Are you a new investor? One of the most important ideas at the heart of successful investing is that everything you do needs to begin with a plan. What, exactly, do you hope to accomplish? Where do you see yourself in a year? Five years? Ten years? How much can you afford to invest today versus how much will you steadily ramp up over time? How much money can you afford to lose? Continue reading to review personal finance tips to keep in mind as a new investor.
The answers to questions like these will help you put together a plan that makes sense for you, not for anyone else. As the old saying reminds us, “Rome wasn’t built in a day.” In this context, it means that you need to understand that you’re looking at a potentially long journey ahead of you, and the only way to ensure you arrive at your intended destination is to put a plan in place today that you can stick to.
While that is a crucial best practice for new investors to follow in particular, it is ultimately just one of many. If you’re getting started in the world of investing and want to ensure that your journey gets off on the right foot, there are several important things to remember.
It’s Not About Tips or Speculation
One common issue many new investors often encounter is the “romantic” aspect. That is to say, what they see in television or movies is how an “overnight success” can be had simply by running into the right person at the right time. You know a friend who knows a friend who heard from a guy about a great investment tip that is sure to be the “next big thing.”
Sometimes, these tips may legitimately pay off, often in small ways. But usually, they wind up doing a lot more harm than good.
The same is true of the idea of speculation. It’s not about looking for the “next big thing” that hasn’t yet paid off. Don’t look for only those investments that offer incredibly high returns, so you spread your money around a myriad of them in the hopes that one pays off enough to cover any other losses you sustain. Investing isn’t about finding the cure for cancer before anyone else. Nor is it about an opportunity that sounds too good to be true.
It’s About Investing
Don’t speculate. Don’t chase tips. Invest with an eye toward the future. If you follow that straightforward best practice and put it at the heart of the majority of the decisions that you’re making, you truly cannot go wrong.
Understand How Much You’re Investing
One of the more straightforward aspects of investing that a lot of new investors, in particular, don’t think about until it’s too late involves how much money they should be putting into this new enterprise of theirs. Obviously, the total amount of money you can conceivably spend will vary depending on your financial situation.
But as a rule of thumb, most people start trying to invest to begin saving for retirement. If they make more than that, terrific – if they can accomplish even that simple, realistic goal, it’s all the better. As a result of that, you would want to invest roughly 10% to 15% of your income every single year.
Again, depending on your financial situation, that may sound like an unrealistic proposition in the short term. But as you build momentum, little by little, it does get easier.
Other people invest for more specific goals – like saving up to buy a house or they want to take the vacation they’ve always dreamed of. In that case, you would adjust your investment expectations accordingly. You wouldn’t necessarily adapt your strategy, but you would still build a plan around whatever actionable goal you’re trying to accomplish.
Time is Money
Investing your money is the key to unlocking its potential and building wealth. Otherwise, with time you risk losing purchasing power as prices rise faster than inflation due to the depreciation of your savings – leaving future payments worth less in today’s terms.
Making the most of your finances requires understanding time’s role in wealth. The concept of “time equals money” is popular because it can help you compare different investment and financial opportunities, guiding your decisions rather than ruling them out entirely. Harnessing this insight gives savvy savers an edge when securing their future prosperity.
Expertise You Can Trust
FSL Tax & Accounting Services LLC is a CPA firm specializing in Small Business Accounting, Tax Preparation, and Bookkeeping services in East Point, GA. Our clients include businesses from diverse industries, including Law firms, Real Estate, Medical, Cannabis Services, Amazon DSP Owners, and many other companies.
Contact one of our experienced CPAs, and we can set up a meeting or a series of them to make your accounting experience more productive, effective, and faster. Call us at 678-702-7218 for a free consultation, or complete the online form to learn more about our personal finance tips for new investors.