7 Steps To Become An Investor And Start Building Wealth
/You have dreams! And if you’re like most people, reaching some of them may depend on amassing the means to fund them. As a student or recent grad, you may not be too far along the path to financial power. You may not even know where to start. But here’s the good news: you can start out now. In fact, the sooner the better. It’s not as tough as it might seem, either. Investing is a great way to amass the finances necessary to achieve your dreams. If you get good enough at it, you may even find yourself with a funded account for options and a new profession! Regardless of your end goal, here are seven tips to help you become an investor and make your dreams come true.
Tip #1: Start Saving—And Soon!
Are you one of the 64% of Americans living paycheck to paycheck, saving money may sound like a daunting task. But particularly if you have no dependents, there are plenty of options for trimming your budget enough to start saving at least a bit of money. Here are some simple ways to start saving right away:
Spend less on gas. Ride your bike to school or work if you live nearby enough. If not, start a carpool with some of your buddies.
Take an inventory of all of your streaming accounts and subscriptions. The average consumer spends a whopping $273 a month on media and entertainment subscriptions Do you actually use all of yours? Could you do without one or two? Have you perhaps even forgotten about some of them? Then ditch the ones you aren’t in love with. You’ll be surprised how quickly your savings will add up.
Take advantage of the automatic savings feature that’s part of your checking account. It’s a painless way to start a savings routine. Getting in the habit of saving money will be a life-long advantage for you.
Use your weekly money date to track your savings and spending. Tracking your money will make you more aware of your financial decisions and awareness is key to elevating your wealth.
Tip #2: Build A Kick-*ss Credit Profile
Consumers who have high credit scores spend less on the major purchases they make over their lifetimes because they are given better interest rates. Mortgage lenders reserve their best rates for the folks with higher credit scores. If you take out a home loan with the lowest interest rate available, you can save tens of thousands of dollars over the time you own your house. Your credit card bills will be lower, too.
Incidentally, lenders aren’t the only businesses that make decisions based on your credit. You’ll pay less for car insurance if you have excellent credit and less for your cell service contract. Many landlords check your credit before deciding to rent to you. They may demand more than the traditional first and last month’s rent when you sign a lease if you have poor credit.
Start building your credit history at a young age by opening a couple of credit accounts, using them frequently, and making every single payment on time. Gas credit cards and store charge cards are the easiest for young people to get. After you’ve used those for a while, you can step up to a general-purpose Mastercard or Visa card. When you’re just starting out in life, your credit score will be relatively low. But the longer you maintain a positive credit history, the quicker your credit score will improve.
Need help boosting your credit score? Here are seven ways to boost your credit score.
Tip #3: Become An Investor, Early
Once you’ve amassed some substantial savings—an emergency fund that equals three to six times your monthly expenses—it’s time to consider investing some of your money. Investing is a passive way of earning money: it leaves you plenty of time to be a great employee wherever you may work.
If you’re employed, the first investment opportunity you should take advantage of is your employer’s matching contribution 401K plan. In today’s competitive job market, even part-time employees are often offered this benefit. If you’re one of them, contribute as much to your plan as you can, up to the highest contribution your employer will match. Otherwise, you’re saying no to free money!
To repeat a phrase you’ve likely heard many times before: all investment involves risk. But most 401K plans offer low-risk investment options, such as mutual funds, which limit risk by spreading your investment across multiple companies in one neat bundle. Mutual funds are a great place to start for those of us who are new to investing. Once you have a little more financial know-how, you can graduate to somewhat riskier investments, which have to potential to earn you more money.
Tip #4: As You Get Savvy, You Can Take on More Risk
In the investment world, the risk is generally tied to reward. Generally, the more volatile an investment is, the greater its potential to earn you a significant return. An investment in a single stock is riskier than investing in a mutual fund or government bonds, for example. But if the stock does well, you’re in the money.
Most financial advisors recommend that younger investors acquire a balanced portfolio—that is, a combination of investments that span the spectrum of potential risk. That changes as you age. Retirees, for example, typically earn less and have less time to recover if one of their investments goes south.
Depending on their means, older investors are typically advised to revert to investing in lower-risk, lower-return assets. But for the time being, when you’re young and healthy and have some financial expertise under your belt, you have lots of investment options.
