are.
How can I Invest with Little Money?
- Set up small, monthly transfers from your current account
- Use a low-cost investing service (e.g. Vanguard)
- Brew your own tea/coffee and invest your Starbucks money
- Immediately invest any tax returns
- Invest any pay raises and/or bonuses instead of altering your lifestyle
- Ask relatives for investing money, rather than other gifts
3. Know the reason you are investing for
How you invest depends on what exactly you are investing for. You might be investing money to help your children with their upcoming university fees. You might even want to invest money to live off when you retire in the distant future.
The time horizons on each of these investments are very different and because you will need access to some of them sooner than others, those with shorter horizons should invest more conservatively and those investing money they don’t need for a long time can choose riskier investments.
Click here for Part 2.
Until next time, thank you and stay safe.
