What you will learn from reading this article:
- That it’s always better to start investing as soon as possible, rather than waiting for the perfect moment
- How you can create a money-making machine by automatically putting aside a small portion of your paycheck each month
- The power of compounding is an essential factor in generating wealth over time
- Steps to start investing today for the greatest rewards in the future
When is the best time to start investing your money? Right from your first paycheck? When you have a spouse and are looking to start a nest egg? Sometime in the misty future? And even then, what’s the best way to start investing? How should you start investing? Did you ever learn to invest? Chances are that you’ve been waiting for just the “right” moment to start investing, but just what makes that moment happen? If you’re trying to figure out whether it makes sense to start investing today or wait until you have more money – we’re here to help you out.
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Use time to your advantage
The short answer is, invest today, not tomorrow. Because even if you just start investing a little bit of your savings, that amount will have that much longer to take advantage of the power of compounding.
Think of it this way –you’re already a financial trader. Maybe you don’t see it that way, but if you work for a living, you’re trading your time for money. That’s probably the worst trade you can make. Why? Because there’s always more money, but you can never get more time. How do you stop this cycle? How can you keep time on your side while still making a profit?
Create a money machine
The basis for creating what we call a money machine – the money that will end up giving you an income for life – is setting aside a set percentage of your paycheck to pay yourself first. That’s how to start investing 101. Maybe that’s 10% or 15%. Maybe 3% or 5%. This number will increase over time as your income grows, but decide what portion of your paycheck you’ll pay yourself now. This is really how to start investing in the future you deserve. Remember, this amount is off the top and doesn’t factor in any other spending. Your other expenses, such as housing costs, utility bills and restaurants will come next.
The trick is then to put this money somewhere it will begin to work for you. “Under your mattress” doesn’t have very good interest rates. But put this set percentage of your earnings into savings no matter what happens and you’re going to slowly start building your financial future. Even if it seems like you’ve already accounted for every penny already, you can start saving right now. It’s the best way to start investing.
How to start investing? Save automatically
The best way to set your money machine in motion is to automate your savings. Yeah, you’ve probably heard this before, huh? But it’s true – when learning how to begin investing the secret is simply in making saving as easy as possible. The key to savings success is by not seeing that money in the first place. That way, you’re not even tempted to spend it somewhere else. You’ll always spend what you have, and reducing that just a little more – trust us, it’ll pay off. It doesn’t matter if you’re living paycheck to paycheck or earn six figures — save now and you’ll be able to reap the rewards later. You’ll be building a money machine that makes money when you sleep, when you eat, and when you eventually stop working.
Here’s how you can start investing and saving automatically:
- Pick the percentage of your income you’re going to set aside automatically. There’s no right answer here, so trust your instincts about what feels right: 10%? 12%? 15%? 20%? 50%? It’s entirely up to you. Track how much you earn and spend in a month and see how much you can put aside. Save as much as you can, because that money will grow in the bank.
- If you’re already enrolled in a retirement account through your job, get HR to start putting your new percentage directly into that account. If you’ve already got automatic deductions, you can increase them to the amount you’ve chosen.
- Self-employed, own your own business or working as a contractor? You can set up a retirement account with a bank or financial institution. Then just set up an automatic transfer from your checking account.
And say you get a raise or other influx of cash – you can stick that into your money machine directly, spread it among your three asset allocation buckets or increase your ongoing savings percentage to match.
Don’t wait to invest – you’ll never get that time back in which you could have been making money. But remember, not all investments are created equal. Learn more about the power of compounding and how to build a smart financial blueprint to get your future under your control.
WHO SAVED MORE?
Let’s use this investment strategy example from financial expert Burton Malkiel – he created the idea of index funds:
Take two brothers, we’ll call them William and James. Both are 65 years old. Based on the information below, which brother has more money in his account at the age of retirement? William, who invested for 20 years, or James, who invested for 25? Have your guess ready? Click below for the answer.
Legal Disclosure: Tony Robbins is the Chief of Investor Psychology at Creative Planning, Inc., an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity based on increased business derived by Creative Planning from his services. Accordingly, Mr. Robbins has a financial incentive to refer investors to Creative Planning.
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