Many younger people have turned to trading cryptocurrencies, for example. About 16% of Americans have, at some point, invested in cryptocurrencies, with members of Gen Z and millennials leading the charge in a big way. An astonishing 94% of them have purchased some form of crypto from one of the hundreds of cryptocurrency exchanges that have launched over the past couple of decades. They’re stashing their funds in secure crypto wallets, buying and selling some 18,000 individual cryptocurrencies. It’s rare, but growing more common, to pay for purchases directly from your crypto wallet.
Media outlets like to publish stories about people who have crypto-traded their way to millionaire status. But investing in crypto can be dicey. The crypto market tends to be volatile. If you have a high tolerance for risk, you may want to start investing in crypto. But take it slow to limit your financial exposure. If you want to look at things like Bitcoin and crypto then you should look at all things like what is the price of bitcoin. You can also check out Dogecoin, another crypto. Here is a website to learn more about it and buy Dogecoin.
Tip #5: Use Technology to Guide Your Investment Decisions
Investing is a complicated subject. There used to be significant barriers that made it difficult for folks with modest means to take advantage of the earning potential investing provides. But nowadays, technology makes it easier for less experienced and small investors to increase their wealth. One option is to research investment ideas and stock options online where you can find possible investments like Primerica and other companies. This is not the only option, either.
There are dozens of mobile apps that combine saving and investing in one convenient place. These platforms, including Webull, Stash, and Betterment, are suitable for investors of all experience levels. Some feature other financial services, such as checking accounts, too.
Most will recommend a balanced portfolio that suits your level of risk tolerance to get you started, but also offer you the option of charting your own investment destiny. Some apps offer a painless way to get started. They automatically round up any retail purchases you make to the next dollar, then invest those nickels and dimes for you. Micro-investing platforms make it easy for people of limited wealth to get their feet wet in the market.
Tip #6: See if You Can Save on Student Loans
At Money & Mimosas, we believe the student loan system is predatory and all student loans should be canceled. While we wait for the federal government to take meaningful action in eliminating the burden of student loans, let’s talk about the current situation. The average federal student loan debt is $36,510 per borrower and private student loan debt averages $54,921 per borrower.
Ask yourself: How much debt am I carrying? Knowing how much debt you have is the first step in creating a plan to pay it down.
Then, look for ways you can reduce your debt. You may be able to reduce the cost of funding your education under certain circumstances:
If you applied for your student loans when interest rates were high, you may be able to refinance your debt at a lower rate now. For example, for the 2018-2019 academic year, private student loan rates averaged 5.05%. In April of 2022, the average rate was 4.19% and some lenders are offering rates that are lower than that right now.
The global pandemic saw interest rates reach historic lows in many categories. But they’re interest rates are rising again. If you took out any variable-rate loans, now might be a good time to lock in a lower rate by refinancing into a fixed-rate loan before interest rates climb further.
If you applied for your student loans when you had no credit history or less-than-ideal credit score and you’ve been diligent about paying your bills on time, there’s a good chance your credit score has improved. That may earn you a better interest rate should you decide to refinance your loans.
If you’re working now and earning a good, steady salary, it’s possible that one of the factors lenders use to evaluate your creditworthiness—your debt-to-income ratio—may have also improved. That can cause your credit score to jump. Since lenders offer their lowest rates to people with excellent credit, refinancing your loans when you’re in a better overall financial position could significantly reduce your monthly payments.
Tip #7: Make a Plan Now and Stick to It
Thinking broadly and thinking long-term are the keys to building wealth. So the sooner you develop a wealth-building strategy and begin to act in keeping with it, the more likely you are to quickly and substantially improve your financial position. It’s easy to get started on the right path. Consider your saving, spending, and investment behaviors and ask yourself, could I do better?
Then look to today’s competitive job market—which currently favors employees—for ways to advance in your career. Nurture your professional network by becoming active on social media like LinkedIn and Twitter. Keep your resume updated so you’re ready to jump on higher-paying career opportunities. You may not get the first job you apply for, but keep at it to keep your writing and interviewing skills sharp.
If all that sounds a little overwhelming to you, reach out for some professional help. Most universities provide career counseling for their current students and graduates. You may also want to consult with a financial advisor, who can help you with budgeting, investment decisions, and more. You can also search online for free, do-it-yourself tools and credit counseling. You’re in the driver’s seat when it comes to your financial future. Make sure you have a good map to guide you on the path toward greater financial security.
Author Bio:
Susan Doktor is a journalist and business strategist who has written hundreds of published articles covering a wide variety of financial topics. Her contribution comes to us courtesy of Money.com.
