You’re working hard. Maybe you’ve been head down and focused on snowballing your debt. It’s time to plant seeds. While you may not be ready to start investing right now, I want to begin the conversation about building wealth. Learning to make our money work hard for us is definitely a topic near and dear to my heart.
In my 20’s, I joined an investment club.
It was probably one of the better decisions I made in my 20’s; other than saying yes to WonderMan.
Pre-WonderMan, there was another gent who’d captured my attention. He started the investment club and so I joined in. When our relationship went south, so did my participation in the club.
Unfortunately, I didn’t continue my investing education. Other than selecting a 401(k), I’d say I’m an investing novice. Unlike Maarten Van Lier who set a goal to have $1 million in 10 years.
There’s no time like the present. If I learned anything from my chat with Emily Guy Birken, author of Choose Your Retirement, it was that I should start now.
So should you.
Investing By The Numbers
Starting now doesn’t mean run out and open a brokerage account somewhere. We want to be smart about this. After all, investing means committing money to an endeavor (business, project, cause, etc) with the expectation that your money will return a profit.
However, expectations don’t always pan out as planned.
You can lose money. Profits are not guaranteed.
This is surely the reason why many women shy away from investing.
- 47% of women say their not knowledgeable about investing
- 57% of women say investing money in the stock market is frightening
- 62% of women gave themselves a C or worse regarding their financial knowledge
- 1% gave themselves an A in financial know-how
If investing makes you feel queezy, you’re in good company.
One philosophy I live by is if someone else can do it, then it’s not impossible. If investing is outside of your comfort zone, you’ll really appreciate today’s podcast episode. I recorded it with you in mind. This is a great foundation of what to consider before we start investing.
Before You Start Investing
Since investment guru I am not, I will be connecting with professionals who are.
For this latest episode of the Midday Money Show, I reached out to Barbara Friedberg because she is a heavy weight – in investments that is. Barbara runs a personal finance site dedicated to educating consumers and demystifying the investment process.
I wanted Barbara to provide an investment primer when I originally contacted her. Tell us what quick tips we need to start investing. However, she took a step back – which I thoroughly appreciate.
In simple terms, we should do the following before we start investing.
- Pay off our debt.
- Build a savings cushion.
- Start to educate yourself.
Doesn’t that make you feel good? You’re already working through a plan to dump debt so you are well on your way.
However, since learning comes in many forms and can be done at your leisure, let’s start the process now.
Building Your Emergency Fund
We had a little chat about the need to build your emergency fund.
It’s a must do.
Have you ever added up your monthly expenses – essential expenses that is?
I know the first time I did the number shocked me because it wasn’t nearly as massive as I assumed. We often think of a month’s expenses as how much we bring home in a month.
That’s not it.
Tally your rent or mortgage, car note, utilities, minimum debt payments and other expenses that you would definitely need to cover in the case of a job loss. Not your $200 hair appointment or shopping spree. Only tally the essentials.
Strive to save this amount in an emergency fund. Then work you way up to 3 times that amount.
If you’re working through a debt snowball, build your full emergency fund after all consumer debt has been repaid. Without debt payments, building your emergency fund is not as daunting.
Remember, break everything ahead of you down into manageable pieces. One step at a time.
Topics Discussed in this Episode
- How to boost your confidence regarding investing.
- 3 steps to take before you start investing.
- How much of your income should be invested – according to the pros.
- Should you engage in DIY investing or with work with professional advisors.
- Ever heard of robo advisors? Barbara breaks down the difference.
- How to check into an advisor’s background to avoid being ripped off by the next Bernie Madoff.
It’s also really really important that you not dive into investing if you have debt…a lot of debt. ~ Barbara Friedberg
Resources Mentioned in this Episode
- Give Yourself a Raise in 21 Days
- Barbara Friedberg Personal Finance
- The Elements of Investing by Charles D. Ellis & Burton G. Malkiel
- FINRA’s Broker Check (Financial Industry Regulatory Authority)
- How to Grow Rich without Winning the Lottery by Barbara Friedberg
- Invest and Beat the Pros and Create a Successful Investment Portfolio by Barbara Friedberg