Thanks to the internet the world is more transparent than ever, but that doesn’t mean things are easy. Jobs are changing, the population is growing, and the prospect of social security may as well be a mirage.
These things and more make it essential for everyone to think about and plan for their financial future. Let’s look at four straightforward ways to do so.
Pay Down Debt
You might be thinking, how does paying off debt have anything to do with investing?—but hear me out. In the U.S., approximately 80 percent of people carry some form of debt between student loans, autos, mortgages, credit cards and medical bills. Mortgages, student loans, and even auto payments are for a concrete need. Credit card debt, however, makes it difficult for anyone to set themselves up for long-term success due to high monthly interest rates.
If you want to invest in your financial future, you need to nail the coffin of credit debt shut permanently. Per NerdWallet, the average credit card balance for households with revolving balances is nearly $7,000. That’s hundreds of dollars each month lost to interest. Imagine how much money could be accumulated through compound interest if you were saving that interest payment instead of handing it to your creditors.
If your balance is too high for you to do anything but make minimum payments and get further behind, consider trying to settle your debt. In an interview with Inspirery, Freedom Financial Network co-founder and CEO Andrew Housser talks about how a friend’s success with debt relief led to him starting a network of debt-assistance companies.
“After ignoring the creditor’s collection efforts for a number of months, he received a threatening message that motivated him to call back and yell at the collector. This yelling eventually turned into negotiating, and he ended up settling the $30,000 for $9,000!”
Debt settlement won’t yield the same outcome for every financial situation, but if you’re drowning in debt it’s worth considering.
Invest in Stocks and Funds Incrementally
It’s true that putting money in the stock market is one of the better long-term investment plays you can make—just don’t get caught up trying to time the market. The stock market ebbs and flows too much for anyone to predict accurately. Even professional traders make mistakes. Try to time the market and you could make a lot of money. You could also lose your shirt. Save yourself the time and energy. Regularly invest small amounts into the stock market.
This used to be difficult to pull off without a financial advisor, and even then, the stocks had to have low enough share prices for a small contribution to be able to purchase full shares. Now, new investing sites and robo-advisors are turning the personal investing world upside down.
One platform, M1 Finance, allows users to set recurring weekly, bi-monthly or monthly deposits. But the best part is that instead of having to buy full shares of stocks, users can own partial shares of companies, funds and sectors. Don’t have money for a share of Amazon? No problem. Deposit $100 per month and select the percentage of the investment you want your pie to comprise. It’s that simple.
Max Out Your (Roth) IRA Annually
If you don’t have an employer-sponsored 401(k) program, then an IRA is the next best thing. While 401(k) plans allow up to $18,500 per year in contributions compared to $5,500 for IRAs, the latter typically offers more flexible investment options. Your IRA options are traditional and Roth.
A traditional IRA is funded with pre-tax dollars and therefore is a tax-deductible contribution. A Roth IRA differs from a traditional in that it’s funded with after-tax dollars and thus the growth of your investments is not taxed later. Between the two, the Roth is often preferred because of its tax-free growth. You don’t have to max out your IRA every year, but you should strive to, especially if you’re young. Imagine what 30-plus years of contributions and even a modest five percent return on investment could yield.
Always Be on the Lookout for Additional Income Streams
We’re taught to work hard, and the rest will take care of itself, but this is far from the case in our society. It’s difficult to amass a big nest egg later in life even with a stable job and diligent saving.
Unless you’re a C-suite executive or own a business, you’ll need additional income streams to build wealth faster, and insulate yourself from a job loss or other unexpected (but inevitable) life events.
Consider learning a new skill that you can turn into a side gig eventually. Or if you already have a hidden talent, use it! From writing and graphic design to getting your realtor or home-inspection license, there are all sorts of ways to bring in secondary income. You just have to be motivated.
The word “investing” alone can be enough to deter people from thinking and planning for their financial future. Don’t get overwhelmed before you start, though. Follow these four simple ways to invest and you’ll be well positioned for your golden years.