Congratulations! Somehow you’ve managed to pull off a miracle, by landing a good job within a year after graduating from college. While your other classmates had to scramble to take what they could get. Like those direct marketing jobs that no one wants. Now you have enough money to have your own place, a car, bills paid, and you’re working towards paying off those student loans. So you can do whatever you want with the rest of the money you make. Right and Wrong.
Yes, it’s your money to blow, but you have a responsibility to yourself to invest your money wisely. You could invest it in a brand new Valentino suit, but that’s only going to benefit you for about a day. It won’t do anything for you later on down the line when you need money for something else. That’s where smart investments come into the picture.
Once all the bills are paid and your basic needs are met, like food and toilet paper, the money let over is referred to as disposable income. Well, that’s would financial advisors would call it, the rest of say, “that’s my ballin” money”. That’s the money we use for the mall, a small trip, the club, a concert, or anything else that we want to do with it. Unfortunately, recent college grads (1-3 years out) should be spending their disposable income frivolously. Instead, they should try to think of ways to turn your disposable income into money to purchase a home, settle your school debt, or a future business venture.
Before you get into the investment game, you need to set goals and create a plan. What are you working towards or what do you see this money doing for you in 5-20 years? You also need to create a financial foundation, which consists of steady income, savings, and an emergency fund. Never invest money that you might need later, that’s what your savings and emergency fund are for. And lastly, consult with a financial advisor to make sure that you know what you’re getting yourself into.
As a beginner, you want to start with small investments first. People don’t realize it but saving money is a type of investment. After everything is said and done, as far as bills, needs, savings, and emergency fund, you can take $10-$100 out of your disposable income ever paycheck and put it into a separate account. Assuming that you keep up with it, $10 every paycheck will turn into $2,400 in 10 years. Doesn’t sound like much, but remember all your bills are paid and you have saved so that $2k can go towards a house, and overseas travel, or out-of-state moving expenses and you won’t even feel it.
Another type of easy investment system is an Employer Retirement Plan or a 401(k). Certain jobs have retirement plans where you could simply invest 1-2 percent of your paycheck every pay period. You won’t even notice it. Meanwhile, you’re building a retirement fund, that could be beneficial in 20-30 years.
If you want to get a little more into it, try Automated Investment Platforms like Bettervestment, WealthFront, or Trade King. Investment sites like these are cheap and easy to use. For example, Bettervestment uses a questionnaire to figure out the best ways to invest your money. Then it sets you up with a portfolio that includes several exchange traded funds (ETFs). ETFS are types of investment funds that are traded on the stock exchange. Also, you can use any amount of money you want, as little as $10.
To take everything a step further, try low-initial-investment mutual fund. Mutual funds are a portfolio of stocks that investors can buy into with a single transaction. The difference between then and ETFs is the fact that they require a minimum to invest, sometimes $500-$5,000. And once you have a substantial amount of money to invest you can get into stocks, real estate, or directly invest into small businesses.
The point is that you can take money that you don’t need at the moment and us it to make more money that you might need later. Investing isn’t something that comes natural, but it is a learned behavior. And a necessary tool to improve your quality of life over time. Don’t be the person at the club popping bottles one day only to find that they can’t afford to take a vacation two years later. If there’s anything that the economy has taught us within the last decade, it;s that nothing is guaranteed. Before you know it we can all lose our jobs and have to depend on the money we’ve put aside or invested to get us through the tough times. You don’t believe me. Google 2008-2009, and see what those people have to say.